Strategic Elements of Competitive Advantage

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Strategic Elements of Competitive Advantage

IKEA

ü  IKEA confront competitors such as supermarkets (Wal-Mart) and other furniture co.

ü  they focused on 3 areas for improvement: product assortment, customer service and product availability. 

ü  Prices are affordable to almost everyone;

ü  colors blue and yellow are Sweden national colors;

ü  customers see the furniture in showrooms and with names instead of model numbers;

ü  shopping is a self-service activity –browse, u write names and look up for them at the lowest level where everything is in flat packs in kit forms that you have to assemble at home.

ü  Most Ikeas have children play area, restaurant, baby care and grocery store.

THE ESSENCE OF MARKETING STRATEGY IS SUCCESSFULLY RELATING THE STRENGHTS OF AN ORGANIZATION TO ITS ENVIRONMENT.

As the horizons of markets have expanded from domestic to regional and global, so too have the horizons of competitors.

The reality in almost all industries today is GLOBAL COMPETITION. This fact puts organizations under increasing pressure.

 

INDUSTRY ANALYSIS: FORCES INFLUENCING COMPETITION

Gain insight into competitors is through INDUSTRY ANALYSIS.

An industry can be groups of co. that are close substitutes for each other.

Harvard university’s Michael Porter developed a five forces model that explains competition in an industry:

1.    Threat (amenaza) of new entrants:

a.     New entrants bring new capacity, desire to gain market share and position and new approaches to better customer needs

b.     New players mean prices will be pushed down and margins squeezed

c.      Barriers

                                               i.     Economies of scale à decline per unit cost while production per unit increases.

                                              ii.     Product differentiation à uniqueness. Achieved as a result of unique product attributes or effective marketing communications, or both.

                                            iii.     Capital requirements à needed for manufacturing facilities and financing R&D, advertising, etc.

                                            iv.     Switching costs à caused by the need to change suppliers and products –as the cost of evaluating a new source

                                              v.     Distribution channels à must invest time and money to enter

                                            vi.     Government policy à government generally restricts competitive entry.

                                           vii.     Cost advantages independent of scale economies à establish firms enjoy this

                                         viii.     Competitive response à if expected à Bruce Henderson: BRINKMANSHIP –occurs when industry leaders convince potential competitors that any market entry effort will be countered with vigorous and unpleasant responses.

2.    Threat of substitute products:

                                               i.     Availability of substitute products places limits on the prices market leaders can change in an industry

                                              ii.     High process may induce buyers to switch to the substitute

3.    Bargaining (negociacion) power of buyers:

                                               i.     Buyers refers to manufacturers –e.g. GM- and retailers –e.g. Wal-Mart)

                                              ii.     Buyer aim to pay lowest possible price

                                            iii.     A way they do this is to buy high quantities that suppliers depend on the buyer’s business

4.    Bargaining power of suppliers:

                                               i.     Is the converse of buyer power

                                              ii.     Suppliers will have the advantage if they are large and relatively few in number.

5.    Rivalry among competitors:...
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