Strength: 1) Product range 2) Brand name 3) Product quality | Weakness: 1) Inventory cost 2) Unstable supply 3) Labor retentions| Opportunity: 1) High growth 2) Low Inflation 3) Political certainty | Threat: 1) Strong competition 2) Regional disparity 3) Reduced tax benefits| Sources of competitive advantage: Market position: porters -The internal rivalry: -Identify competitors: -firms making the same product or products to the same customers at a similar products to the same customers at similar prices, -firms making products that supply the same service. Measure the intensity of rivalry: -number of existing competitors, -the industry growth rate, -the degree of product differentiation, -industry cost structure, -exit barriers, -excess capacity. -Deter the new entrants: -the established brand/reputation -existing relationships with buyers and distributors -location advantages; access to raw materials, gov favourable policies. -the experience curve as an entry barrier; the learning effect, -scale economies. –
Threat of substitutes: -substitutes vs complements; substitutes increase the intensity of rivalry; DVD adds pressure on all existing VCR manufacturers ubstitutes increase the bargaining power of buyers -seemingly strong substitutes may pose little threat if they are prices too high -Bargaining power of suppliers: -suppliers can squeeze industry profits if; -suppliers are concentrated and there are few substitutes (monopolise/have greater bargaining power) -suppliers pose a threat of forward integration (becoming distributor/retailer downstream) -their customers are locked into relationships with them; highly specialised investment leads to high switching costs -supplier power should not be taken synonymous (equal) with the importance of an input to a firm Bargaining power of buyers: -buyers have strong bargaining power if; -buyers are concentrated or purchase in large volume -buyers pose a threat of backward integration (becoming a supplier upstream) -the products are standard or undifferentiated (they can switch/have multiple options) -sellers make high transaction-specific investments -buyer power is related to the intensity of internal rivalry; the higher the intensity of internal rivalry, the stronger the buyer power -sources of competitive advantage: resources and capabilities; -resources; firm-specific assets: the firm has access to, but don’t have to own tangible; -plant capacity, information systems, – patents and trademarks, -buyers, suppliers, partners. -intangible; -brand-name, reputation, -org culture, -staff morale, customer loyalty, supplier commitment -capabilities: activities that a firm does better than competitors; arising from using firm specific resources. -value chain: -Resource-based view (RBV): RBV of the firm; -a heterogeneous (different) bundle of resources and capabilities -each firm is different and has its unique character -enables a firm to compete in the marketplace. resources and capabilitiescore competencies (firm specific, difficult to imitate and have developed over time)competitive advantage -the sustainability of a firms competitive advantage; depends on how costly it is for other firms to obtain the same resources and capabilities. –
The basis of sustainable competitive advantage: RBV -How rare/valuable is the resource: -value: only value-adding resources can possibly lead to competitive advantage. but what was previously a value-adding resource and capability may become obsolete. rare: resource heterogeneity (different); the basic condition of competitive advantage: scarce. resources that are valuable but not rare are unlikely to become sources of competitive advantage. -How mobile/tradable is the resource: -perfectly immobile: non-tradable (org culture) – CEO not a source of sustainable C. A; Can be traded -imperfect mobile: tradeable but are relationship-specific (e. g registered trademark, co-specialised assets) -How replicable/imitable is the resource: -resources that can be easily copied or imitated provide little scope for competitive advantage. does the ‘best practice’ give you sustainable competitive advantage? -complex, tacit and hard-to-describe knowledge; knowledge only transferred by doing/hard to teach. -How easily can the resource be substituted: -the availability of alterative resources that fulfil a similar purpose –
Preventing limitation: -isolating mechanisms: the economic forces that limit the extent to which a competitive advantage can be duplicated or neutralised. -tangible isolating mechanisms: -legal restrictions; patents, copyrights, trademarks, government control (licensing quotas) -superior access to inputs or customers market size and sale economies; scale-based advantage can be sustainable only if demand does not grow too large (if it does new entrants will emerge in the market due to increased demand) -intangible isolating mechanisms: – causal ambiguity; the cause of a firms ability to create more values of its competitors are obscure and only imperfectly understood. tacit knowledge; difficult to articulate, write down, or codify as an algorithm, formula and set of rules. tacit capabilities; develop through trial and error, learn by doing. path dependence: firm capabilities are accumulated in its unique history –Japanese subcontracting – social complexity: socially complex process underlies firm advantage -Impeding substitution: -resource substitution: -the use of alternative resources and capabilities to achieve a same or better outcome. embodies fundamentally different set of mment practices, technologies and of bus models. – dynamic capability: the firms ability to reconfigure, reintegrate and transform its existing resources and capabilities into new competencies and C.
A. –escalate the ‘performance hurdle’. the importance of learning: a forms core competencies are accumulated rather than acquired in factor markets READ FROM HERE Sources of Competitive Advantages – External analysis: – Porter’s view Five forces model: Buyers’ power, suppliers’ power, threats from new entrants, threats from substitute products, internal rivalry. (outside in perspective; good strategy should be based in immediate environment), if you don’t understand your immediate enviro you won’t be able to have a good strategy.
Emphasise to how analyse your immediate industrial enviro; and therefore decide you should position yourself within that particular industry or not; look at 5 forces; which collectively constitute the law of the competition (all forces shape the competition). – Internal analysis Resource-based view; Conditions for sustainable competitive advantages – Valuable, rare, non-imitable, non-substitutable. key to creating and sustaining CA lies within the bus inside out perspective (not about how to position yourself in your immediate industrial environment) particularly to creating ‘sustainable’ advantage.
Key to creating good strategy based on careful analysis on resources, which will enable the firm to achieve those objectives. If you don’t have a strong resource base in terms of these 4 criteria’s, you don’t potential to have a good strategy. Having all 4 doesn’t ensure CA, just implies stronger potential to achieve long term CA. Complimentary between the two: SWOT analysis (traditional framework for analysing strategy frameworks) OT deals with porters; SW deals with RBV; Resources will create potential CA