Competitive advantage in

Strategic Management

M.T.Doniyorova
  The meaning of Competitive Advantage
Plan for the
lecture
 Organizations must operate within a
competitive industry environment. They do
not exist in vacuum.
  It is true that strategic management is all
about gaining and maintaining competitive
advantage.
 The term can be defined to mean “anything
What is that a firm does especially well when
Competitive compared with rival firms”.
Advantage?  Note the emphasis on comparison with rival
firms as competitive advantage is all about
how best the company does than rivals and
stay competitive in the market.
  Strategik menejment raqobatbardosh
ustunlikka erishish va uni saqlab qolishdan
iboratdir.

Raqobatchilik  Bu atama “raqobatdosh firmlar bilan

ustunligi solishtirganda firma ustunlikka ega
bo’ladigan har qanday narsa” degan
nima?
ma’noni anglatadi.
 Bunda raqobatdosh firmalar bilan
solishtirishga alohida e’tibor qaratiladi.
  Competitive advantage accrues to a firm
Competitive when it does something that the rivals
Advantage cannot do or owns something that the
rival firms desire.
  Raqobatdosh ustunlik korxona raqobatdosh
Raqobatdosh korxonalar qila olmagan yoki ular anchadan
ustunlikning buyon xohlayotgan ishni amalga oshirganda
yuzaga kelishi yuzaga keladi.
  Analyzing organization’s competitors
helps an organization to discover its
weaknesses, to identify opportunities for
and threats to the organization from the
Competitor industrial environment.
Analysis
 While formulating an organization’s
strategy, managers must consider the
strategies of organization’s competitors.
  Competitor analysis is a driver of an
organization’s strategy and effects on
how firms act or react in their sectors.
 The organization does a competitor
analysis to measure/assess its standing
Competitor amongst the competitors.
Analysis  Competitor analysis begins with
identifying present as well as potential
competitors. It portrays an essential
appendage to conduct an industry
analysis.
  An industry analysis gives information
regarding probable sources of
competition (including all the possible
strategic actions and reactions and effects
on profitability for all the organizations
competing in the industry).
An Industry  However, a well-thought competitor
Analysis analysis permits an organization to
concentrate on those organizations with
which it will be in direct competition, and it
is especially important when an
organization faces a few potential
competitors.
  Porter's Five Forces is a model that identifies
and analyzes five competitive forces that shape
every industry and helps determine an
industry's weaknesses and strengths. Five
Forces analysis is frequently used to identify an
industry's structure to determine corporate
What are strategy.
Porter’s Five  Porter's model can be applied to any segment of
Forces the economy to understand the level of
competition within the industry and enhance a
company's long-term profitability.
 The Five Forces model is named after Harvard
Business School professor, Michael E. Porter.
  Michael Porter in
Porter’s Five Forces Model has
assumed that the competitive
environment within an industry depends
on five forces:
1. Competition in the industry
Porter’s Five 2. Potential of new entrants into the
Forces Model industry
3. Power of suppliers
4. Power of customers
5. Threat of substitute products
  The first of the Five Forces refers to the
number of competitors and their ability to
undercut a company. The larger the number of
competitors, along with the number of
equivalent products and services they offer, the
lesser the power of a company.
1. Competition  Suppliers and buyers seek out a
in the Industry company's competition if they are able to offer
a better deal or lower prices. Conversely, when
competitive rivalry is low, a company has
greater power to charge higher prices and set
the terms of deals to achieve higher sales and
profits.
  A company's power is also affected by the
force of new entrants into its market. The
less time and money it costs for a
competitor to enter a company's market and
2. Potential of be an effective competitor, the more an
New Entrants established company's position could be
into an significantly weakened.
Industry  An industry with strong barriers to entry is
ideal for existing companies within that
industry since the company would be able
to charge higher prices and negotiate better
terms.
  The next factor in the Porter model addresses how
easily suppliers can drive up the cost of inputs. It
is affected by the number of suppliers of key
inputs of a good or service, how unique these
inputs are, and how much it would cost a
company to switch to another supplier. The fewer
3. Power of suppliers to an industry, the more a company
would depend on a supplier.
Suppliers
 As a result, the supplier has more power and can
drive up input costs and push for other advantages
in trade. On the other hand, when there are
many suppliers or low switching costs between
rival suppliers, a company can keep its input
costs lower and enhance its profits.
  The ability that customers have to drive prices
lower or their level of power is one of the Five
Forces. It is affected by how many buyers or
customers a company has, how significant each
customer is, and how much it would cost a
company to find new customers or markets for
4. Power of its output.
Customers  A smaller and more powerful client base means
that each customer has more power to negotiate
for lower prices and better deals. A company
that has many, smaller, independent customers
will have an easier time charging higher prices
to increase profitability.
  The last of the Five Forces focuses on substitutes.
Substitute goods or services that can be used in
place of a company's products or services pose a
threat. Companies that produce goods or services
for which there are no close substitutes will have
5. Threat of more power to increase prices and lock in favorable
Substitutes terms. When close substitutes are available,
customers will have the option to forgo buying a
company's product, and a company's power can be
weakened.
 What Are Porter's Five Forces Used for?
 Porter's Five Forces Model helps managers
and analysts understand the competitive
landscape that a company faces and to
understand how a company is positioned
within it.
Usage
Is Porter's Five Forces Model Still
Relevant?
 Yes, even though it was created more than 40
years ago, the Five Forces Model continues
to be a useful tool for understanding how a
company is positioned competitively.
  What Are Some Drawbacks of
Question Porter's Five Forces?
 The Five Forces model has some drawbacks:

 The limitation in time

 Single Model for several Companies regardless of
Drawbacks their size
 Single Market
 Assess all five forces equally
 What's the Difference Between
Porter’s Five Porter's Five Forces and SWOT
Forces and Analysis?
SWOT
 What's the Difference Between Porter's Five
Forces and SWOT Analysis?
 Porter's Five Forces and SWOT (strengths,
weaknesses, opportunities, & threats) analysis
are both tools used to analyze and make
Porter’s Five strategic decisions.
Forces and  Companies, analysts, and investors use Porter's
SWOT Five Forces to analyze the competitive
environment within an industry, while they
tend to use a SWOT analysis to look more
deeply within an organization to analyze its
internal potential.
 The main objectives of doing competitor analysis can be
summarized as follows:
 To study the market;
 To predict and forecast organization’s demand and
supply;
 To formulate strategy;
 To increase the market share;
Why is it
 To develop strategy for organizational growth;
important
 To study forthcoming trends in the industry;
 Understanding the current strategy strengths and
weaknesses of a competitor can suggest opportunities and
threats;
 Insight into future competitor strategies may help in
predicting upcoming threats and opportunities.
Let’s see the real examples!
 What does an analysis using the five forces
model suggest about Starbucks?
The Five Forces Model suggests that Starbucks is
under the threat of
 competitive rivalry,
Starbucks  high power of buyers
 threat of substitutes.
However, it gains benefits from
 low new entrant threats
 supplier power.
Nike’s Porter’s Five Forces Analysis
1. Competition in the industry (Strong Force)
2. Potential of new entrants into the industry
(Strong Force)
3. Power of suppliers (Weak Force)
4. Power of customers (Moderate Force)
5. Threat of substitute products (Strong Force)
 Porter’s Five Forces Analysis:
Group 1 - Apple
Group 2 - Microsoft
Group 3 – Tesla
Group 4 - Artel
Group 5 - Adidas
Task Group 6 - Samsung
Group 7 - Amazon
Group 8 – Netflix
Format: presentation
Deadline: 2nd November