Competitive

Advantage
Subject : Global Firm
Prof. : Tae Koo Kang
G2 : Koo min-woo(200510085)
G2
Song Eun-gwon(200510227)
Kim Jun-won(62338)
Jang Seo-young
 In 2007, Hyundai motor company
has put a new car on markets.

The new car is “GENESIS”

Genesis’ main consumer target is
high-income grade.

The reason of launching Genesis is that

Hyundai motor will be target a high-grade
car market over the world.

Until 1990s, Hyundai was treated

“ Cheep price, suitable quality “
In US car market.
But, Global car market is more and more intense.
So, Hyundai do not survive existing cost-leadership strategy.
In 2007, Hyundai motors has launching High-Class Premium Car “GENESIS”

The Means of GENESIS is that Hyundai will be concentrate the premium

car market and Differentiation is new strategy on Hyundai.
1. What is the Competitive Advantage?

2. Source of Global
Competitive Advantage

3. Competitive Advantage by
Porter
Competitive Advantage means

Something that places a company

or a person above the competition
 The company will be able to apply to strong point

Without being what does not evaluate a property and the ability
which the company possesses

Competition company comparison will lead and the strong point

which is relative could be grasped.

The strategy which sees from viewpoint of competitive advantage

Continuous a competitive advantage reinforcement and competitive

advantage endeavors not to disappear
 The reason of enterprise
have a competitive advantage
Resource/Performance

1. Customer satisfaction and loyalty increase, Increase of profit

, Increase of market share
→ bring market perfomance
2. The product offering which is value in the market
→ competitive advantage offering valuable product and service

3. various size and scope and profitability of company

→ The competitive advantage makes the base will be able to expan
d the enterprise which is various.
 Competitive Advantage Cycle.

Step 1. Source of Competitive Advantage

STEP4. Encroachment Superior assets
Super Capabilities
Key Success Factor
STEP3. Value proprsal

Step 2. Barriers to Imitation

STEP2. Barrier to
Imitation
higher the barrier to entry to company
STEP1. Source of When the new business opportunity
Competitive Advantages.
coming from the Market which enters
first mover advantage
barriers to imitation
Step 3. Value proposal form of competitive advantage
Operational Excellence
Product Leadership
Customer Intimacy

Step 4.Eencroachment prevents of competitive advantage

New competitive advantage position construction

effort encroachment prevents of competitive advantage

Reinvestment of profit
asset and capability accumulation
resource strengthen of competitive advantage
 Cost advantage

Competitive
Advantage

Differentiation
Advantage
 A Model of Competitive advantage

Resources

Distinctive Cost advantage

Value
Competencies Or
Creation
Differentiation advantage

Capabilities
Main aspects of five forces analysis

1. the rivalry between existing sellers in the market

2. the potential threat of the entry of new competitors

3. the threat of substitute products becoming available

the market

4. the bargaining power of consumer

5. the bargaining power of suppliers

Main aspects of
five forces analysis
Competitive advantage
strategies
1. Cost Leadership (Low Cost Strategy)
cost Leadership mean that produce goods level of equal more in
expensive

2. differentiation (Differentiation Strategy)

Differentiation is that provide inventive value can improve of
perceive valued of consumers toward product(or service) in the
market.

3. Focus Cost Leadership / Differentiation:

When competition's range is narrow, in other words when target
on specific customer segment will be focused cheap price and
differentiation strategy.
 Source of Global competitive
advantage
Tapping
the optimal Maximizing
Adapting to Exploiting Exploiting
locations knowledge
local economies economies
for transfer
market of global of global
activities across
differences scale scope
and location
resources
 Adapting to Local Market Differences
Companies must respond to the inevitable
heterogeneity they will encounter in these markets.

Differences in language, culture, income levels,

customer preferences, and distribution systems.

(a) (c)
(b) Improved Adapting to
Increased Neutralizing
price local market
market local
realization. differences
share. competitors.
(a) Increased market share.

Offering standard products and services across countries

reduces the boundaries of the served market to only those
customers whose needs are uniform across countries.

(b) Improved price

realization.
- Tailoring products and services to the preferences of local
customers enhances the value delivered to them.
- A portion of this increased value should translate into higher
price realization for the firm
 © Neutralizing local
competitors.

One of the natural advantages enjoyed by most local competitors

stems from their deep understanding of and single-minded
responsiveness to the needs of the local market.
 Exploiting Economies of Global Scale

Building a global presence automatically expands a

company's scale of operations, giving it larger
revenues and a larger asset base.

Potential benefits of economies of scale in various

ways: spreading fixed costs, reducing capital and
operating costs, pooling purchasing power, and
creating critical mass.
(a) Spreading Fixed costs over larger volume.

• Benefit is most salient in areas such as research and development,

operations, and advertising.

(b) Reducing capital and operating costs per unit.

(c) Pooling global purchasing power over suppliers.

• Concentrating global purchasing power over any specific supplier

generally leads to volume discounts and lower transaction costs.

(d) Creating requisite critical mass in selected activities.

• Larger scale gives the global player the opportunity to build centers of
excellence for the development of specific technologies and/or products
Exploiting Economies of Global Scope
Global scope refers to the multiplicity of regions and countries
in which a company markets its products and services.

(a) Providing coordinated services to global customers.

(b) Market power compared with competitors

• A global supplier has the opportunity to

understand the unique strategic requirements
and culture of its global customer.
Tapping the Optimal Locations for Activities and resources
A firm that can exploit these intercountry differences better than its competitors
has the potential to create significant proprietary advantage

(a) Performance enhancement.

(b) Cost reduction.

• Location decisions can affect the cost structure in terms of the cost of
local manpower and other resources, the cost of transportation and
logistics, as well as government incentives.

(c) Risk reduction.

Maximizing Knowledge Transfer Across Locations

(a) Faster product and process innovation.

(b) Lower cost innovation.

- A second by-product of not reinventing the wheel is considerable savings in
the costs of innovation.

(c) Reduced risk of competitive preemption.

- A global company that demands constant innovations from its subsidiaries,
but does not leverage these innovations effectively across subsidiaries, risks
becoming a fount of new ideas for competitors.
How a firm can actually
create and sustain a
competitive advantage
in its industry?
Competitive Advantage Definition

“Competitive strategy is about being different. It

means deliberately choosing to perform activities
differently or to perform different activities than
rivals to deliver a unique mix of value.”
-- Michael Porter
 Two Basic Types

Differentiation
Cost Leadership

Both can be more broadly approached or narrow, which

results in the third viable competitive strategy
Approach 1 to Competitive advantage: Cost leadership

- A firm sets out to become the low cost producer in its industry.

- Note: a cost leader must achieve parity or at least proximity in

the bases of differentiation, even though it relies on cost
leadership for it’s CA.

- Note: if more than one company aim for cost leadership, usually
this is disastrous.

- Often achieved by economies of scale

-Examples of Cost Leadership: Nisson; Tesco; Dell

Approach 1 to Competitive advantage: Cost leadership
Steps in Strategic Cost Analysis

STEP1. Identify the appropriate value chain and assign

costs and assets to it.
STEP2. Diagnose the cost drivers of each value activity and
how they interact.
STEP3. Identify competitor value chains, and determine the relative
cost of competitors and the sources of cost differences.
STEP4. Develop a strategy to lower relative cost position
through controlling cost drivers or reconfiguring
the value chain and/or downstream value.
Competitive advantage model 2: Differentiation

- a firm seeks to be unique in it’s industry along some dimensions

that are widely valued by buyers.

- Note: a differentiator cannot ignore it’s cost position. In all areas

that do not affect it’s differentiation it should try to decrease cost; in
the differentiation area the costs should at least be lower than the
price premium it receives from the buyers.

- Area’s of differentiation can be: product, distribution, sales,

marketing, service, image, etc.
Competitive advantage model 2: Differentiation
Steps in Differentiation
1. Determine who the real buyer is

2. Identify the buyer’s value chain and the firm’s impact on it

3. Determine ranked buyer purchasing criteria

4. Assess the existing and potential sources of uniqueness in a firm’s

value chain
5. Identify the cost of existing and potential sources of differentiation

6. Choose the configuration of value activities that creates the most valuabl
e differentiation for the buyer relative to cost of differentiating
Competitive advantage 3: Focus
- a firm sets out to be best in a segment or group of segments.
- 2 variants: cost focus and differentiation focus.