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 society Economic Sociocultural Political/Legal Technological Global

Cont… 9 Industry Environment – Forces that directly affect a given firm and its relevant competitors 9 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 each Single-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 time Life cycle: launch; exploitation; erosion