Competitive Analysis
Instructions: Each question is worth 5 marks and your answers to these questions should include a definition, description and some practical example or application on how it is used; and exceed five lines.
1Product life cycle
2Strategic innovation
3Key success factors
4.Architectural capabilities
5.Differentiation advantage
6.Uncertain imitability
7.Value chain analysis
8.Brand extension
9.PEST analysis
10.Corporate social responsibility
11.Economies of scope
Solution.
Competitive Analysis
Product Life Cycle
A product life cycle is an n interesting concept in marketing today. It details the journey of a product from when it was merely an idea to when it exits the market (2016).
The product life cycle is not the same for all commodities because some do not reach the final stage. They exit the market prematurely. The process of the product is broken down into four steps that make up the life cycle:
Introduction- researching, developing and launching the product
Growth- an increase in sales over a certain period
Maturity- sales are high, but growth becomes subdued due to the presence of competitors
Decline- this is the final stage when sales eventually fall.
When a company launches a new product, it goes through this entire life cycle.
Strategic Innovation
Strategic innovation is the process that a company undergoes in a bid to reinvent and redesign its corporate strategy so as to drive growth (2016).
There are many outcomes to be expected in the case where strategic innovation is in place. The management creates more value for the company stock as well as raising the competitive advantage. It combines all creative assets within the organisation to come up with breakthrough ideas that will drive the growth of the business.
Organisations that are within the technology industry will use strategic innovation to keep coming up with the best products in the market.
Critical Success Factors
As the name suggests, key/critical success factor is something that is essential for a company to achieve its mission objective.
Several elements that must be right for an organisation to meet its intended target. Most studies tend to come up with five critical factors that sum up the key success factors in business:
People- the individuals who make up the organisation
Purpose- the reason for working together as a company
Processes- the roles to be played by all parties in the organisation
Physical resources- equipment, working space, money, etc.
Customers- people willing to pay money for the company products
Architectural capabilities
The aim of structural enterprise capability is the integration of resources necessary for creating an entirely new view of the organisation (2016). Changing the architecture of the group so as to achieve individual goals.
Architectural capabilities also provide products that facilitate the transition of the team into an integrated environment with processes that are responsive to the delivery of the business strategy as well as other unexpected changes.
Architectural capabilities require the integration of:
People-roles and skills of the people involved
Tools- all tools used by the experts in analysing data
Content- principles, inventory, standards, etc
Process- combining people and instruments to achieve the goals
Architectural capabilities are applicable when a company intends to initiate changes in operations to increase efficiency (2016).
Differentiation Advantage
Differentiation advantage is when a company decides to use product differentiation as a competition strategy in the market (2016).
An organisation might choose to focus on a certain attribute about the product and build on it to drive sales. The area that the company chooses to focus on improving should be significant enough to the buyers to warrant the attention. The market has to value the attribute highly so as to pay premium prices. If they don’t value it highly, the returns will be below average.
Virgin Airlines can stay on top of the competition by offering prices that are significantly lower.
Uncertain Imitability
Uncertain imitability refers to a capability or feature about the firm that makes it impossible for others to imitate. These skills are developed under ex-ante uncertainty conditions (2016).
The ultimate value of this unique ability is a strong source of competitive advantage for the organisation. Economic models that are based around this concept give an explanation for the sustained differences in a firm’s profitability due to certain unique capabilities and not its position of within the industry.
The technology industry is a good example of the use of uncertain imitability. An individual company may come up with a model or Operating System that is impossible to imitate such as Apple.
Value Chain Analysis
Value chain analysis is a process where companies identify their primary and support activities that add value the final product and the analyse them to increase differentiation and reduce costs.
It is a strategic tool that is employed by an organisation to examine the internal activities of a firm so as to come up with the most valuable activities and other that could be improved. The firm can notice where their competitive advantages and disadvantages lie.
A company could realise that its competitive disadvantage lay in the high cost of production and hence they might decide to outsource so as to benefit from cheaper labour.
Brand extension
Brand extension is a model that is used by firms to launch a new product under an existing brand name on a product in another category.
A company that uses brand extension is aiming at leveraging its customer base and brand loyalty to grow profits with a new product on the market. There must be some logical relationship between the new product and the original one so as to avoid brand dilution. An unsuccessful brand extension might harm the parent label.
Starbucks launched a range of ice cream flavours based on its coffee portfolio, and the ice cream is sold in grocery stores instead of Starbucks retail outlets.
PEST Analysis
A PEST analysis is a tool of measurement in business. PEST refers to Political, Economic, Socio-cultural, and Technological factors that influence the market of an individual firm (Porter, 2014).
The company can study the external forces that they are exposed to and then come up with ways to create a competitive advantage of all available opportunities. The difference between PEST and the SWOT analysis is that the former looks at the factors that influence a decision, new business or market. The latter looks at the firm or product level.
An organisation studies the changes going on in their environment and then making the necessary modifications to adapt.
Corporate Social Responsibility
Corporate social responsibility is a practice that businesses engage in for the benefit of the society (Harvard business review on corporate responsibility, 2003).
A company decides to take responsibility for its effect on the environment as well as on the social structure of the population (Porter, 2014). Corporate social responsibility may range from environmental efforts, philanthropy, ethical practises and volunteering among others.
Starbucks created C.A.F.E Practises guidelines which ensure that the company sources coffee that is sustainably grown by considering the economic, social and environmental aspects.
Economies of Scope
Economies of scope imply that there is a decrease in the average total cost of production if the number of different goods produced is increased (Porter, 2014).
Production of complementary goods leads to a drop in the average and marginal costs of a company in the long-run.
Mc Donald’s can produce both French
fries and hamburgers at a lower average expense compared to two different firms
producing each item separately. In Mc Donald’s certain features such as storage
and preparation facilities are shared and hence the total cost is low.
References
Porter, M. (2014). Competitive advantage of nations. [Place of publication not identified]: Free Press.
Harvard business review on corporate responsibility. (2003). Boston.
(2016). Retrieved 1 November 2016, from http://www.investopedia.com/terms