Competitive Advantage Strategic Management

Competitive Advantage
Strategic management is all about acquiring and preserving a competitive advantage. The term
can be defined as "anything a company does well compared to other competing companies." A
competitive advantage goes to a business when it does something its competitors cannot or when
it has something its competitors want. For example, a competitive advantage in a recession may
provide some companies with a liquidity reserve in which they can buy back companies in
difficulty and strengthen their strategic position. In other cases, having a competitive advantage
can mean that a company has less fixed assets than a competitor, which is still beneficial in the
event of an economic downturn
Sustainable Competitive
Advantage A company can only imitate a competitive advantage for a certain period as a
competitor and copying the business strategies result in losing the competitive advantage in the
long-term. It is therefore imperative that the company maintains a developmental and a
sustainable competitive advantage.
This can be achieved by
: • Continuously adapting to changing external business environments and adapting to internal
strengths and capabilities through smooth channelling of resources and capabilities.
• Formulation, implementation and effective evaluation of strategies using the factors described
above.
A competitive advantage must be acquired and defended. As a result, agile companies that
respond to changing market conditions and whose internal capabilities are geared toward
external opportunities are those that would survive in the brutal business landscape of the 21st
century. It is ethereal and can change. Therefore, companies must always be on the lookout for
new competitive advantages and pay attention to the movements of their competitors.
Core Competencies: Essential Skills for the Success
Core Competence is a unique skill or technology that creates clear customer value. For example,
the main competence of Federal Express (Fed Ex) is the management of logistics. Unique
organizational skills are embodied primarily through the collective knowledge of people and the
organizational system that influences the way employees interact with each other. As the
company grows, evolves and adapts to the new environment, its core competencies adapt and
evolve. Basic skills are therefore flexible and evolve over time. They do not stay rigid and firm.
The organization can make maximum use of the given resources and associate them with the
new opportunities offered by the environment.
Resources and skills are the basic elements for which a company creates a value-added strategy
and implemented in order to achieve adequate returns and strategic competitiveness. Resources
are inputs for a company in the production process. These can be human, financial,

technological, physical or organizational. The more unique, valuable and specialized the
resources are, the sooner the company has the basic skills. Resources must be used to build
strengths and 6 eliminate weaknesses in the business. Skills relate to organizational skills to help
your resource team integrate more effectively.
IMAGE (FLOW DIAGRAM)
Organizational skills usually come from the organization's system, processes, and control
mechanisms. These are immaterial nature. A business may have unique and valuable resources.
However, if it does not have the ability to use these resources productively and effectively, it
cannot create a key qualification. Organizational strategies can develop new resources and
capabilities or strengthen existing resources and capabilities, thereby strengthening the
organization's core competencies.
Core competencies help a company differentiate its products from competitors and lower costs
compared to its competitors in order to gain competitive advantage. This helps to create
customer value. In addition, basic skills help to create and develop new goods and services.
Basic skills determine the future of the organization. These decide on the characteristics and the
structure of the global competition organization. Basic skills give way to innovations. By using
basic skills new technologies can be developed. They provide customers with high quality
products and services.
Definition: Generic Strategies:
Generic, as the name implies, are basic in nature and offer a company the opportunity to
influence its competitive advantage in the market of its choice. Although the benefit may be in
the form of low cost or product variation, the scope may be broad (industry wide) or narrow
(market segment)
Porter’s Generic Strategies Model for Competitive Advantage:
Porter proposed four "generic" business strategies to gain a competitive advantage. Strategies
focus on the scope of activities in a company’s terms of its size and the extent to which a
company wants to differentiate its products. The most important strategic challenge for most
companies is to find a way to achieve a sustainable competitive advantage over other competing
products and companies in the market.
A competitive advantage is an advantage over competitors, which is achieved by providing
consumers with greater value either through lower prices or by providing greater benefits and a
service that justifies higher prices.
The four strategies are:

Strategies for differentiation and cost containment target a competitive advantage in a variety of
market segments or sectors. In contrast, differentiation and cost targeting strategies are applied in
a small market or small industry.
IMAGE (SOURCE OF COMPETITVE ADAVNATGE
Cost Leadership:
The goal of this strategy is to become the lowest cost producer in the industry. The traditional
approach to achieving this goal is to produce on a large scale, allowing the company to leverage
economies of scale. Why is cost control possibly so important? Many (possibly all) market 8
segments in the industry are supplied with a focus on reducing costs. If the sales price achieved
is at least (or almost) the market average, the manufacturer with the lowest costs (theoretically)
benefits from the best profits.
This strategy is generally associated with large companies that offer "standard" products that are
not very differentiated for most customers and are easily acceptable. Occasionally, a low-cost
leader will also disconcert their product to maximize sales, especially if it has a significant cost
advantage over its competitors, thereby further increasing its market share.
A cost containment strategy requires close collaboration across all functional areas of a
company. To be the most cost-effective producer, a company is likely to achieve or exploit many
of the following goals:
• High Productivity
• High Capacity
• Utilization
• Leveraging Bargaining Power to Beat the Lowest Prices
• Production Resources
• Production Methods
• Efficient Use of Technology in The Production Process
. • Channel Access to Effective Distribution
Focus Strategy:
It concentrates on a segment narrowing and a cost advantage or one Go for differentiation within
the segment. It focuses on the needs of a segment and carries its name accordingly. Due to the

concentration of the business, the company has a high level of customer loyalty, but due to the
low volume, less bargaining power and higher costs. Companies in this sector, through their
understanding of the customer, can create a wide range of products to satisfy their customers.
Differentiation Focus:
In the differentiation strategy, a company strives to differentiate within one or a few target
market segments. Due to the specific customer needs of the segment, products can be offered
that are significantly different from those of competitors and can appeal to a broader customer
base. For 9 any company applying this strategy, it is important to ensure that customers have
different needs and desires - that is, there is a valid basis for differentiation - and that competing
products do not meet those needs and desires. Differentiation is the classic strategy of niche
marketing. Many small businesses can enter a niche market segment with this strategy and
achieve higher prices than undifferentiated products. There are many successful examples of
focusing differentiation. For example, Apple has its own user interfaces, operating systems, and
hardware that are designed to enhance the customer experience, resulting in superior brand
awareness and competitive differentiation.
Differentiation Leadership:
With leadership differentiation, the organisation targets now much larger markets and the focus
is now on attaining competitive advantage through overall differentiation all over the country.
This strategy is to select one or more criteria used by buyers in a market and then position the
company in a unique way to meet those criteria. This strategy is usually associated with charging
a high price for the product, often due to higher production costs and additional value-added
functions for the consumer. Differentiation involves charging a higher price that covers more
than additional production costs and giving clear reasons to prefer the product to other, less
differentiated products. This goal can be achieved in many ways, although it is not easy and
requires a significant and sustainable marketing investment. Methods include:
• Superior product quality (features, advantages, durability, reliability),
• brand image (strong customer recognition and wishes, brand loyalty), industry-wide
• use in all industries main channels (i.e., the product or the brand is an essential part of the retail
store)
• Permanent promotion - Often dominated by advertising, sponsorship, etc.
PESTLE Analysis - A Business Analysis Tool
What is PESTLE Analysis? The PESTLE analysis, sometimes referred to as PEST analysis, is a
concept of marketing principles. In addition, this concept is used by companies to monitor the
environment in which they operate or to plan the introduction of a new project / product /
service, etc. PESTLE is a memory base which in its developed form P policy, E for economic, S
for social, 10 technological for T, L and E for right environment designates. It provides a bird's-

eye view of the entire environment from different angles to be reviewed and tracked while
thinking of a idea / plan. The framework has undergone some changes as marketing gurus have
added some things, such as: For example, a code of ethics to clarify the demographic element
while the framework is used in market research. Here, it is worth asking some questions analysed
and give them an idea of what to consider. These are:
• What is the country's political situation and how can it affect the industry?
• What are the prevailing economic factors?
• What significance does culture have on the market and what are its determinants?
• Which technological innovations should emerge and influence the market structure?
• Are there industry laws or can they be changed?
• What are the environmental concerns for the industry?
All aspects of this technique are critical to any business unit of a business. Beyond market
understanding, this framework is one of the backbones of strategic management, which defines
not just what a business should do, but also accounting. for the goals of an organization and
related strategies. The importance of each factor varies depending on the types of industries, but
it is imperative that every strategy that a company wants to develop leads to making PESTLE
analysis because it is a more complete version of the SWOT analysis.
Politics:
These factors determine how much a government can influence the economy or a sector. For
example, a government could introduce a new tax or tax that could change the whole structures
that generate revenue from organizations. Political factors include tax policy, tax policy, trade
rates, etc. that a government can take about the financial year and this can greatly influence the
business environment (economic environment).
IMAGE (FLOW DIAGRAM-COMPETITVE ADVANTGE MODEL)
Economic: These factors are determinants of the performance of an economy, which have a
direct impact on a company and long-term effects. For example, an increase in the inflation rate
of an economy would affect the way companies value their products and services. Moreover, this
would affect a consumer's purchasing power and change the demand / supply patterns for that
economy. Economic factors include inflation, interest rates, exchange rates, economic growth,
etc. Foreign direct investment is also included by sector for which this analysis is carried out.

Social: These factors examine the social environment of the market and measure determinants
such as cultural trends, demographics, population analysis, etc. One example is buying trends in
Western countries such as the United States, where demand is high during the holiday season.
Technological: These factors relate to technological innovations that may have a favourable or
unfavourable effect on the industry and the market. This relates to automation, research and
development and the importance of the technological awareness of a market.
Law: These factors have both external and internal sides. Some laws affect the business
environment in a country, while some companies apply specific policies. The legal analysis takes
both aspects into account and then uses the strategies in the light of this legislation. For example,
consumer laws, safety standards, labor laws, etc.
Environment:These factors include those that affect or are determined by the environment. This
aspect of PESTLE is crucial for some industries, including tourism, agriculture, agriculture, etc.
Environmental include, but are not limited to, climate, weather, geography, global climate
change, environmental impact, etc.
BCG MATRIX:
The Boston Consulting Group (BCG) matrix is a 4-cell matrix (2 * 2 matrix) developed by BCG
in the United States. It is the best-known tool for analysing company portfolios. It provides a
graphical representation of an organization looking at different companies in their portfolio
based on their market share and industry growth rates. This is a two-dimensional analysis of
strategic business unit (SGE) management. In other words, it is a comparative analysis of
business potential and environmental impact assessment. Under this matrix, companies could be
considered high or low depending on their industry growth rate and relative market share.
Relative market share = SGE sales this year-leading the sales of competitors this year.
Market Growth Rate = Sector sales this year - Sector sales last year.
The BCG matrix consists of four cells, with the horizontal axis indicating the relative market
share and the vertical axis the market growth rate. The centre of relative market share is 1.0. If
all SBUs belong to the same sector, the average growth rate of the sector is used. If, on the other
hand, all SBUs belong to different sectors, the focus will be on the growth rate of the economy.
The assignment of resources to functional units is based on their location in the grid. The four
cells in this matrix were called stars, cows, question marks, and dogs. Each of these cells
represents a company.
IMAGE (RELATIVE MARKET SHARE)
1. Stars: They represent business units - a significant market share in a growing industry. They
can generate revenue, but due to the rapid growth of the market, the stars need huge investments

to keep their lead. Net cash flow is generally modest. The SBUs in this cell are attractive because
they belong to a robust industry sector and these businesses are very competitive in this sector. If
a star succeeds, he becomes a cash cow as the industry grows.
2. Cash Cows: They commercial units that have a significant market share in a slow-growing,
mature sector. Cash cows require little investment and generate cash that can be used to invest in
other businesses. These strategic operating entities are the company's primary source of liquidity
and its core business. They are the basis of an organization. These companies generally pursue
stability strategies. As cash cows become less attractive and worsen, a cost-cutting policy can be
pursued.
3. Question Marks- They represent business units with low relative market share and located in a
high-growth sector. They need huge sums of money to hold or gain market share. They need
attention to see if the business can be profitable. Question marks are usually new products and
services with a good business perspective. No specific strategy can be adopted. If the company
believes it has a dominant market share, it can apply an expansion strategy, otherwise an
expenditure reduction strategy can be used. Most businesses start with a question mark as they
try to enter a fast-growing market where there is already market share. If question marks are
ignored, question marks can turn into dogs, and when large investments are made, they can
become stars.
4. Dogs: They represent companies with low market shares in growth markets. They do not
generate money and do not require large sums of money. Due to their low market share, these
businesses face cost disadvantages. In general, staff reduction strategies are used as these
companies can only gain market share at the expense of their competitors or competitors. Their
market share is low due to high cost, poor quality, inefficient marketing, etc. If a dog has no
other strategic goal, it should be liquidated if it is less likely to gain market share. The number of
dogs should be avoided and minimized in an organization.
Boundaries of the BCG Matrix:
BCG Matrix provides a framework for allocating resources to different business units and allows
you to compare multiple areas at a glance. However, the BCG matrix is not constrained because
• The BCG matrix classifies companies in ascending or weak order, but companies can typically
be average. Thus, the true nature of the business cannot be reflected.
• The market is not clearly defined in this model.
• A high market share does not always lead to high profits. High costs are also associated with a
high market share.
• Growth rate and relative market share are not the only indicators of profitability. This model
ignores and ignores other profitability indicators.

• Sometimes dogs can help other companies to gain a competitive advantage. Sometimes they
can even earn more than cash cows.
• This four-cell approach is considered too simplistic.
THE MATRIX GE MCKINSEY:
The GE McKinsey matrix is a nine-field matrix used as a strategy tool. It helps cross-enterprise
companies to evaluate their business portfolios and systematically prioritize investments from
different business units. This technique is used in brand marketing and product management. The
analysis helps companies decide which products to add to a product portfolio and which other
opportunities should continue to be invested. Although the GE version, like the BCG matrix, is
much more complex. The analysis begins with a two-dimensional portfolio matrix. However, the
dimensions are multifactorial: nine indicators of the attractiveness of the sector and twelve
indicators of the strength of the company. The business world is increasingly focusing on their
investment decisions as resources become increasingly scarce. Any decision must be to make the
best possible use of investment and aim to make the most of this investment. For diversified
companies, the battle over resource allocation is becoming even more complex as multiple
products, brands and portfolios need to be managed. This matrix helps companies make these
decisions in a more systematic and informed way.
IMAGE (GE MCKISNEY MODEL)
UNDERSTANDING MATRIX
The matrix represents a 3 × 3 grid. The Y axis measures the attractiveness of the market, while
the X axis measures the strength of the company. The scale is high, medium and low.
Some important steps are required to create this matrix:
• List the entire product range created or sold by a strategic business unit.
• Identify the factors that make a market attractive.
• Assessment of the position of the strategic business unit in the market.
• Calculate the strength of the company and the attractiveness of the market.
• Determine the category of strategic business unit: high, medium or low.
Attractiveness of The Market:
This dimension enables the attractiveness of the market to be determined by analysing the
benefits a business can gain through market entry and competition. Several factors are examined