DEVELOPING A COMPETITIVE ADVANTAGE

Transcription

1 INTERNATIONAL ISSUES DEVELOPING A COMPETITIVE ADVANTAGE Project and Industrial Planning

2 INDUSTRY DEFINITION The arena of competition is described in terms of: Its boundaries, Its rules of the game, and Its players. The industry: all the activities that are necessary to deliver a product or service that meets the expectations of a market. Many definitions of a company's business, or of its industry is more to its business than a product, a process, and a market. In fact an entire chain of activities, from product design to product utilization by the final customer, that must be mobilized to meet market expectations. ti The most commonly accepted term to designate this chain of activities is the business system.

3 INDUSTRY DEFINITION

4 INDUSTRY DEFINITION

5 COMPETITIVE MOVES Competitive Advantages Offered by the Business System. competitive formulas are the basis of all successful strategies: t In the watch industry the main activities of the business system include design, manufacturing of movement parts, movement assembly, case manufacturing and assembly, wholesaling, and retail. Each activity can be performed to maximize the perceived value for the final user, or to minimize the delivered cost. Design, for example, can emphasize luxury and elegance, or it can ensure low cost manufacturing. Traditional distribution channels through wholesalers and specialty stores will provide more perceived value, while mass distribution ib ti directly through h low-margin outlets t will contribute t to a low delivered cost. A range of competitive formulas can thus be developed, combining the various activities of the business system in a manner that will provide the desired per-ceived value at the desired delivered cost.

6 THE IMPORTANCE OF STRATEGY

7 The State of Competition Intense competition Its nature is Mild competition Its nature is Perfectly competition Its nature is The corporate strategist's goal is to find a position in the industry where his or her company can best defend itself against these forces or can influence them in its favor.

8 The Contending Forces The importance of strategy formulation even a company with a strong position in an industry unthreatened by potential entrants will earn low returns if it faces a superior or lower-cost substitute product coping with the substitute becomes the number one strategic t priority. it Every industry has an underlying structure that gives rise to these competitive forces. The strategist, wanting to position his company to cope best with its industry environment or to influence that environment in the company's favor, must learn what makes the environment tick.

9 Threat of Entry Economies of scale These economies deter entry by forcing the aspirant either to come in on a large scale or to accept a cost disadvantage. Product differentiation Brand identification creates a barrier by forcing entrants to spend heavily to overcome customer loyalty. Capital requirements The need to invest large financial resources in order to compete. Cost disadvantages independent of size Entrenched companies may have cost advantages not available to potential rivals, no matter what their size and attainable economies of scale: Proprietary technology Access to the best raw materials sources Assets purchased at preinflation prices Government subsidies Favorable locations.

10 Threat of Entry Access to distribution channels The new entrants must secure distribution of his product or service. A new food product must displace others from the supermarket shelf via price breaks, promotions, intense selling efforts, or some other means. Government policy The government can limit or even foreclose entry to industries with such controls as license requirements and limits on access to raw materials. The government can also play a major indirect role by affecting entry barriers through controls such as air and water pollution standards and safety regulations.

11 Powerful Suppliers and Buyers A supplier group is powerful if: It is dominated by a few companies and is more concentrated than the industry it sells to. Its product is unique or at least differentiated, or if it has built up switching costs (fixed costs buyers face in changing suppliers) It is not obliged to contend with other products for sale to the industry. It poses a credible threat of integrating forward into the industry's business. The industry is not an important customer of the supplier group.

12 Powerful Suppliers and Buyers A buyer group is powerful if: It is concentrated or purchases in large volumes. The products it purchases from the industry are standard or undifferentiated. The products it purchases from the industry form a component of its product and represent a significant fraction of its cost. It earns low profits, which create great incentive to lower its purchasing costs. Highly profitable buyers are generally less price sensitive. The industry's product is unimportant to the quality of the buyers' products or services. The industry's product does not save the buyer money; rather, he is interested in quality. The buyers pose a credible threat of integrating backward to make the industry's product.

13 Substitute Products By placing a ceiling on prices, substitute products or services limit the potential of an industry the industry will suffer in earnings and possibly in growth. Substitute products that deserve the most attention strategically are those that: are subject to trends improving their price- performance trade-off with the industry's s product, are produced by industries earning high profits. Substitutes often come rapidly into play if some development increases competition in their industries and causes price reduction or performance improvement.

14 REACHING THE GLOBAL MARKETS Western Europe Intratrade: 1,616 *) North America Intratrade: Asia/Pacific Rim Intratrade: Rest of World Intratrade: *) Billions of dollars

15 NATIONS COMPETITIVE ADVANTAGE Company strategy, structure, and rivalry Number of companies in the industry Intensity of competition Public or private Demand ownership conditions Factor conditions Size of market Natural resources Sophistication of Education and skill levels e customers Wage rates Media exposure of products Related and supporting industries Existence of supplier clusters

16 EMERGENCE OF BORDERLESS ECONOMIC WORLD Protectionism Tariffs Quota Increase prices Limit supply Decrease world trade

17 DECLINE OF ECONOMIC PROTECTIONISM General Agreement on Tariffs and Trade (GATT) Tariffs reduction World Trade Organization (WTO) Decide on trade dispute between members Issue binding decisions European Union (EU) In 1993 eliminated most of trade barriers North American Free Trade Agreement (NAFTA) Asian Free Trade Agreement (AFTA)

18 A New Reality Global competition among global companies for global consumers Global competition: firms originate, produce, and market their products and services worldwide Global strategic alliances: two or more independent firms agree to cooperate Global l companies: Three types: International firms extension of home country Multinational firms multidomestic marketing strat. Transnational firms global marketing strategy Global consumers: Customer groups living in Global consumers: Customer groups living in many countries having similar needs

19 THE EMERGENCE OF A NETWORKED GLOBAL MARKETSPACE The wide use of Internet/web based technology as a tool for exchanging goods, services, and information

20 GLOBAL MARKET-ENTRY STRATEGY Higher potential Profit p Lower Exporting: Direct Indirect Licensing: Contract manufacturing Contract Assembly Franchising Joint venture Direct investment

21 PRODUCT AND PROMOTION STRATEGIES Product Emphasis Same product Adapt product New product Pro omotion Emphasis ion Sam me promot tion Adap pt promot Product Extension Strategy Communication Adaptation Strategy Product Adaptation Strategy Dual Adaptation Strategy Product Invention Strategy

22 DISTRIBUTION AND PRICING STRATEGIES Distribution strategy: Seller Seller s International Marketing headquarters Channels Channels within foreign nations between nations Final consumers Pi Pricing i strategy: t Dumping Grey market