Chapter #6: Competitive Position & Sources of Advantage

Question 1

What should be used to analyse competitive position?

Answer 1

Overall value (rather than simply cost)

Question 2

Competitive advantage can result in some level of superior customer value due to a customer’s preference for what three things?

Answer 2

Performance benefits
The cost the purchase
The ease of the purchase

Question 3

Two sources of customer value (cost and performance/differentiation of advantage) attract two different kinds of customers. Which two kinds of customers?

Answer 3

Different perceptions of what’s valuable

• Price focused customers
• Benefit focused customers

Question 4

Superior customer value results in superior __________

Answer 4

Company profit

Question 5

To achieve above average profits a business has to develop what?

Answer 5

A competitive advantage that provides positive customer value.

Question 6

How can a business create superior customer value?

Answer 6

More brand awareness
Broader product lines
Effective distribution
Higher brand preference
Higher market share

Question 7

What are the 3 main sources of competitive advantage?

Answer 7

Cost advantage
Differentiation advantage
Marketing advantage

Question 8

To be a competitive advantage a source of advantage should be ___________.

Answer 8

Meaningful to the customer

Sustainable - not easily copied by competitors

Question 9

What is the scale effect?

Answer 9

A larger unit volume allows for production and purchasing economies of scale

Question 10

What is the scope effect?

Answer 10

A business can lower the average unit cost of all products by adding products that have a similar manufacturing process (made from the same/similar materials)

Question 11

What is the learning effects?

Answer 11

Each unit produced provides additional learning and the opportunity to build the next unit more efficiently

Question 12

What is a product differentiation advantage?

Answer 12

Product differentiation (design, style, usability/easy to use)

Having a product that is a little different and unique

Question 13

What is a service differentiation advantage?

Answer 13

Fewer errors, availability, better customer service (solving customer problems)

Question 14

What is a marketing competitive advantage?

Answer 14

Greater share of the market - most dominant/market leader

Question 15

What is a product line advantage?

Answer 15

More options that encourage a user to make a purchase (grog, toothpaste etc.)

Question 16

What is a channel advantage?

Answer 16

A business that is able to control channels in a market and to some degree control market access (sometimes via relationships with manufacturers)

Question 17

What is a competitive knowledge advantage?

Answer 17

Specialist in the market

Question 18

A business with excellent customer knowledge but limited competitor knowledge will likely __________ to customer demands.

Answer 18

Overreact

Question 19

What is competitor intelligence?

Answer 19

A source of competitive advantage

A way to understand the options available to customers/view the available substitutes

Question 20

What is a perceptual map?

Answer 20

A competitor grid. Gives a better understanding of competitive position and identify key competitors to benchmark against.

Question 21

What are the 3 steps in benchmarking your brand against competitors?

Answer 21

1. Identify a key area of competitive weakness.
2. Identify a benchmark company.
3. Track the benchmark company’s process advantage.

Question 22

What are some examples of industry forces?

Answer 22

Barriers to entry/exit
Customer buyer power
Supplier selling power
Product substitutes
Competitive rivalry