Global Marketing Exam 2- Ch. 16: Strategic Elements of Competitive Advantage
5 barriers to entry (threat of new entrants)
economies of scale, product differentiation, capital requirements, switching costs, distribution channels
industry
group of firms that produce products that are close substitutes for one another
competitive advantage
the rest of a match between a firms's distinctive competencies and the factors critical for creating superior customer value in an industry
nature of firm strategy, structure and rivalry
4th determinate of a national "diamond"
What is the connection between national competitive advantage and company competitive advantage?
National competitive advantage: sum of the company competitive advantage in a country, derived from formulation and implementation
Give an example of a a company that illustrates each of the four generic strategies that can lead to a competitive advantage:
Overall cost leadership: Bic, Walmart Cost Focus: IKEA, Kia Differentiation: Kodak, Gillette, Nike Differentiation Focus: Harley-Davidson
factor conditions
a country's endowment with resources (ex: Human, Physical, Knowledge, Capital and Infrastructure Resources)
hypercompetition
a dynamic competitive world in which no action or advantage can be sustained for long
double diamond framework
a framework for understanding national competitive advantage in terms of a "double-diamond" instead of the singe diamond founding Porter's national advantage model
cost leadership (low-cost advantage)
competitive advantage based on a firm's position as the industry's low-cost producer
4 generic strategies
cost leadership, product differentiation, cost focus, and focused differentiation
related and supporting industries
one of the determinants of national advantage
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 (composition, size, pattern of home demand, and rapid home market growth)
According to current research on competitive advantage, what are some of the shortcomings of Porter's models?
they are static, rather than dynamic; 5 forces model has been criticized for placing too much emphasis on entry barriers; today's competitive environment is much more dynamic than it was when it was created in 1970s; does not explain why different companies in the same industry facing the same forces perform differently
Outline Porter's 5 forces model of industry competition. How are the various barriers to enter relevant to global marketing?
threat of new entrants (increases once global), threat of substitute products (limits a company's ability to raise prices), bargaining power of buyers and suppliers, rivalry among competitors (intense in global industries such as automobiles, consumer electronic and pharmaceuticals);
5 forces model
threat of new entrants, threat of substitute products, bargaining power of suppliers and buyers, rivalry among competitors
How can a nation achieve competitive advantage?
through the four determinate of competitive advantage: 1. Factor conditions 2. demand conditions 3. related and supporting industries 4. firm strategy, structure, and rivalry
cost focus
when a firm's lower-cost position enables it to focus on a narrow target and offer lower prices than the competition (IKEA)
differentiation
when a firm's product has an actual or perceived uniqueness in a broad market
focused differentiation
when a firm's small niche market and its products are perceive as unique, the firm can change premium prices