You could develop competencies in awareness, accessibility, product redesign, pr

Question

You could develop competencies in awareness, accessibility, product redesign, product invention, automation, plant utilization, human resources, cash flow management, and forecasting. All of these competencies take several years to develop.

You would use these competencies to develop competitive advantages. For example, competencies in automation and human resources could lead to a competitive advantage in cost leadership. Competencies in awareness, accessibility, and design could lead to a competitive advantage built upon differentiation.

With this as background, present an argument

1. What are the top three competencies you believe necessary to execute your vision and strategy?

2. What decisions do you need to make to develop these competencies?

3. How will you produce competitive advantage?

Explanation / Answer

Q.1) Michael Porter a graduate from Harvard University created a book in 1985, which identified three strategies that can be used to tackle competition. This booked was named this ninth most influential management books on the 20th century. These approaches can be applied to all businesses whether it’s a good or a service. He called these approaches generic strategies; they include cost leadership, differentiation and focus. These strategies have been created to improve and gain competitive advantage over competitors. These strategies can also be recognized as the comparative advantage and the differential advantage.

Cost leadership strategy

Cost leadership is a business ability to produce a product or service that will be at a lower cost than other competitors. If the business is able to produce the same quality product but sell it for less this gives them a competitive advantage over other businesses. Therefore, this provides a price value to the customers. Lower costs will result in higher profits as businesses are still making a reasonable product on each good or service sold. If businesses are not making a large enough profit, Porter recommends finding a low-cost base such as labor, materials and facilities. This gives businesses a lower manufacturing cost over those of other competitors.

Differential strategy

A differential advantage is when a businesses products or services are different to similar competitors. According to Michael Porters strategies 1985, he recommends making those good or services attractive and stand out from other competitors. The business will need strong research, development and design thinking to create innovative new ideas. These improvements to the good or service could include delivering high quality to customers. If customers see this product or service different from other products consumers are willing to pay more to receive these benefits.

Along with this, the business will need very effective marketing and advertising so consumers understand how this product or service will benefit them or could be seen as better than what they already have. If the business has a strong idea but weak marketing consumers won’t know the benefits of this specific item in comparison to competing products.

Focus strategy

Focus strategy ideally try’s to get businesses to aim at a few target markets rather than trying to target everyone. This strategy is often used for smaller businesses, as they may not have the appropriate resources and ability to do so. Businesses that use this method usually focus on the needs of the customer and how the products or services could improve their daily lives. With this some firms may let consumers have input into their product or service.

This method can also be called the segmentation strategy, which includes geographic, demographic, behavioral and physical segmentations. By narrowing the market down to smaller segmentations, businesses are able to meet these needs of the consumer. Porter believes that once businesses have decided what groups they will target its essential to decide if they will take the cost leadership approach or differentiation approach. Focus strategy will not make a business successful. Porter mentions that it is important to not use all 3 generic strategies, because there’s a high chance companies will come out achieving no strategies instead of achieving success. This can be called ‘stuck in the middle’ and the business won't be able to achieve a competitive advantage.

When businesses can find the perfect balance between the two ‘price and quality’ it usually leads to a successful product or service. A product or service must offer value through price or quality to ensure the business is successful in the market. To succeed, it’s not enough to be ‘just as good as’ another business. It comes to firms that can deliver a product or service in a manner that is more meaningful and different to customers based on their needs and desires. Deciding on the appropriate price and quality will depend along the business brand image and what they hope to achieve relating to their competition.

Q.2) According to Porter's Generic Strategies model, there are three basic strategic options available to organizations for gaining competitive advantage. These are: Cost Leadership, Differentiation and Focus.

Organizations that achieve Cost Leadership can benefit either by gaining market share through lowering prices (whilst maintaining profitability) or by maintaining average prices and therefore increasing profits. All of this is achieved by reducing costs to a level below those of the organization's competitors.

Companies that pursue a Differentiation strategy win market share by offering unique features that are valued by their customers. Focus strategies involve achieving Cost Leadership or Differentiation within niche markets in ways that are not available to more broadly-focused players.

Q.3)Competitive advantage is an advantage that a firm has over its competitors, allowing it to generate greater sales or margins and/or retain more customers than its competition. There can be many types of competitive advantages including the firm's cost structure, product offerings, distribution network and customer support.

Competitive advantages give a company an edge over its rivals and an ability to generate greater value for the firm and its shareholders. The more sustainable the competitive advantage, the more difficult it is for competitors to neutralize the advantage.

There are two main types of competitive advantages: comparative advantage and differential advantage. Comparative advantage, or cost advantage, is a firm's ability to produce a good or service at a lower cost than its competitors, which gives the firm the ability sell its goods or services at a lower price than its competition or to generate a larger margin on sales. A differential advantage is created when a firm's products or services differ from its competitors and are seen as better than a competitor's products by customers.

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.