From the ?lecture slide, talk about the business strategies of the PC manufacturers that jump out at you when you study the information.
BUSINESS COMPETITION Dale Krageschmidt, Ph.D.
Business Strategies for Sustainable Change WHAT IS COMPETITION?
? Competition is a continuous pressure
challenging a company to find and
maintain an advantage
? Competitive success does not mean
being the ?best?
? Competitive success comes from being
? Competitive success is who will secure
the value an industry provides
? Doing it differently than the
? Having a value chain different from
? Having a P & L better than the
industry average ?In business you can win without annihilating your rivals, ? Port WHAT IS COMPETITION?
? In order to thrive, a company must
determine the competitive advantage
? Competition should place greater focus
on the customer rather than the rivals
? Most business niches have no absolute
? There are different customers with
? Avoid competitive convergence,
? i.e., many companies doing the same
things in the same ways Porter likes to say,
?One-upmanship is not a strategy? HEAD-TO-HEAD COMPETITION
? Classical theory: Perfect competition is the most
efficient way to promote social welfare
? Porter?s theory: Head-to head competition is rarely
perfect for either customers or companies
? Customers may benefit from resulting lower
? Customers may have to give up product/service
? As the choices diminish, value is destroyed
? Forced to pay for extras not needed or wanted
? Forced to make do with what is available Porter, ?As they become more complex,
they have also become more prone to
costly failures.? OPERATIONAL EFFECTIVENESS
? Operational effectiveness refers to an organization that is has
functions that work well
? These functions must fit together and work in conjunction with each
other to implement a wanted strategy
? Operational effectiveness involves practices that enable an
? Better utilize its resources
? Better implement its processes
? Achieve its mission and goals ? Operational effectiveness is about continuously improving
? Porter, ?Operational effectiveness is doing what rivals do, but doing
it better ? it is internal (tactical), not external (strategy)?
? Bruce Greenwald, ?Life is an unprotected market ? only the very
best players will survive and prosper, and even they have to be
continually on their toes? ?? on their toes? COMPETITIVE EDGE
? Competitive edge is being able to
do what rivals cannot
? How does a company get an ?edge??
1. There is an entry barrier to getting into
2. Being the incumbent
? A successful entrant becomes the
? An incumbent is always vulnerable to the
? Newer technology, less expensive labor,
some other temporary edge, regulations ?incumbent is always vulnerable? COMPETITIVE ADVANTAGES
? Competitive advantage almost always has a ?local?
? Product or service line ? When a company moves too far from its base, results
? Competitive advantages are generally local and specific
rather than general and diffuse
? Strategic analyses should include a competitive
? Do any competitive advantages actually exist? COMPETITIVE ADVANTAGE:
BARRIERS TO ENTRY VS. DIFFERENTIATION ? Barriers to entry, not differentiation provide
? Differentiation may keep a product from being a
generic commodity. Similarity in product/service
delivery can cause:
? Intense competition
? Low profitability
? Efficient firms earn no more than a normal
return on their invested capital COMPETITIVE ADVANTAGE:
? Efficiency is necessary for survival where the
market has no barriers to entry
? Product differentiation does not come for free
? Advertising, R&D, sales and service, distribution, ?.
? ROI will fall below efficient competitors ? Less efficient companies further decline when
successful companies expand
? Even with premium pricing, ROI for differentiation
will decline COMPETITIVE ADVANTAGES
1. Identify the competitive landscape in which the firm operates
? Which markets?
? Who are the competitors?
2. Test for existence of competitive advantages in each market
? Incumbent firms ? stable, profitable
3. Identify the likely nature of any competitive advantage that may
? Do the incumbents have proprietary advantages (technology,
permits, captive customers?
? Are there economies of scale or regulatory hurdles? COMPETITIVE ADVANTAGES
Three kinds of genuine competitive advantages:
? Cost advantages ? produce and deliver products or services more cheaply than
competitors 2. Demand:
? Branding (habits)
? Cost of switching
? Expense of looking for a substitute 3. Economies of scale
?. Some others:
? Governmental protection
? Superior access to information USE YOUR COMPETITIVE ANALYSIS
TO BUILD YOUR BUSINESS STRATEGY
? Identifying your firms competitive advantage
analysis to determine a market share stability
? Exposes unseen costs, customer captivity, economies
of scale ? Should assist in determining sustainability A S S E S S I N G C O M P E T I T I V E A D VA N TA G E Greenfield, B. and
Portfolio Press, 2005 CASE STUDY - APPLE Map of the CPU Chips PC Manufacturing
PC Industry Intel
AMD Acer Motorola IBM H-P Apple Software Networks Microsoft
Century Link PC Market Share VIA IBM Linux Charter
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