Competitive Advantage G2 Subject : Global Firm Prof. : Tae Koo Kang G2 : Koo min-woo(200510085) Song Eun-gwon(200510227) Kim Jun-won(62338) Jang Seo-young
Opening Case In 2007, Hyundai motor company has put a new car on markets. The new car is “GENESIS” Genesis’ main consumer target is high-income grade. The reason of launching Genesis is that Hyundai motor will be target a high-grade car market over the world. Until 1990s, Hyundai was treated “ Cheep price, suitable quality “ In US car market. But, Global car market is more and more intense. So, Hyundai do not survive existing cost-leadership strategy.
Opening Case In 2007, Hyundai motors has launching High-Class Premium Car “GENESIS” The Means of GENESIS is that Hyundai will be concentrate the premium car market and Differentiation is new strategy on Hyundai.
What is the Competitive Advantage? Competitive Advantage means Something that places a company or a person above the competition
What is the Competitive Advantage? The company will be able to apply to strong point Without being what does not evaluate a property and the ability which the company possesses Competition company comparison will lead and the strong point which is relative could be grasped. The strategy which sees from viewpoint of competitive advantage Continuous a competitive advantage reinforcement and competitive advantage endeavors not to disappear
What is the Competitive Advantage? The reason of enterprise have a competitive advantage Resource/Performance 1. Customer satisfaction and loyalty increase, Increase of profit , Increase of market share -> bring market perfomance 2. The product offering which is value in the market -> competitive advantage offering valuable product and service 3. various size and scope and profitability of company ->The competitive advantage makes the base will be able to expand the enterprise which is various.
What is the Competitive Advantage? Competitive Advantage Cycle.
Step 1. Source of Competitive Advantage Superior assets Super Capabilities Key Success Factor
Step 2. Barriers to Imitation
higher the barrier to entry to company When the new business opportunity coming from the Market which enters first mover advantage barriers to imitation
What is the Competitive Advantage? Step 3. Value proposal form of competitive advantage Operational Excellence Product Leadership Customer Intimacy
Step 4.Eencroachment prevents of competitive advantage
New competitive advantage position construction effort encroachment prevents of competitive advantage Reinvestment of profit asset and capability accumulation resource strengthen of competitive advantage
What is the Competitive Advantage? Cost advantage Similar product At lower cost Competitive Advantage Higher price For unique product Differentiation Advantage
What is the Competitive Advantage? A Model of Competitive advantage Resources Cost advantage Or Differentiation advantage Distinctive Competencies Value Creation Capabilities
What is the Competitive Advantage? Main aspects of five forces analysis 1. the rivalry between existing sellers in the market 2. the potential threat of the entry of new competitors 3. the threat of substitute products becoming available the market 4. the bargaining power of consumer 5. the bargaining power of suppliers
What is the Competitive Advantage? Main aspects of five forces analysis
What is the Competitive Advantage? Competitive advantage strategies
What is the Competitive Advantage? Cost Leadership (Low Cost Strategy) cost Leadership mean that produce goods level of equal more in expensive 2. differentiation (Differentiation Strategy) Differentiation is that provide inventive value can improve of perceive valued of consumers toward product(or service) in the market. 3. Focus Cost Leadership / Differentiation: When competition's range is narrow, in other words when target on specific customer segment will be focused cheap price and differentiation strategy.
2. Sorce of Global Competitive Advantage Adapting to Local Market Differences Companies must respond to the inevitable heterogeneity they will encounter in these markets. Differences in language, culture, income levels, customer preferences, and distribution systems.
2. Sorce of Global Competitive Advantage (a) Increased market share. (b) Improved price realization. Offering standard products and services across countries reduces the boundaries of the served market to only those customers whose needs are uniform across countries. - Tailoring products and services to the preferences of local customers enhances the value delivered to them. - A portion of this increased value should translate into higher price realization for the firm
2. Sorce of Global Competitive Advantage Exploiting Economies of Global Scale Building a global presence automatically expands a company's scale of operations, giving it larger revenues and a larger asset base. Potential benefits of economies of scale in various ways: spreading fixed costs, reducing capital and operating costs, pooling purchasing power, and creating critical mass.
2. Sorce of Global Competitive Advantage Exploiting Economies of Global Scope Global scope refers to the multiplicity of regions and countries in which a company markets its products and services.
2. Sorce of Global Competitive Advantage Tapping the Optimal Locations for Activities and resources A firm that can exploit these intercountry differences better than its competitors has the potential to create significant proprietary advantage
2. Sorce of Global Competitive Advantage Maximizing Knowledge Transfer Across Locations (a) Faster product and process innovation. (b) Lower cost innovation. - A second by-product of not reinventing the wheel is considerable savings in the costs of innovation. (c) Reduced risk of competitive preemption. - A global company that demands constant innovations from its subsidiaries, but does not leverage these innovations effectively across subsidiaries, risks becoming a fount of new ideas for competitors.
3. Competitive Advantage By Porter How a firm can actually create and sustain a competitive advantage in its industry?
3. Competitive Advantage By Porter Competitive Advantage Definition “Competitive strategy is about being different. It means deliberately choosing to perform activities differently or to perform different activities than rivals to deliver a unique mix of value.” -- Michael Porter
3. Competitive Advantage By Porter Two Basic Types Both can be more broadly approached or narrow, which results in the third viable competitive strategy
3. Competitive Advantage By Porter Approach 1 to Competitive advantage: Cost leadership
A firm sets out to become the low cost producer in its industry.
Note: a cost leader must achieve parity or at least proximity in the bases of differentiation, even though it relies on cost leadership for it’s CA.
Note: if more than one company aim for cost leadership, usually this is disastrous.
Examples of Cost Leadership: Nisson; Tesco; Dell
3. Competitive Advantage By Porter Approach 1 to Competitive advantage: Cost leadership Steps in Strategic Cost Analysis STEP1. Identify the appropriate value chain and assign costs and assets to it. STEP2. Diagnose the cost drivers of each value activity and how they interact. STEP3. Identify competitor value chains, and determine the relative cost of competitors and the sources of cost differences. STEP4. Develop a strategy to lower relative cost position through controlling cost drivers or reconfiguring the value chain and/or downstream value.
3. Competitive Advantage By Porter Competitive advantage model 2: Differentiation
a firm seeks to be unique in it’s industry along some dimensions that are widely valued by buyers.
Note: a differentiator cannot ignore it’s cost position. In all areas that do not affect it’s differentiation it should try to decrease cost; in the differentiation area the costs should at least be lower than the price premium it receives from the buyers.
- Area’s of differentiation can be: product, distribution, sales, marketing, service, image, etc.
3. Competitive Advantage By Porter Competitive advantage model 2: Differentiation Steps in Differentiation Determine who the real buyer is Identify the buyer’s value chain and the firm’s impact on it Determine ranked buyer purchasing criteria Assess the existing and potential sources of uniqueness in a firm’s value chain Identify the cost of existing and potential sources of differentiation Choose the configuration of value activities that creates the most valuable differentiation for the buyer relative to cost of differentiating
3. Competitive Advantage By Porter Competitive advantage 3: Focus - a firm sets out to be best in a segment or group of segments. - 2 variants: cost focus and differentiation focus.