Competitive advantages Like a G9 Chapter learning objectives
Competitive advantages Like a G9
Chapter learning objectives Competitive Factors Introduction 2
Porter’s 5 Forces Competitive Advantage Competitive advantage Competitive Factors Key Issue Whether the firm has a sustainable competitive advantage Environmental analysis Porter’s Value Chain SWOT
Porter’s 5 Forces Competitive Advantage Competitive advantage Competitive Factors Competitive Advantage Porter’s Value Chain SWOT Cost leadership Differentiation Focus Choice one Choice two Generic Strategies Cost Leadership Versus differentiantion Degree of Focus
Broad target Narrow target Lower cost Differentiation Competitive scope Basis of competition Competitive Factors Environmental analysis Porter’s 5 Forces Competitive Advantage Porter’s Value Chain SWOT 5
Cost Leadership Competitive Factors Car Industry Porter’s 5 Forces Competitive Advantage Porter’s Value Chain SWOT “Price-sensitive” market Profit Improving process efficiencies, Gaining unique access to low cost materials Making optimal outsourcing, Vertical integration decisions Ways to acquire cost advantages Being the low-cost producer in an industry for a given level quality Genetic strategy Market share 6
Differentiantion Competitive Factors Porter’s 5 Forces Competitive Advantage Porter’s Value Chain SWOT Development of product or service with unique aattributes To reduce the ongoing cost to the customer of using the product To increase customer satisfaction with the product To modify the customer’s perception of value Ways to have successful differentiation strategy 7
Focus Competitive Factors Porter’s 5 Forces Competitive Advantage Porter’s Value Chain SWOT Narrow segment High degree of customer quality Can be the only way into market for a small company competing against larger companies An important advantage of focus strategy Achievement of a cost advantage or differentiation 8
Competitive advantage / Illustration Competitive Factors Car Industry Porter’s 5 Forces Competitive Advantage Porter’s Value Chain SWOT Differentiation Cost Leadership Focus
10 Bargaining power of suppliers Bargaining power of customers Treats of substitute products Threats of entry Competitive rivalry Porter’s five forces model Factors:
Bargaining power of suppliers Bargaining power of customers Treats of substitute products Threats of entry Competitive rivalry Porter’s five forces model 11
Bargaining power of suppliers Bargaining power of customers Treats of substitute products Threats of entry Competitive rivalry Porter’s five forces model 12
13 Bargaining power of suppliers Bargaining power of customers Treats of substitute products Threats of entry Competitive rivalry Porter’s five forces model
14 Bargaining power of suppliers Bargaining power of customers Treats of substitute products Threats of entry Competitive rivalry Porter’s five forces model
Enterprise in economy 15
How do suppliers & customers influence on your margin? 16 Your margin (Depends on managing these two factors) Customers try to buy your goods as cheap as possible Suppliers tend to raise prices on what they provide Customers bargaining power Suppliers bargaining power
High bargaining power of suppliers Lack of substitutes or high switching costs (e.g. Transneft for LukOil) Presence of dominant suppliers controlling prices (e.g. Boing and Airbus for air transporters) Products of suppliers have a uniqueness of brand, technical performance or design (e.g. Cosmetics producers for Specialised retailers) 17
High bargaining power of customers Where a buyer’s purchases are a high proportion of the suppliers business (e.g. Cocoa producers for farmers) Where a buyer makes a low profit (e.g. Auchan for goods producers) Where the quality of purchases is unimportant (e.g. Discount stores for food producers) 18
Porter’s value chain How, if at all, a firm’s activities contribute towards its competitive advantage? 19
Porter’s value chain: primary activities 20
Porter’s value chain: support activities 21
Porter’s value chain: results of analysis 22
How different departments contribute to competitive advantage?
Purchasing Cost advantages: sourcing cheaper materials bulk discounts centralized buying 24 Quality advantages: sourcing higher quality materials employing expert buyer
Production Cost advantages: mass production lines Standardization just above min wages low stock levels 25 Quality advantages: good quality of materials more quality control procedures highly skilled staff flexible manufacturing systems use of technologies ongoing training of staff
Marketing Cost advantages: word-of-mouth promotion sell direct to cut distribution cost centralized buying 26 Quality advantages: market research to meet customer needs large promotional budgets sponsorship perceived quality pricing brand development
Service Cost advantages: outsourcing not offering service provision low paid staff 27 Quality advantages: outsourcing highly skilled staff
SWOT Description One of the most effective tools in the analysis of environmental data and information A SWOT analysis generates information that is helpful in matching an organization’s or a group’s goals, programs, and capacities to the social environment in which they operate
So, What is SWOT SWOT is a summary of your Strengths Weaknesses Opportunities Threats 29 Internal External
SWOT vs. PEST 30
Starbucks SWOT 31 Strength global coffee brand 17,000 stores in 49 countries more than 6500 licenses shops capture key locations Weaknesses Higher prices compared to the competitors Too focus on US domestic market Protest against the company on different issues Opportunities Product diversification Co-branding with other food manufactures Entry into new markets Threats Competition Substitute products
32 Competitive factors Part of external analysis Complements PEST analysis Competitive advantage Porter’s 5 forces Porter’s value chain SWOT Cost leadership Differentiation Focus Competitive rivalry Threat of Entry Threat of substitutes Power of suppliers Power of buyers Primary activities Inbound logistics Operations Outbound logistics Marketing Service Support activities Procurement Infrastructure Technology Strengths Weaknesses Opportunities Threats
Your questions are welcomed 33
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