What do the terms “Competitive advantage”, “Customer Value” and “Voice of the Customer” mean?
Competitive advantage is the separating factor between you and your competitors
Customer Value is the benefit a customer gets from a product of service in comparison with its cost.
Voice of the Customer is a market research technique which produces a detailed set of needs and wants organised hierarchically
What is Porters generic strategies model of countering competitive forces?
Cost Leadership – lowest cost
Differentiation – offers services deemed to be unique e.g. by image or product such as rolex
Focus – targeting a specific market
How was Porters generic strategies for countering competitive forces adapted?
Due to focus being unable to achieve competitive advantage on its own, a matrix was set up with 4 quadrants,
Low focus cost leadership – overall cost leadership with a high volume low cost strategy
High focus cost leadership – cost focus strategy targets markets with lowest disposable income levels
Low focus differentiation – unfocused differentiation strategy utilises attributes such as high quality
High focus differentiation – differentiation focus strategy targets very niche markets
What is the strategy clock approach to countering competitive forces?
It focusses on customer value and price and produces a greater combination of possible strategies.
Low price – market penetration strategy
Hybrid – aggressive strategy to deal with competitors but difficult to sustain
Focussed differentiation – perceived added value to a particular segment warranting a premium price
Low price, low added value – without unnecessary extras
Once you have successfully implemented a strategy for competitive advantage, how can it be sustained? Give two examples for price based and differentiation based.
Price based can be sustained if increased volumes compensate for reduced profit margins or the company has distinctive strategic competencies which drive down costs throughout the supply chain so margins are maintained.
Differentiation based can be sustained if it is perceived by customers there are high switching costs or generated profit margins are sufficient to reinvest in differentiation. It could also be if the differentiation is too costly for competitors to imitate.
What methods are there for collaborating with the supply chain to achieve competitive advantage?
- Consortium buying
- Partnership sourcing
- Industry collaboration in R&D
- Collaborative advertising
- Forming joint ventures to share resource
What elements must be considered when analysing the strategic position (P of the PCA model for strategy development model)?
Stakeholders – can exist throughout all environments below
• Internal environment consists of factors specific to the organisation, which might influence the way it conducts its operations or the way it acts.
• Micro environment is the competitive environment and consists of the factors that affect the specific industry or sector.
• Macro environment consists of external factors such as the economy
What is a useful tool for monitoring external factors in both the macro and micro environment?
S – Social T – Technology E – Environment E – Economy P – Political L – Legal E - Ethics
What is Porters model which analyses competition, an element which does not fit into the STEEPLE framework ?
Porters 5 forces are:
- Bargaining power of suppliers
- Bargaining power of buyers
- Rivalry among existing firms
- Threat of new entrants
- Threat of substitute products or services
As well as competition, another key consideration to bear in mind is the product life cycle and how this changes over time. What does the product life cycle graph look like and why is this important?
It is important for a strategist to understand which part of the product lifecycle under consideration. This demonstrates competitive forces varying over time. (Graph is revenue/profit plotted against time with revenue and profit increasing over time but then eventually curving down and decreasing)
What is cycle competition?
The process of competitive action and reaction between competing companies.
What three things should you consider when doing competitor assessment?
- Their goals and likely strategies (how they might try to compete)
- Their capabilities (strengths and weaknesses)
- How they might respond to environmental threats and opportunities