Chapter 5 - Competitive strategies Flashcards
(32 cards)
SWOT Analysis purpose
internal analysis = Strengths + weakness
external analysis = Opportunities + Threats
=> strategy
SWOT Analysis
-Identify company’s resource strength + competitive capabilities
-Identify company’s resource weakness + competitive deficiencies
- Identify company’s market opportunities
-Identify external threats to company’s future well-being
=> conclusions concerning the overall business situation
(attractiveness of the company + where are the (un)attractive parts))
==>Implications for improving company strategy
strategy inferences from SWOT Analysis
=> look for combinations that point towards different alternatives
- S+O Strategy
- S+T Strategy
- W+O Strategy
- W+T Strategy
S+O Strategy
How do I use these STRENGTHS to take advantage of these OPPORTUNITIES?
S+T Strategy
How do I use my STRENGTHS to reduce the likelihood + impact of these THREATS?
W+O Strategy
How do I overcome my WEAKNESSES that prevent me taking advantages of these OPPORTUNITIES?
W+T Strategy
How do I address the WEAKNESSES that will make these THREATS reality?
sustaining competitive advantage
isolation mechanism to prevent imitation
Types of isolation mechanism
- obscure superior performance
- deterrence (agressive signals to imitators)
- Preemption (exploit all available investment opportunities)
- casual ambiguity
- base competitive advantage on immobile/ costly to replicate resources
competitive strategies
- cost advantage
- differentiation advantage
- niche strategy
cost advantage strategy
same price but lower costs = higher profit
cost advantage strategy requirements
- cost control
- product/ service standardisation
- economies of scale/ Scope
- learning effects
- outsourcing/ vertical integration
- bargaining power
cost advantage strategy risks
- catch-up of competitors
- cost-price dynamics (hyper-competition)
- changes in costumer behaviour
cost leadership + experience curve
- empirical estimate: where do unit costs fall - volume of production increases
=> firms which manage to establish first in market -> realize cost advantages through higher market shares + accelerated learning
cost leadership + Economies of scale
=> positive relation between market share + cost level
- usually at capital intensive operations
- source: invisibility + spreading of fixed costs = decreasing costs per unit
cost leadership + Economies of scope
=> positive relation between product portfolio + cost level
(average cost of product lowered by joint production with other products)
! depend on increased variety not higher volume of production!
Economies of scope sources
- use of one/ more common resources in production of several outputs
-spreading fixed costs over more products - application of knowledge + core capabilities to production of several outputs
=> applying knowledge + core competencies to a broader scope of products without using up the relevant knowledge/ competence
Drivers of cost advantage
- economies of scale
- economies of learning
- production techniques
- product design
- input costs
- capacity utilization
- residual efficiency
using the value chain to analyze costs
- identify activities
- allocate total costs
- identify cost drivers
- identify linkages
- identify opportunities for cost reduction
Differentiation strategy
same cost but higher price bc of the differentiation
Differentiation strategy requirements
- brand name/ reputation / image
- superior product quality
- first mover advantage
- strong service + process skills
- design/ marketing skills
- ability to attract creative employees
Differentiation strategy risks
- overspending erodes profitability
- inadequate price premiums
- imitation by the competiors
Differentiation strategy - delivering value via broad differentation
- lower buyer’s overall cost of using the product
- incorporate tangible features -> increase costumer satisfaction (eg. design features)
- incorporate intangible features -> increase buyers satisfaction (eg. status)
- signal the value of the product (justify costumers minds)
=> using the value chain to analyze costs/ skills
Focus (Niche) Strategy
focusses on a narrow costumer segment
- satisfy needs of a specific costumer segment better than any other
- may be defined by geographic uniqueness, specialized requirements in product uniqueness or special products attributes
