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[answered] BUSINESS COMPETITION Dale Krageschmidt, Ph.D. Viterbo Unive


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.

 

Viterbo University

 

MGMT 550

 

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

 

unique

 

? Competitive success is who will secure

 

the value an industry provides

 

? Doing it differently than the

 

competition

 

? Having a value chain different from

 

the competition

 

? 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

 

best vendor/supplier

 

? There are different customers with

 

different needs

 

? 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

 

prices

 

? Customers may have to give up product/service

 

choices

 

? 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

 

organization to:

 

? Better utilize its resources

 

? Better implement its processes

 

? Achieve its mission and goals ? Operational effectiveness is about continuously improving

 

functional performance

 

? 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

 

the market

 

2. Being the incumbent

 

? A successful entrant becomes the

 

incumbent

 

? An incumbent is always vulnerable to the

 

next entrant

 

? Newer technology, less expensive labor,

 

some other temporary edge, regulations ?incumbent is always vulnerable? COMPETITIVE ADVANTAGES

 

STAY ?LOCAL?

 

? Competitive advantage almost always has a ?local?

 

foundation

 

? Geographical

 

? Product or service line ? When a company moves too far from its base, results

 

deteriorate

 

? Competitive advantages are generally local and specific

 

rather than general and diffuse

 

? Strategic analyses should include a competitive

 

advantages evaluation:

 

? Do any competitive advantages actually exist? COMPETITIVE ADVANTAGE:

 

BARRIERS TO ENTRY VS. DIFFERENTIATION ? Barriers to entry, not differentiation provide

 

strategic opportunities

 

? 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

 

? 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

 

ASSESSMENT

 

3 steps:

 

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

 

exist

 

? Do the incumbents have proprietary advantages (technology,

 

permits, captive customers?

 

? Are there economies of scale or regulatory hurdles? COMPETITIVE ADVANTAGES

 

EVALUATION

 

Three kinds of genuine competitive advantages:

 

1. Supply:

 

? Cost advantages ? produce and deliver products or services more cheaply than

 

competitors 2. Demand:

 

? Differentiation

 

? 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

 

and profitability

 

? 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

 

Kahn, J.

 

Competition

 

Demystified

 

Portfolio Press, 2005 CASE STUDY - APPLE Map of the CPU Chips PC Manufacturing

 

PC Industry Intel

 

DellMicrosoft Yahoo

 

AMD Acer Motorola IBM H-P Apple Software Networks Microsoft

 

Century Link PC Market Share VIA IBM Linux Charter

 

1990

 

Apple Applications

 

Today

 

Levono Microsoft

 

Apple 11%

 

10%

 

Intuit

 

IBM

 

8%

 

Adobe

 

<1%

 

Autodesk

 

H-P

 

8% 20%

 

Dell 13%

 


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