Competitive advantage & value creation Flashcards
Hoe definieer je winst voor de producent?
(prijs die de consument betaalt) - (kost om de grondstof om te zetten in een afgewerkt product
Wat is de theoritische definitie van consumentensurplus? (kost/consument,…)
Consumentensurplus:
gepercipieerde waarde (door de klant) MIN prijs die de consument betaalt
Wat is kost?
Kost om de grondstof om te zetten in een afgewerkt product
Definieer prijs
price consumers pay for the finished good
-> prijs die de consument betaalt
Definieer perceived benefit
= value consumers derive from the finished good
–> wat de klant vindt dat het product waard is
Wat is gecreëerde waarde?
perceived benefit MIN cost
–> wat de klant vindt dat het product waard is MIN kost om de grondstof om te zetten in een afgewerkt product
Wanneer spreek je van superieure waarde? (superior value)
Superior customer value IF:
- real advantages product/service > expected advantages
- Advantages own product/service > advantages product/service competitors
What is a competitive advantage?
When two or more firms compete within the same market, one firm possesses a competitive advantage over its rivals when it earns (or has the potential to earn) a persistently higher rate of profit
Critical note:
Firm may forgo current profit in favor of investments, to be able to attain a competitive advantage in the future!
How does a competitive advantage emerge? Discuss the internal sources of change
Some firms have greater creative and innovative capability (internal change, irrespective of external sources of change)
strategic innovation = new approaches to doing business, including new business models
examples:
- new industries => the creation of a new market
- new customer segments for existing products
How does a competitive advantage emerge? Discuss the external sources of change
- resource heterogeneity among firms means differential impact
(example: tobacco industry, similar resources & capabilities. Competitive advantages tend to be small) - some firms are faster and more effective in exploiting change
–> Schumpeter’s entrepreneurship
What is Schumpeter’s Entrepreneurship?
The ability to act on the opportunity that innovations and discoveries create
=> seizing opportunities is the essence of entrepreneurship
What are the 5 types of competitive advantage?
- Differentiation strategy
- Cost leadership
- Focus differentiation (specialization)
- focus cost leadership
- stuck in the middle
=> the strategy is intertwined with the whole company system (structure/ processes/ culture/…)
What is the differentiation strategy?
Unique selling proposition/ effectiveness
+
total industry
What is the focus differentiation (specialization) strategy?
Unique selling proposition/ effectiveness
+
Niche
What is the cost leadership strategy?
Low cost/ efficiency + total industry
What is the Focus cost leadership strategy?
low cost/efficiency
+
niche
List some key elements of the basis of cost leadership
- economies of scale
- design for easy manufacturing
- control on overhead cost (limited R&D)
- process innovation
- outsourcing
Describe the resources/competences of the basis of cost leadership
- access to capital
- process engineering skills
- tight cost control
- job specialization (efficiency increases)
- quantative targets and goals
Give an example of cost leadership
ryanair
List some key elements of the basis of the differentiation strategy
Emphasis on:
- branding
- quality
- design
- service
- new product development
Describe the resources/ competences of the basis of the differentiation strategy
- marketing skills
- product engineering skills
- creativity
- R&D
- cross functional coordination
What are the dangers of the cost leadership strategy?
- cost benefit fades away (imitation, rises in material prices)
- changing technology
- clients prefer differentiation
- focused players can cut under you prices
What are the dangers of the differentiation strategy?
- imitation
- clients do not attach value on your differentiation
- focused players can add more value
What are the dangers of a failing corporate strategy?
Changing the corporate strategy is very difficult on the short/middle term!!
What would you suggest to a business in a hypercompetitive market?
Do not try to attain a long-term advantage;
rather
Try to achieve a sequence of temporary advantages that keep the firm one step ahead of the rest of the industry
In a hypercompetitive market, what are the four arenas of competition?
- cost & quality (C-Q)
- timing and know-how (T-K)
- Strongholds (S)
- Deep pockets
Give an example of the cost & quality competition in an hypercompetitive market
Pepsi vs. Coke
pepsi started at low cost (twice as much for same price)
because rising ingredient cost
–> increased prices to coke’s level
battle shifted form price to quality
coke& pepsi price spiral!
Give an example of a stronghold in hypercompetition.
Microsoft was able to attain a ‘monopoly’ status in the market at the starting dates, and was able to keep this status for a long time
What are the advantages of the “deep pockets” in hypercompetition?
- stand-alone businesses are discouraged from entering potential markets by the deep-pockets of their rivals
in particular in markets where it is harder to raise external capital
- short-term losses do not automatically result in business failure
