Competitive advantage

1. G2
Competitive
Advantage
Subject : Global Firm
Prof. : Tae Koo Kang
G2 : Koo min-woo(200510085)
Song Eun-gwon(200510227)
Kim Jun-won(62338)
Jang Seo-young

2. 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.

3. 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.

4. 1. What is the Competitive Advantage?
2. Source of Global
Competitive Advantage
3. Competitive Advantage by
Porter

5. Competitive Advantage means
Something that places a company
or a person above the competition

6. 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

7. 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 expan
d the enterprise which is various.

8. Competitive Advantage Cycle.
STEP4. Encroachment
STEP3. Value proprsal
STEP2. Barrier to
Imitation
STEP1. Source of
Competitive Advantages.
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

9. 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

10. Competitive
Advantage
Cost advantage
Differentiation
Advantage

11. A Model of Competitive advantage
Resources
Distinctive
Competencies
Capabilities
Cost advantage
Or
Differentiation advantage
Value
Creation

12. 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

13. Main aspects of
five forces analysis

14. Competitive advantage
strategies

15. 1. 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.

16. Source of Global competitive
advantage
Adapting to
local
market
differences
Exploiting
economies
of global
scale
Exploiting
economies
of global
scope
Tapping
the optimal
locations
for
activities
and
resources
Maximizing
knowledge
transfer
across
location

17. 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.
(a)
Increased
market
share.
(b) Improved
price
realization.
(c)
Neutralizing
local
competitors.
Adapting to
local market
differences

18. (a) Increased market share.
Offering standard products and services across countries
reduces the boundaries of the served market to only those
customers whose needs are uniform across countries.
(b) Improved price
realization.
- 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

19. © Neutralizing local
competitors.
One of the natural advantages enjoyed by most local competitors
stems from their deep understanding of and single-minded
responsiveness to the needs of the local market.

20. 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.

21. • Benefit is most salient in areas such as research and development,
operations, and advertising.
(a) Spreading Fixed costs over larger volume.
(b) Reducing capital and operating costs per unit.
• Concentrating global purchasing power over any specific supplier
generally leads to volume discounts and lower transaction costs.
(c) Pooling global purchasing power over suppliers.
• Larger scale gives the global player the opportunity to build centers of
excellence for the development of specific technologies and/or products
(d) Creating requisite critical mass in selected activities.

22. Exploiting Economies of Global Scope
Global scope refers to the multiplicity of regions and countries
in which a company markets its products and services.
(a) Providing coordinated services to global customers.
• A global supplier has the opportunity to
understand the unique strategic requirements
and culture of its global customer.
(b) Market power compared with competitors

23. 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
(a) Performance enhancement.
• Location decisions can affect the cost structure in terms of the cost of
local manpower and other resources, the cost of transportation and
logistics, as well as government incentives.
(b) Cost reduction.
(c) Risk reduction.

24. 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.

25. How a firm can actually
create and sustain a
competitive advantage
in its industry?

26. 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

27. Two Basic Types
Differentiation
Cost Leadership
Both can be more broadly approached or narrow, which
results in the third viable competitive strategy

28. 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.
- Often achieved by economies of scale
-Examples of Cost Leadership: Nisson; Tesco; Dell

29. 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.

30. 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.

31. Steps in Differentiation
Competitive advantage model 2: Differentiation
1. Determine who the real buyer is
2. Identify the buyer’s value chain and the firm’s impact on it
3. Determine ranked buyer purchasing criteria
4. Assess the existing and potential sources of uniqueness in a firm’s
value chain
5. Identify the cost of existing and potential sources of differentiation
6. Choose the configuration of value activities that creates the most valuabl
e differentiation for the buyer relative to cost of differentiating

32. 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.