Acquiring Competitive Advantage through Supply Chain Management

Topics: Supply chain management, Management, Strategic management Pages: 6 (2156 words) Published: May 20, 2014
Acquiring Competitive Advantage through Supply Chain Management

LOGISTICS AND SUPPLY CHAIN MANAGEMENT

EXECUTIVE SUMMARY

Competitive advantage is crucial for a company’s success. For many business models, strategic supply chain management has become the cornerstones of their competitive weapons, for differentiation or cost leadership strategy. They create added value for product and consistently support organizational objectives. This paper will demonstrate how to achieve competitive advantage with corresponding supply chain techniques. A case of Zara will be used to explain in depth.

Table of Contents

1 INTRODUCTION

In today’s increasingly global marketplace, companies and enterprises are confronted with the relentless pressures from competitors all around the world. The well-connected transport network and advanced information technology have addressed the geographical gap to a large extent and render an unprecedentedly fierce and direct competition among different companies. Competitive advantage over rivals is essential for a business model to survive and thrive.

This report is consisted of three parts. The first one will discuss how firms gain competitive advantage via differentiation and cost leadership. Secondly, it will demonstrate how supply chain management supports competitive strategy. The last section is going to analyse the specific case of Zara and its supply chain management in the aspects of agile supply chain vertical integration. Also, comparison with its competitors will be presented to illustrate how supply chain management differentiates Zara’s business model.

2 Where competitive advantage comes from

According to Porter (1980 P.3), ‘Competitive advantage (CA) grows fundamentally out of value a firm is able to create for its buyers that exceeds the firm’s cost of creating it’. Also, he identifies two basic types of CA, namely differentiation and cost leadership, in broader market or particular segments. The following section will focus on these two strategies respectively and the threat to the sustainable competitive advantage.

2.1 Directive Diffentiatiation for gain competitive advantage

To win business competition, companies seek to differentiate their products or service in some way to retain qualitative and valuable uniqueness. In this process, it is of paramount importance to understanding target group of customers’ demand and achieves the differentiation in accordance with demanders’ perceived value (Sharp 1991). Because the perceived value largely depends on subjective preference, directive differentiated products could exclusively match demanders’ specific requirement, which would significantly increase its value, and thereby, achieve value creation. Only when demanders gain satisfaction from its consumption would they have the willingness to pay a high price for a product (Pienaar and Vogt 2009). While determining strategy, differentiation can be achieved through a host of features like better quality or customer service, quick response, or greater availability, which also depends on the characteristics of niche market and targeted customers’ inclination.

2.2 Cost leadership

Apart from differentiation, low cost is another approach to enhance a company’s competitiveness. Because of the lower cost, companies are able to set a more competitive price for their commodities. This can significantly enhance the product attractiveness, especially among those price-sensitive customers. It is an effective strategy to expand market share. On the other hand, low cost is not necessarily consistent with low price. A lowest-cost producer has more flexibility to set their price in accordance with changes in the external environment and marketing strategy. Therefore, along with higher flexibility and efficiency, the company would have a higher profitability than the average in the industry.

2.3 Sustainable the uniqueness and make it an...

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