Competitive Advantage Flashcards
What is porter’s 5 forces model?
- Rivalry amongst current competitors
- Threat of new entrants (Entry barriers)
- Bargaining power of customers
- Bargaining power of suppliers
- Threat of substitutes
What influences rivarly amongst current competitors?
- Number of competitors and their market share
- Degree of differentiation /”segmentability of market”
- Level of regulation
What are entry barriers?
Advantages that incumbents have relative to new entrants. They are result of the strategies competitors undertake over the years.
- Brand, Trademarks, Patents, Copyrights
- Capital Requirements
- Economies of Scale
- Economies of Scope
- Know how and know why
- Ad-hoc laws and regulations
What is Economy of Scope?
When the marginal cost of goods gets cheaper the more different types of goods one produces.
C(A+B) < C(A) + C(B)
What are Substitutors?
players of different industries (different products) which perform a similar function or satisfy a the same need.
They erode value especially when:
- They offer competitive price-quality products
- Customers can easily switch
Who are suppliers and buyers?
They can erode value when:
- There’s few of them
- They provide specialised product or service
- Customers can easily switch
How can technology impact the 5 forces?
Impacts Entry barriers, rivalry amongst existing competitors, bargaining power of suppliers.
How were the 5 forces in the pharma industry in the 80s and 90s VS 2005?
What are porter’s Generic Strategies?
What were Merck’s and Pfizer’s strategies respectively?
Competitive Advantage = Cost, Differentiation
Scope = Total Market, Niche Market
Cost leadership, Differentiation
Cost Focus, Differentiation Focus
Merck = develop new markets with less rivalry. (Differentiation) Pfizer = Marge to reduce buyer power ad rivalry. (Differentiation and Cost reduction)
What are the competences at core of innovation?
Core competences = unique resources that are hard to imitate and substitute and give rise to important technologies and innovations. (Good scientists, R&D ability)
Complementary assets = resources that help funnel technologies and innovation to the marketplace. (Marketing and Sales)
Describe Hamel and Prahalad’s Model:
The roots of competitive advantage are Core competences.
From core competences the firm develops core products.
Core products are assigned to specific Business Unit.
The Business Unit markets the End Product.
Core competences –> Core products –> Business Units –> End Products
