Strategic elements of competitive advantage
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Strategic Elements of Competitive Advantage. Chapter 10 Global Marketing. Industry Analysis. Industry – group of firms that produce products that are close substitutes for each other Five forces influence competition in an industry. Porter’s Five Forces Model. Threat of New Entrants.

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Strategic Elements of Competitive Advantage

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Strategic elements of competitive advantage

Strategic Elements of Competitive Advantage

Chapter 10

Global Marketing


Industry analysis

Industry Analysis

  • Industry – group of firms that produce products that are close substitutes for each other

  • Five forces influence competition in an industry

Keegan and Green, Chapter 10


Porter s five forces model

Porter’s Five Forces Model

Threat of

New Entrants

Threat of

Substitutes

Industry

Competitiveness

Bargaining

Power

of Buyers

Bargaining

Power

of Suppliers

Current

Rivalry

Keegan and Green, Chapter 10


Threat of new entrants

Threat of New Entrants

  • New entrants mean downward pressure on prices and reduced profitability

  • Barriers to entry determines the extent of threat of new industry entrants

Keegan and Green, Chapter 10


Barriers to entry

Economies of Scale

Product differentiation

Capital requirements

Switching costs

Distribution channels

Government policy

Cost advantages independent of scale economies

Competitor response

Barriers to Entry

Keegan and Green, Chapter 10


Threat of substitute products

Threat of Substitute Products

  • Availability of substitute products places limits on the prices market leaders can charge

  • High prices induce buyers to switch to the substitute

Keegan and Green, Chapter 10


Bargaining power of buyers

Bargaining Power of Buyers

  • Buyers seek to pay the lowest possible price

  • Buyers have leverage over suppliers when

    • They purchase in large quantities (enhances supplier dependence on buyer)

    • Suppliers’ products are commodities

    • Product represents significant portion of buyer’s costs

    • Buyer is willing and able to achieve backward integration

Keegan and Green, Chapter 10


Bargaining power of suppliers

Bargaining Power of Suppliers

  • When suppliers have leverage, they can raise prices high enough to affect the profitability of their customers

  • Leverage accrues when

    • Suppliers are large and few in number

    • Supplier’s products are critical inputs, are highly differentiated, or carry switching costs

    • Few substitutes exist

    • Suppliers are willing and able to sell product themselves

Keegan and Green, Chapter 10


Rivalry among competitors

Rivalry among Competitors

  • Refers to all actions taken by firms in the industry to improve their positions and gain advantage over each other

    • Price competition

    • Advertising battles

    • Product positioning

    • Differentiation

Keegan and Green, Chapter 10


Competitive advantage

Competitive Advantage

  • Achieved when there is a match between a firm’s distinctive competencies and the factors critical for success within its industry

Low Cost

Differentiation

Keegan and Green, Chapter 10


Figure 10 2 generic strategies

Figure 10-2: Generic Strategies

TARGET MARKET

Narrow Broad

Focused

Differentiation

Product

Differentiation

Narrow

Wide

Product

Mix

Width

Cost

Focus

Cost

Leadership

Keegan and Green, Chapter 10


Figure 10 3 the flagship model

Figure 10-3: The Flagship Model

Keegan and Green, Chapter 10


Approaches to competitive innovation

Approaches to Competitive Innovation

  • Building layers of advantage

  • Searching for loose bricks

  • Changing the rules of engagement

  • Collaborating

Keegan and Green, Chapter 10


Global competition

Global Competition

  • Occurs when a firm takes a global view of competition and sets about maximizing profits worldwide, rather than on a country-by-country basis

Keegan and Green, Chapter 10


Figure 10 4 national diamond

Figure 10-4: National Diamond

Keegan and Green, Chapter 10


Role of chance and government

Role of Chance and Government

  • Chance events are occurrences that are beyond control

    • They create major discontinuities

  • Government is also an influence on determinants through roles

    • Buyer of products

    • Maker of policies

    • Regulator of commerce

Keegan and Green, Chapter 10


Figure 10 7 the complete system

Figure 10-7: The Complete System

Keegan and Green, Chapter 10


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