comp analysis 5

COMPANY SITUATION ANALYSIS

V

Factors of competitive advantage of a company

• Quality

• Customer Responsiveness

• Efficiency

• Innovation

Prime sources of competency

• Resources

- that help strengthen demand for a company’s product

• Capabilities/Company Skills - at coordinating its resources and putting them

to productive use.

Resource type

• Financial

• Physical

• Human

• Technological

• Organizational

Resource type

• Tangible

- land, buildings, plant and equipment

• Intangible- brand names, reputation, patents,

technological or marketing know-how

Capabilities

• A company’s capabilities are the product of its organizational structure and culture.

• They specify how and where decisions are made within a company:- the kind of behaviour, - the company rewards and incentive, - the company’s cultural norms and values.

Competitive Advantage

• A company may have unique and valuable resources but unless it has the capability to use these resources effectively it may not be able to create or sustain a distinctive competitive advantage.

• Honda using its distinctive competency in the design and manufacture of high-powered lightweight engines to move from motor cycles to cars, lawn mowers and four-wheel off-road buggies.

Luck

• Can luck be a factor in competitive advantage?

- Microsoft was lucky with Q-DOS

- Japanese had luck in getting foothold in US market

Sustaining a competitive advantage Factors affecting that competition

#1. BARRIERS TO IMITATION

Tangible such as plant and equipment are easily imitated than intangibles such as brand name or marketing or technological know-how.

- Marketing strategies can also be easily copies such as Coca Cola imitating Diet Pepsi.

Sustaining a competitive advantage

# 2. CAPABILITY OF COMPETITORS

Can you identify why 3M is so successful at developing new products?

• Hire the relevant people from the competitor? Mostly it is the team that delivers the result.

Sustaining a competitive advantage

# 3. INDUSTRY DYNAMISM

In a dynamic industry environment where the life cycle of a product is short such as in personal computer competitive advantage can be very transitory as a product today can be made obsolete tomorrow by a competitor’s innovation.

Why do companies fail?

• Companies find it difficult to change their strategies and structures in order to adapt the changing competitive conditions. Examples

- DEC refusing to go micro during the 80s

- IBM finding it difficult to accept the shift from mainframe to small, low-priced personal computers.

Inertia

• Organizational capabilities are the reason for the inertia as certain distribution of power and influence rests within the established decision-making and management processes of the organization.

• Prior strategic commitment can also be a stumbling bloc.

Icarus Paradox

• The Icarus Paradox is an obsession with ones present strategy that has been doing so well such as DEC refusing to budge from Mini or Wang from its word

processors.

Things to Do

• What should a company do to avoid the pitfalls on the path to competitive advantage?

- Focus on the building blocks of competitive advantage

- Institute Continuous Improvement and Learning

- Track best industrial practices through benchmarking

SWOTstrength/weakness

• Financial Resources

• Economy of Scale

• Experience Curve

• Skills – technological, marketing, management

• Core Competence

SWOTstrength/weakness

• Capability – Innovation (R&D)Processing (manufacturing, distribution)

• Patent/Copyright

• Market Image (Customer perception)

• Profitability (par, above or below)

SWOTopportunity

• Emerging new technologies

• Ability to transfer technology to new skills

• Falling trade barriers in attractive foreign markets

SWOTopportunity

• Means to broaden product line to meet broader range of customer needs

• Integrating forward and backward

• Complacency among rivals

SWOTthreat

• Entry of low-cost foreign competitors

• Rising sales of substitutes

• Slower market growth

• Costly regulatory requirements

• Adverse shift in foreign exchange rates

SWOTthreat

• Adverse demographic changes

• Changing buyer needs and tastes

• Growing customer/supplier bargaining power

• Vulnerability to recession or business cycle