MKT 363 Ch 16: Strategic Elements of Competitive Advantage

distribution channels

a barrier to entry; is channels are full, or unavailable, the cost of entry is substantially increased because a new entrant must invest time and money to gain access to existing channels or to establish new channels

factor conditions

refers to a country's endowment with resources; may have been created or inherited

national advantage

Porter's competitive advantage framework for analysis at the nation-state level; the degree to which a nation develops competitive advantage depends on four elements: factor conditions, demand conditions, the presence of related and supporting industries, and the nature of firm strategy

capital requirements

a barrier to entry that involves monetary needs to finance a new good

product differentiation

a barrier to entry that is the extent of a product's perceived uniqueness--in other words, whether it is a commodity

economies of scale

a barrier to entry that refers to the decline in per-unit product costs as the absolute volume of production per period increases

switching costs

a barrier to entry that results from the need to change suppliers and products

cost advantages independent of scale economies

a barrier to entry; access to raw materials, a large pool of low-cost labor, favorable locations, and government subsidies are several examples

government policy

a barrier to entry; governmental restriction on competitive entry

competitor response

a barrier to entry; if new entrants expect existing competitors to strongly oppose the entry, the entrants' expectations about the rewards of entry will certainly be affected

strategic intent

a competitive advantage framework developed by strategy experts Gary Hamel and C.K. Prahalad; focuses on competitiveness as a function of the pace at which a company implants new advantages deep within its organization; growing out of ambition and obsession with winning --> means for competitive advantage

composition of home demand

a demand condition element that determines how firms perceive, interpret, and respond to buyer needs; competitive advantage can be achieved when this demand sets the quality standard and gives local firms a better picture of buyer needs, at an earlier time, than what is available to foreign rivals

industry

a group of firms that produce products that are close substitutes for each other

disadvantaging

a means of gaining competitive advantage through competitive innovation that weakens another firm's advantage

hypercompetition

a strategy framework developed by Richard D'Aveni that views competition and the quest for competitive advantage in terms of the dynamic maneuvering and strategic interactions by hypercompetitive firms in an industry

basic factors

a type of factor conditions that may be inherited or created without much difficulty because they can be replicated in other nations

layers of advantage

an approach to competitive advantage that describes a company's lower likeliness of facing a risk due to its wide portfolio of advantages

changing the rules of engagement

an approach to competitive advantage that involves a firm refusing to play by the rules set by industry leaders

loose bricks

an approach to competitive advantage that takes advantage of the 'loose bricks' left in the defensive walls of competitors whose attention is narrowly focused on a market segment or a geographic area to the exclusion of others

collaborating

an approach to competitive advantage the involves using know-how developed by other companies; may take the form of licensing agreements, joint ventures, or partnerships

rapid home-market growth

an element of demand that is an incentive to invest in and adopt new technologies faster and build larger, efficient facilities

size and pattern of growth of home demand

an element of home demand that is only important if the composition of the home demand is sophisticated and anticipates foreign demand

Porter's four generic strategies for creating competitive advantage

cost leadership, product differentiation, cost focus, focused differentiation

five forces model

developed by Michael E Porter; explains competition in an industry: threat of new entrants, treat of substitute products or services, the bargaining power of buyers, the bargaining power of suppliers, and the competitive rivalry among current members of the industry

global competition

occurs when a firm takes a global view of competition and sets about maximizing profits worldwide, rather than on a country-by-country basis

cost leadership

one of four options for building competitive advantage; based on a firms position as the industry's low-cost producer in a broad market

differentiation

one of four options for building competitive advantage; present when a firm serves a broad market and its products are perceived as unique; this allows the firm to charge premium prices compared with the competition

focused differentiation

one of four options for building competitive advantage; when a firm serves a small (niche) market and its products are perceived as unique, the firm can charge premium prices

cost focus

one of four options for building competitive advantage; when a firm that serves a small (niche) market has a lower cost structure than its competitors, it can offer customers the lowest prices in the industry

capital resources

one of the five categories of Porter's factor conditions; countries vary in the availability, amount, cost, and types of capital availability to the country's industries; the nation's savings rate, interest rates, tax laws, and government deficit all affect the availability of this factor

infrastructure resources

one of the five categories of Porter's factor conditions; includes a nation's banking system, health care system, transportation system, and communications system, as well as the availability and cost of using these systems

knowledge resources

one of the five categories of Porter's factor conditions; the availability within a nation of a signification portion of the population having scientific, technical, and market-related knowledge means that the nation is endowed with this factor

physical resources

one of the five categories of Porter's factor conditions; the availability, quantity, quality, and cost of land, water, minerals, and other natural resources determine this factor; also includes a country's size and location

human resources

one of the five categories of Porter's factor conditions; the quantity of workers available, the skills possessed by those workers, the wage levels, and the overall work ethic of the workforce together constitute this factor

entry barriers

one of the four arenas of D'Aveni's hypercompetition model that involves industries in which barriers to entry have been built up; include economies of scale, product differentiation, capital investments, switching costs, access to distribution channels, cost advantages other than scale, and government policies

timing and know-how

one of the four arenas of D'Aveni's hypercompetition model that is based on organizational advantages; the six dynamic strategic interactions that drive competition in this arena: capturing first-mover advantages, imitation and improvement by followers, creating impediments to imitation, overcoming the impediments, transformation or leapfrogging, downstream vertical integration

cost/quality

one of the four arenas of D'Aveni's hypercompetition model that occurs via seven dynamic strategic interactions: price wars, quality and price positioning, 'the middle path', 'cover all niches', outflanking and niching, the move toward and ultimate value marketplace, and escaping from the ultimate value marketplace by restarting the cycle

related and supporting industries

one of the four determinants of a 'national diamond' in porter's framework for national competitive advantage; a nation has an advantage when it is home to globally competitive companies in business sectors that comprise related and supporting industries

competitive innovation

the art of containing competitive risks within manageable proportions

demand conditions

the factors that either train firms for world-class competition or that fail to adequately prepare them to compete in the global marketplace

nature of firm strategy, structure, and rivalry

the final determinant of a nation's diamond; domestic rivalry in a single national market is a powerful influence on competitive advantage

competitive advantage

this exists when there is a match between a firm's distinctive competencies and customers' needs permits the firm to outperform competitors