1. What is competitive advantage, and how does it relate to a company’s business model?
A company needs competitive advantage to perform better than its competitors. To achieve this, managers must perform some strategies that helps in increasing the profits. To manage these strategy-making process, companies require Strategic-Leadership.
A company is known to have competitive advantage over its competitors when its profitability is greater than the average profitability and the profit growth of the company is greater than that of the ones competing for the same set of customers. More the profitability relative to the competitors, greater is the competitive …show more content…
1. Risk of entry of potential competitors
2. The intensity of rivalry among establishes companies within an industry
3. The bargaining power of buyers
4. Bargaining power of suppliers
5. Closeness of substitutes to the products
As these forces get stronger, the chances of greater profits decreases. These factors might change with time with changes in the industry. So, the issue here is understanding how these changes create new opportunities and threats and to formulate appropriate strategic responses. A company can also alter the strength of these factors to its benefit through its choice of strategy.
3. Describe how “Risk of Entry”, “Bargaining Power of Buyers”, “Bargaining Power of Suppliers”, and industry competition (“Threat of Substitutes”) affect the external threats a company faces. Provide examples of each.
Risk of entry: It is the risk involved with the entry of the potential competitors. Potential competitors are the companies that are not currently competing, but are capable. For example, risk of entry of Amazon as a store into the market like Walmart or …show more content…
They also build a strategy to face upcoming threats.
Various companies in the industry formulate their strategy to position the products in market based on the market segments they serve, the distribution channels they use, the quality of their products, technological leadership, advertising policy, customer service, pricing policy, and promotions. As a result, each company follows similar business model to within the same group while different in different groups. These different groups are known as “strategic groups”.
Mobility barriers are within-industry factors that inhibit the movement of companies between strategic groups. These mobility barriers include the barriers to entry into a group and the barriers to exit from a company’s existing group. While considering an entry into another strategic group, a company must evaluate whether it could (Charles W. L. Hill and Gareth R. Jones. Strategic Management: An Integrated Approach. 2017, 2017) (Senge., 1994) imitate or outperform its potential competitors in that strategic group. Managers must play a role in evaluating whether it is cost-effective to overcome mobility barriers prior to