Competitive Strategies

Competitive Strategy

• Strategy firms use to get an advantage over rivals.
• This involves choosing actions that provide an edge over competitors involved in the same market.

Generic Competitive Strategies

• Frameworks developed by Michael Porter.
• Focused Cost Leadership: Aims at a niche market by reducing costs.
• Intense cost efficiency and significant profit margins inside a niche can be advantageous.
• Can be at risk if competitors target the niche more broadly or if cost benefits disappear.
• Broad Cost Leadership: Lower costs than competitors while attracting a broad market.
• Economies of scale and pricing power are advantageous.
• Quality or innovation can be affected and requires continuous cost-cutting.
• Focused Differentiation: Providing specific traits to a target market.
• Strong customer loyalty and ability to charge premium prices inside the segment can be advantageous.
• Market size is limited, and improvements from competitors can cause vulnerability.
• Broad Differentiation: Offering unique products or services on a wide scale.
• Building solid brand loyalty and withstanding price competition are advantageous.
• High costs to maintain uniqueness with risks of imitation from competitors

Dual-Advantage (Blue Ocean) Strategy

• Creates a new market by pursuing differentiation and cost leadership simultaneously.
• Reduces competition and creates an uncontested market.
• Difficult to sustain if rivals imitate or if barriers to the market diminish.

Positioning Concepts

• Stuck-in-the-Middle: Failure to choose either cost leadership or differentiation.
• Firms risk ineffective competitive positioning or resource dilution.
• "Blue Ocean" Strategy: Creativity to innovate in untapped markets with decreased competition.
• Emphasis on innovation of value can result in high growth; innovative reinvention is required.

Business Models and Revenue Generation

• Business Model: How an organization creates, delivers, and captures value.
• Revenue Generation Models: Includes fees, subscriptions, advertising, licensing, and freemium structures with various costs, appeal, and scalability.

Platform versus Traditional Businesses

• Pipeline Businesses: Value created through production to delivery linear processes.
• Sequential value chains and limited user interaction.
• Platform Businesses: Creates value by encouraging interactions between interdependent groups.
• Driven by network effects, low costs for additional users, and scalability but has governance concerns.

Corporate Strategy and Diversification

• Corporate Strategy: Determines the scope of businesses a firm competes in.
• Single Business: Focuses solely on one area with risk if the market declines.
• Dominant Business: Centers on a core business with peripheral units, stable, but core markets stagnate.

Vertical Integration

• Forward Integration: Moves closer to the customer.
• A manufacturer opening retail outlets.
• Backward Integration: Gaining control over supply channels.
• A retailer acquiring a supplier.
• Advantage: potential cost savings and control.
• Disadvantage: risk of overextending the firm and high capital costs.

Diversification

• Related Diversification: New businesses related in markets, products, or technology.
• Unrelated Diversification: Expansion into different industries with possible risk reduction.

Transaction Costs, Economies, and Learning Curve Economies

• Transaction Costs: the expenses incurred when making an economic exchange
• Internal: Within the firm, like administration.
• External: Interacting with external entities, like contracts.
• Bureaucratic costs slow decision-making.
• Economies:
• Scale: Cost advantages from higher production volume.
• Scope: Cost advantages from a variety of products.
• Learning Curve: Cost savings by learning over time for improvements of efficiency.
• Strategic Importance: Barriers to entry are created, key to maintaining competitive advantage.

Strategic Growth Options

• Mergers and Acquisitions (M&A):
• Advantages: Market consolidation, rapid expansion, and higher synergies.
• Disadvantages: High costs, mismatches of culture, and integration issues.
• Strategic Alliances and Joint Ventures:
• Advantages: Leveraging expertise, mitigation of risks, and shared resources.
• Disadvantages: Dilution of control, management issues, and conflicts.
• Internal Development:
• Advantages: Builds organic growth and skills internally.
• Disadvantages: A slower progress and resource-intensive phase.

International Expansion

• Advantages: New markets, economies of scale, and risk diversification.
• Disadvantages: Complex logistics with political instability and cultural differences.

Modes of Foreign Market Entry

• Exporting: Low costed but limited local presences.
• Licensing/Franchising: Low-risk and low-investment.
• Strategic Alliances/Joint Ventures: Shared risk with local knowledge, though potential conflicts.
• Wholly Owned Subsidiaries: Integration with high control, but higher risk.

Global Strategy Types

• International Strategy: Limited local adaptation and exports core products.
• Global Standardization Strategy: Focuses on cost control by standardizing products but risks missing local nuances.
• Multidomestic Strategy: Responds to local market needs though it may sacrifice global efficiency.
• Transnational Strategy: Balances efficiency with local responsiveness

Organizational Structures

• Simple Structure: Flexible informal with lack of Clear accountability, used for small firms
• Functional Structure: Specialization but can create silos and grouped by functions.
• Divisional Structure: Organized by product lines or areas geographically with risk of duplicate functions.
• Matrix Structure: Combines functional and product dimensions with complexities.
• Global structures: local control and decision-making with overall strategic coherence

Control Systems and Corporate Governance

• Input Controls: Concentrate on resource and processes.
• Output Controls: Concentrate on results and performance.
• Corporate Governance: Structures and processes of companies directed by key players, Board of Directors, managers and shareholders.

Value-Chain Analysis

• Separates firm activities into main categories: primary and support.
• Primary Activities: Involved in marketing, production, and service
• Support Activities: Helps the primary activities
• Example: Used by phone manufacturers sourcing components in operations for after-sales strategies to sustain better advantage.

VRIO Analysis

• Stands for Value, Rarity, Imitability, and Organization.
• Determines sustainable competitive advantage of a resource/capability.
• The resources help neutralize threats.
• Are they hard or costly to copy?
• Are they unique?

V-P-C (Value–Price–Cost) Analysis

• Determines product or service with value, price, and costs.
• It helps ensure services and products have enough value to customers along with prices.
• Consider a ride-hailing service. They must balance costs and value of convenient rides for rider profitability.

Build–Borrow–Buy Framework

• It guides companies on how to gain new capabilities.
• Build: Internally develop, train, and research over time.
• Borrow: Strategic alliances to access partnership.
• Buy: Get mergers and the acquisitions.

BCG Matrix

• Classifies units based on market share with market growth into 4 categories.
• Stars: Need leading investments to maintain leadership.
• Cash Cows: Generate steady cash flow.
• Question Marks: Require investments to grow.
• Dogs: Less attractive to get investments.
• An example is a consumer goods company which can evaluate using a product portfolio, or an organic trending food line.

Porter's Diamond

• How a country's environment influences competitive advantage via interrelated structures.
• Factor Conditions: Having natural resources including skilled labor.
• Demand Conditions: Home-market demand.
• Related Industries: Industries that are competitive.
• Rivalry: Intensity of domestic rivalry.
• Germany’s automotive industry contains skilled workers in engineering institutions from automakers driving constant innovation.

CAGE Framework

• Framework used to evaluate the cultural, economic, geographic, and administrative differences between countries for international business.
• Cultural Distance: Differences in language.
• Administrative: Legal system differences.
• Geographic: Physical distance.
• Economic: Development differences, income.
• When expanding the popular McDonald’s menu, adjustments are made for taste in other countries.

Global Integration vs Local Responsiveness

• They must balance pressures through preferences.
• Global integration involves standardizing across other countries for better economies.
• For example, Coca-Cola tailors marketing to fit taste and regions. While companies like McDonald’s change their menu based on different countries.

Corporate Structure and Control Systems

• Executing strategies effectively through structure and design.
• Structures ranging from centralized decisions to decentralized units for all.
• To maintain strategic vision Google use metrics for many different products.

Final Thoughts

• Various frameworks with different sides providing insight on how to look and examine competitive corporate strategy.
• For example, portfolios along product entries can have allocation assistance providing strength along weaknesses.
• It is important to recognize global dynamics and ensure that implementation is effective with organizational analysis.

Tim Hortons - Global Expansion into China

• Strong Canadian brand known with national identity.
• The expansion contained joint ventures with local knowledge.
• Also localized products through clustering.

SwissOne - Competing in the Swiss Chocolate Industry

• The brand uses strong narrative through methods highlighting a target market geared towards quality.
• Industry overview for growth demanding sustainability and transparency.
• Strategic recommendations focus on luxury and focusing on gift packaging.

onefinestay – Platform vs. Pipeline

• Business model combining multiple groups extracting value through fees and service.
• Also contains a list of vulnerabilities and is post acquisition in 2016. It is strategic through depth for platform strength within differentiation of scale.

Tesla - Strategy and Industry Leadership

• A leader through brand and production operating in segments with integration.
• Strategic strength also builds around OTA updates along with proprietary products.
• Its ambitions are to reach peak numbers through the strategic leader Elon Musk driving market momentum.