Competitive Advantage in the Marketplace

Chapter 5

Competitive Advantage

Benefit that exists when a firm has a product or service that is seen by its target market as better than those of its competitors

Ways to Achieve a C.A.

Price/value

Unique service features

Notable product attributes

Customer experience

Accessibility

External Environment

Macroenvironment – broad factors that affect all businesses in societyEconomicSociocultural Political/LegalTechnologicalGlobal

Cont… Industry Environment – Forces that directly

affect a given firm and its relevant competitors

Forces that determine the nature/degree of competition: Bargaining power of buyers Threat of substitute products or services Bargaining power of suppliers Rivalry among existing competitors Threat of new competitors

SWOT Analysis

Strengths

Weaknesses

Opportunities

Threats

internal

external

Broad-Based Strategy Options

Cost-Advantage - firm is lowest cost producer within the market: cheap labor; efficiency; location; used equipment; etc…

Marketing Advantage - differentiation of product/service by means other than cost: uniqueness; product--promotion

Market Segmentation Dividing total market into groups

with similar needs - focused - arises from competition

Benefit variables - identify segments based on the benefits customers desire

Demographic variables - identifies the market through customer characteristics and purchasing power

Market Segmentation Strategies

Unsegmented - Total market is target - mass marketing Multi-segmentation - two or more market segments with separate m.mix for eachSingle-segmentation - recognizes several segments, but concentrates on only one - good for small firms

Niche Marketing

Focusing on a market segment that competitors are not serving

Sustainable Competitive Advantage

Value-creating industry position that should endure over time

Be forward-thinking and maintain a continuous stream of competitive advantages

Returns will diminish over timeLife cycle: launch; exploitation; erosion