BCG Concepts Flashcards
market share can lead to relative lower cost and therefore higher profits. but 2 principle reasons leads to shift in market share: lack of capacity and a willingness to lose share to maintain price.
If the market grows and the capacity does not, then whoever has the capacity takes the growth and increase their share of the market.
Since low-cost firm typically has the largest market share, his higher-return expectations often lead him to sacrifice share to maintain near-term margins. the loss of moderate amount of the market may seem far less costly short term than meeting a price concession of a minor competitor or spreading the price reduction necessary to fill proposed new capacity over his entire sales volume. Unfortunately the tradeoff is cumulative. more and more share must be given up to maintain price. costs are a function of market share because of experience effect. lost market share leads to loss of cost advantage. eventually, there is no way in resolving profitability.
Change in market share should be an investment decision.
if you are the low-cost competitors, you can carry out with less risk than your competition. the debt can be converted into profit by leverage.
If the high-cost competitor maintain the same debt/equity ratio and uses the same dividend payout ratio as his lower cost competition, it’s inevitable that the higher-cost competitor will lose market share. relative growth must inevitably be in proportion to return on equity under these conditions.
“Capability-based competitive strategy”
The way Walmart replenished inventory is the center piece of its competitive strategy. it has:
- cross-docking logistics technique: goods are not sitting in inventory but cross from one loading dock to another in 48 hrs or less –> reduce inventory and handling costs
- dedicated truck fleet (2000 companies trucks) -> short turnaround time
- private satellite communication system to enable point of sales data between distribution centers, suppliers, and every point of sales in every store
- empowering on-the-spot cooperation without centralized control
- infrastructure to enable exchange information between front-lines and HQ
hui
when the economy was relatively static (durable goods, stable customer needs, well-defined national or regional markets, clearly identified competitors), strategy can afford to be static. competition is a like a war of position on a chessboard. the key to competitive advantage was where a company chose to compete. how it chose to compete was also important but secondary, a matter of execution.
hui
in a moer dynamic business environment, strategy has to be come correspondingly more dynamic. competition is now a war of movement in which success depends on anticipation of market trends and quick response to changing customer needs. successful competitors move quickly in and out of products, markets and sometimes even entire businesses. in such an environment the essence of strategy is not the structure of a company’s products and market but the dynamics of its behavior. the goal is to identify and develop the hard-to-imitate org. capabilities that distinguish a company from its competitors in the eyes of customers.
hui
4 basic capabilities-based competition:
- The building blocks of corporate strategy are not products and markets but business processes.
- Competitive success depends on transforming a company’s key processes into strategic capabilities that consistently provide superior value to the customer.
- Companies create these capabilities by making strategic investments in a support infrastructure that links together and transcends traditional SBUs and functions.
- Because capabilities necessarily cross functions, the champion of a capabilities-based strategy is the CEO.
hui
Capabilities-based competitors identify their key business processes, manage them centrally, and invest in them heavily, looking for a long-term payback.
five dimension to outperform competition:
speed, consistency,
acuity (The ability to see the competitive environment clearly and thus to anticipate and respond to customers’ evolving needs),
agility, innovativeness
