Unit 18 - Creating Competitive Advantage Flashcards
What are the three steps involved in Analyzing Competitors?
Identifying competitors
Assessing competitors
Selecting competitors
Define Competitive Advantage.
An advantage over competitors gained by offering consumers greater value than competitors offer – it’s what makes your product or service better than the competition
Define Competitor Myopia.
Refers to a firm focusing too narrowly on what it considers to be its direct competition and not being aware of indirect or new competitors
Understand Michael Porter’s Basic Competitive Strategies – cost leadership, differentiation and focus
Overall cost leadership strategy company achieves the lowest production and distribution costs and allows it to lower its prices and gain market share
Differentiation strategy company concentrates on creating a highly differentiated product line and marketing program so it comes across as an industry class leader
Focus strategy company focuses its effort on serving only one or just a few market segments well rather than going after the whole market
Understand the three “other” Basic Competitive Strategies as explained by the Value Disciplines Model created by Michael Treacy and Fred Wiersema – operational excellence, customer intimacy and product leadership
Operational excellence - company provides value by leading its industry in price & convenience by reducing costs and creating an efficient value delivery system
Customer intimacy - company provides superior value by segmenting markets and tailoring products or services to match the needs of the targeted customers
Product leadership - company provides superior value by offering a continuous stream of leading-edge products or services. Product leaders bring new ideas and solutions and to the market quickly
Know the relative market shares of the four Competitive Positions
Market leader 40%
Market Challengers 30%
Market followers 20%
Market nichers 10%
What are the characteristics of a Market Leader?
Expand total demand – increase the market
Protect their current market – keep what you have already achieved, while still growing
Expand market share – grow sales relative to competitors
What are the characteristics of a Market Challenger?
Challenge the leader with an aggressive bid for more market share
Full frontal attack (#2 Lowes taking on #1 Home Depot)
Indirect attack (Southwest Airlines taking on American and other larger airline by focusing on short-haul routes and out-of-the-way airports)
What are the characteristics of a market follower?
Market followers take the safer approach of observing what has made the leader successful, attempting to copy it and sometimes improve on it
Challenge firms its own size or smaller
What are the characteristics of a market nicher?
Key to success with a Market Niche strategy is to specialize by market, customer or product
Ideal market niche is big enough to be profitable with growth potential and has little interest from competitors because it’s so small
