Competitive advantage  Products with a competitive advantage have more price or value benefits than competitive products  A value relationship is the amount of benefits received given the product’s price

U.S. competitive position since WWII  Early U.S. dominance immediately after the war  Economic recovery and growth throughout 1960’s and 1970’s in Western Europe and Eastern Asia.  China and Russia opened to foreign trade in 1980’s  Former Soviet bloc countries open to trade in 1990’s  Today many more countries are participating in global trade, causing U.S. competitive advantages to begin disappearing

Competitive advantage strategies: Differentiation  Making the product uniquely different than competitors ◦ Higher quality ◦ Strong brand image ◦ Better features ◦ Better service ◦ Meet needs faster ◦ ◦ Differentiated strategy

Competitive advantage strategies: Lower costs  Lower production costs mean lower prices for consumers  Achieving economies of scale: large volume of product is produced, lowering the cost of each individual product  Improving productivity: increasing the amount of product that can be produced with a limited set of economic resources (land, labor, capital)

Competitive advantage strategies: Focus on single market  Focusing on a single market in a single country allows a company to concentrate it’s resources on the market where it is the strongest  Discourages competition   Focused strategy 

Students work in pairs and complete the following Businesses are continually trying to find ways to make their companies more efficient, save costs, and become more profitable. One method many companies use is a process called “ERP Systems.” Your objective for this assignment is to research “ERP Systems” and prepare a brief report in PPT format that discusses the following questions: What does ERP stand for? What is an ERP system? What advantages does an ERP system provide for a business – how can it improve business performance? How can an ERP system help global business performance? Do not copy and paste- use your own words Hint: try using a search for “ERP Systems” or global ERP

Using company resources to help gain a competitive advantage: Human resources ◦ Top management should have international trade experience ◦ Labor force should be well-trained in manufacturing processes ◦ Some countries have well educated labor forces, but more costly ◦ Developing countries may have less educated work force, but lower labor costs ◦ Developing economies are continually upgrading their education systems to train managers and increase their competitive position

Using company resources to help gain a competitive advantage: Financial resources ◦ Access to financial markets enables businesses to raise financial resources needed to by other resources  Less availability of markets/banks in developing countries ◦ Lowering interest rates for loans makes it easier for companies to borrow, and encourages business development  However, easy lending practices can run the risk of creating too much bad debt ◦ Micro-loans in developing countries (usually around $100) enable entrepreneurs to start businesses and make money ◦ ◦ Micro-loans

Using company resources to help gain a competitive advantage: Manufacturing resources ◦ Manufacturing: processing raw materials into final goods ◦ Japan has competitive advantage in automobile manufacturing—largest producer in world. Why?  Industry of suppliers that produce high quality products  Just-in-time inventory system; no storage of parts lowers costs—parts are received, immediately assembled with other components, and immediately shipped without being held in inventory  Continuous assessment of manufacturing processes and identifying improvements

Using company resources to help gain a competitive advantage: Marketing resources  Customers: advantage to companies selling in their own culture because they share cultural heritage with customers  Distribution channels: comprised of individuals and businesses that participate in the exchange of goods and services, moving the product and its components through the supply chain, from raw materials, to manufacturer, to distributors, to end users.  Often difficult to enter new markets and find supply sources  Brand image: the strength of global brands creates consumer demand, and gives the company an advantage when seeking distributors

Evaluating international competitors ◦ Direct competition—competitors working in the same industry, selling similar products to the same target market ◦ Indirect competition: different types of products that provide similar benefits ◦ Example Honda grew from a motorcycle manufacturer (indirect competitor for automobiles) to become an automobile manufacturer (direct competitor) ◦ Honda

Building barriers to competition ◦ Intellectual property laws: patents, trademarks, copyrights limit other firms trying to enter the marketplace ◦ Trade policies: Quotas, tariffs, license requirements force competitors to drive up prices, which places them at a competitive disadvantage  May benefit businesses, but not necessarily customers  Limiting competition may result in higher prices and/or poorer quality ◦ Market power: exists when a firm can control prices within an industry Companies with large market share, or monopolies, can lower prices and drive out competitors. Steve Jobs

Students work with their partner and complete the following: Identify 2 direct and 2 indirect competitors to the business they have selected for their business plan. Indicate the advantages and disadvantages & strengths and weaknesses of these businesses compared to the student’s proposed business How will you counter these competitor issues?