1. © 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Chapter 19 Analysing competitors and creating a competitive advantage

2. The Porter model of competitive Industry structure Entry barriers Economies of scale Proprietary product differences Brand Identity Switching costs Capital requirements Access to distribution Absolute cost advantages Proprietary learning curves Access to necessary inputs Proprietary low-cost product design Government policy Expected retaliation Rivalry determinants Industry growth Fixed (or storage) costs/value added Intermittent overcapacity Product differences Brand identity Switching costs Concentration and balance Informal complexity Diversity of competitors Corporate stakes Exit barriers Determinants of supplier power Differentiation of inputs Switching costs of suppliers and firms in the industry Presence if substituent costs Supplier concentration Importance of volume to supplier Cost relative to total purchases in the industry Impact of inputs on cost or differentiation Threat of forward integration relative to threat of background integration by firms in the industry Determination of buyer power Bargaining Leverage Buyer concentration versus firm concentration Buyer volume Buyer switching costs relative to firm switching costs Buyer information Ability to backward- integrate Substitute products Pull-through Price Sensitivity Price/total purchases Product differences Brand identity Impact on quality/performance Buyer profits Decision-makers’ incentives Determinants of substitution threat Relative price performance of substitutes Switching costs Buyer propensity to substitute New entrants Substitutes Suppliers Buyers Threat of new entrants Bargaining power of suppliersBargaining power of buyers Threat of substitutes Industry Competitors Insensitivity of rivalry 2

3. Competitor analysis 1.Who are our competitors? 2.What are their strengths and weaknesses? 3.What are their strategic objectives and thrust? 4.What are their strategies? 5.What are their response patterns? Competitor analysis seeks to answer five key questions 3

4. Competitor analysis Identifying competitors Product form Product substitutes Generics New Entrants Audit competitor capabilities Financial Technical Managerial Marketing assets Strengths and weaknesses Infer competitor objectives and strategic thrust Build Hold Harvest Growth directions Deduce competitor strategies Target segments Differential advantages Competitive scope Cost leadership Estimate competitor response patterns Retaliator Complacent Hemmed-in Selective Unpredictable 4

5. Competitor identification The Competitive Arena Product form competitors Technically similar products Product substitutes Technically dissimilar products Generic competitors Products that solve the problem or eliminate it in a dissimilar way Potential new entrants With technically similar products With technically dissimilar products 5

6. Company capability profiles 1 2 3 4 5 Key success factor Innovativeness Financial strengths Technical assistance to customers Product Quality Well-qualified workforce Access to international distribution channels 1 2 3 4 5 Our companyCompetitor 1Competitor 2 6

7. Apple The design of Apple’s Store in Shanghai reflects the innovativeness of its products. 7

8. Competitive Strategy Options Competitive base Scope Broad Narrow DifferentiationCost Differentiation leader Differentiation focuser Cost focuser Cost leader 8

9. Sources of competitive advantage Superior skills. Superior resources. Core competences. Value chain. 9

10. Nespresso Nespresso aims to retain its competitive advantage in the coffee capsule market by using celebrity endorsement of the brand. 10

11. The value chain Procurement Technology development Human resource management Firm infrastructure Inbound logistics Operations Outbound logistics Marketing & Sales Services Margin through value Primary activities Support activities 11

12. Value chain reconfiguration No-frills (e.g. easyjet, Ryanair) Reduce costs and prices Online retailers (e.g. Amazon) Provide wider choice, and reduce costs and prices) No-frills hotels (e.g. Travelodge, Premier lodge) reduce costs and prices) Direct marketers (e.g. Dell Computers) Provide customization and reduce costs and prices 12

13. Creating a differential advantage Product Price DistributionPromotion Differential Advantage 13

14. Bang & Olufsen Bang & Olufsen's stylish audio and television equipment. 14

15. Cost drivers Economies of scales Capacity utilization Learning Linkages Integration Policy decisions Institutional factors Interrelationships Timing Location Costs 15

16. Core reading to support this topic can be found in Chapter 19 of your recommended text Core Reading 16