Organizational resources that provide a competitive advantage include: Competitive advantage of firms on a global scale

The world does not stand still, information is constantly updated, and market participants are in search of marketing ideas, ways of doing business, and new views on their product. Any business is tested for strength by its competitors, so when developing a development strategy, it is wise to take into account their influence, market share, positions and behavior.

What is competitive advantage

Competitive advantage is a certain superiority of a company or product over other market participants, which is used to strengthen its position when reaching the planned level of profit. Competitive advantage is achieved by providing the client with more services, more quality products, relative cheapness of goods and other qualities.

A competitive advantage for a business provides:

– prospects for long-term growth;

– stability of work;

– obtaining a higher rate of profit from the sale of goods;

– creating barriers for new players when entering the market.

Let us note that competitive advantages can always be found for any type of business. To do this, you should conduct a competent analysis of your product and the competitor’s product.

What types of competitive advantages are there?

What allows you to create competitive advantages for a business? There are 2 options for this. First of all, the product itself can provide competitive advantages. One of the types competitive advantages is the price of the product. Buyers often prefer to buy a product only because it is cheap relative to other offers with similar properties. Due to its low cost, a product can be purchased even if it does not provide much consumer value to buyers.

The second competitive advantage is differentiation. For example, when a product has distinctive features that make the product more attractive to the consumer. In particular, differentiation can be achieved through characteristics that are not related to consumer properties. For example, due to the trademark.

If a company creates a competitive advantage for its product, it can uniquely differentiate its position in the market. This can be achieved by monopolizing part of the market. True, such a situation contradicts market relations, since the buyer is deprived of the opportunity to choose. However, in practice, many companies not only provide themselves with such a competitive advantage of the product, but also maintain it for quite a long time.

4 criteria for assessing competitive advantages

Utility. The proposed competitive advantage should be beneficial to the company's operations and should also enhance profitability and strategy development.

Uniqueness. A competitive advantage should differentiate a product from its competitors, not replicate them.

Security. It is important to legally protect your competitive advantage and make it as difficult as possible to copy it.

Value for the target audience of the business.

Strategies for Competitive Advantage

1. Cost leadership. Thanks to this strategy, the company receives income above the industry average due to the low cost of its production, despite high competition. When a company receives a higher rate of profit, it can reinvest these funds to support the product, inform about it, or beat competitors due to lower prices. Low costs provide protection from competitors, since income is preserved in conditions that are not available to other market participants. Where can you use a cost leadership strategy? This strategy is used when there are economies of scale or when there is a prospect of achieving lower costs in the long term. This strategy is chosen by companies that cannot compete in the industry at the product level and work with a differentiation approach, providing distinctive characteristics for the product. This strategy will be effective when there is a high proportion of consumers who are price sensitive.

• Information about competitors: 3 rules for its collection and use

This strategy often requires unification and simplification of the product to facilitate production processes and increase production volumes. It may also require a high level of initial investment in equipment and technology to reduce costs. For this strategy to be effective, careful control of labor processes, product design and development, with a clear organizational structure is required.

Cost leadership can be achieved through certain opportunities:

– limited access of the enterprise to obtaining cheap resources;

– the company has the opportunity to reduce production costs due to accumulated experience;

– management of the company’s production capacity is based on the principle that promotes economies of scale;

– the company provides for scrupulous management of its inventory levels;

– strict control of overhead and production costs, abandoning small operations;

– availability of technology for the cheapest production in the industry;

– standardized production of the company;

2 steps to building a competitive advantage

Alexander Maryenko, project manager of the A Dan Dzo group of companies, Moscow

There are no clear instructions for creating a competitive advantage, taking into account the individuality of each market. However, in such a situation, you can be guided by a certain logical algorithm:

Determine the target audience that will buy your product or influence this decision.

Determine the real need of such people related to your services or products, which is not yet satisfied by suppliers.

2. Differentiation. When working with this strategy, the company provides unique properties for its product that are important to the target audience. Consequently, they allow you to set a higher price for the product compared to competitors.

A product leadership strategy requires:

– the product must have unique properties;

– the opportunity to create a reputation for high quality product;

– highly qualified employees;

– the ability to protect competitive advantage.

The advantage is the ability to sell the product at higher prices than the industry average, avoiding direct competition. Thanks to this strategy, it is possible to achieve better commitment and loyalty to the brand, under the conditions of competent construction of the assortment and the presence of competitive advantages.

Risks or disadvantages of using a differentiated marketing strategy:

– a significant difference in prices is possible, due to which even the unique qualities of the product will not attract a sufficient number of buyers;

– a product may lose its uniqueness when its advantages are copied by cheaper products.

This strategy is used for saturated markets by companies that are ready to make high investments in promotion. There is no need to talk about low cost - it will be higher than the market average. However, this is offset by the ability to sell the product at higher prices.

3. Niche leadership or focus. The strategy involves protection from major competitors and substitute products. In this case, it is possible to achieve a high rate of profit by more effectively meeting the needs of a narrow audience of consumers. This strategy can be based on any type of competitive advantage - the breadth of the offered range or the lower price of the product.

In this case, the company is limited in market share, but it does not need significant investments to develop the product, which is a chance for the survival of small enterprises.

Risks and disadvantages of using a focusing strategy:

– there is a high probability of large differences in product prices compared to leading brands on the market, which can scare away its target audience;

– the attention of large market participants switches to niche segments in which the company operates;

– a serious danger of reducing the difference between the needs of the industry and the niche market.

Where to Use a Niche Leadership Strategy? Working with this strategy is recommended for small companies. It is most effective when the market is saturated, there are strong players, when costs are high or when costs are uncompetitive in comparison with market leaders.

Three stages of service strategy

Stage I. Innovation. When one of the market participants introduces something new in terms of customer service. The company stands out during this period, given the presence of a new competitive advantage.

Stage II. Addiction. The proposed service is becoming familiar to consumers, and an analogue is gradually being introduced in the activities of competitors.

Stage III. Requirement. For consumers, this offer becomes integral element services or products, becoming standards.

How to check the level of service in your company

• Conducting informal surveys. The CEO and other managers need to understand consumers’ opinions about the proposed service.
• Conducting formal surveys (focus groups). It would be rational to involve both consumers and representatives of all departments of your company for these events.
• Hire outside consultants to survey company employees. With external consultants, the value of the answers increases (with more candid answers).

How to improve the service

Tatiana Grigorenko, managing partner of 4B Solutions, Moscow

Let's look at general tips for improving service in companies.

1. Surprise, influence emotions. Typically, visitors to the office are offered packaged tea or instant coffee. We decided to pleasantly surprise our customers - the visitor is offered a choice of 6 types of professionally prepared coffee, 6 excellent varieties of tea with signature chocolate for dessert.

2. Break the rules. In today's market, it is ineffective to be like everyone else; you need to be better than the rest.

3. Listen to your customers. Do you need to ask your clients what would be of interest to them?

How to create a competitive advantage

When developing a competitive advantage, there are nine criteria for a successful option to consider:

1) Uniqueness.

2) Long-term. Competitive advantage must be of interest for at least three years.

3) Uniqueness.

4) Credibility.

5) Attractiveness.

6) Have ReasonstoBelieve (reason for trust). Specific reasons that will make buyers believe.

7) Be better. Buyers must understand why this product is better than others.

8) Have the opposite. There needs to be a complete opposite in the market. Otherwise it will not be a competitive advantage.

9) Brevity. Must fit into a 30 second sentence.

Step #1. We make a list of all the benefits

Product benefits are sought as follows:

– we ask buyers what competitive advantages they hope to gain from your product;

– make a detailed list of all the properties that the product has, based on the characteristics from the “marketing mix” model:

1) Product

What can you say about the product:

– functionality;

– brand symbols: logo, name, form style;

– appearance: packaging, design;

– required quality product: from the position of the target market;

– service and support;

– assortment, variability.

2) Price

What can you say about the price:

– pricing strategy for entering the market;

– retail price: the selling price of a product must necessarily correlate with the desired retail price, only if the company does not become the last link in the overall distribution chain.

– pricing for different sales channels; different prices are assumed, depending on a specific link in the distribution chain, a specific supplier;

– package pricing: with the simultaneous sale of several company products at special prices;

– policy regarding promotional events;

– availability of seasonal promotions or discounts;

– possibility of price discrimination.

3) Place of sale

It is necessary to have the product on the market in the right place so that the buyer can see it and purchase it at the right time.

What can you say about the sales meta:

– sales markets, or in which the sale of goods is planned;

– distribution channels for selling goods;

– type and conditions of distribution;

– conditions and rules for displaying goods;

– issues of logistics and inventory management.

4) Promotion

Promotion in this case involves all marketing communications to attract the attention of the target audience to the product, with the formation of knowledge about the product and key properties, the formation of the need to purchase the product and repeat purchases.

What can you say about promotion:

– promotion strategy: pull or push. The Push strategy involves pushing goods through the trade chain by stimulating intermediaries and sales personnel. Pull – “pulling” products through the distribution chain by stimulating consumers, the final demand of their product;

– target values ​​of knowledge, brand loyalty and consumption among its target audience;

– required marketing budget, SOV in the segment;

– geography of your communication;

– communication channels for contact with consumers;

– participation in specialized shows and events;

– media strategy of your brand;

– PR strategy;

– promotions for the coming year, events aimed at stimulating sales.

5) People

– employees who represent your product and company;

– sales personnel in contact with target consumers of the product;

– consumers who are “opinion leaders” in their category;

– manufacturers on whom the quality and price of the product may depend;

– privileged consumer groups also belong to this group, including VIP clients and loyal customers who generate sales for the company.

What can you say about working with people:

– programs to create motivation, with the development of relevant competencies and skills among employees;

– methods of working with people on whom the opinion of the consumer audience depends;

– education and loyalty programs for its sales staff;

– methods for collecting feedback.

6) Process

This one applies to the services market and the B2B market. “Process” refers to the interaction between the company and consumers. It is this interaction that constitutes the basis for purchasing on the market with the formation of consumer loyalty.

• Unique selling proposition: examples, development tips

You can talk about programs to improve the process of providing services to your target clients. The goal is to ensure maximum comfortable conditions for buyers when purchasing and using the offered service.

7) Physical environment

This also applies to the service and B2B market. This term describes what surrounds the buyer during the purchase of a service.

Step #2: Rank all the benefits

To evaluate the list, a three-point scale of the importance of characteristics is best suited:

1 point - the benefit of this characteristic for target consumers is not valuable;

2 points - the benefit is not primary, which stimulates the purchase of the product in the first place;

3 points - the benefit received is one of the most significant properties of the proposed service.

Step #3. Compare the list of benefits with competitors

The resulting list of characteristics should be compared with your competitors according to two principles: the presence of this property in the competitor, whether the competitor’s condition is better or yours.

Step #4. Seek Absolute Competitive Advantages

Among the sources of absolute competitive advantages, the following should be noted:

– the product is unique due to one or several properties;

– uniqueness in combination of properties;

– special components of the product composition, a unique combination of ingredients;

– certain actions are performed better, more efficiently and quickly;

– features of appearance, shape, packaging, method of sales or delivery;

– creation and implementation of innovations;

– unique technologies, methods for creating a product, patents;

– qualification of personnel and uniqueness of its human capital;

– the ability to provide the minimum cost in your industry, while assuming higher profits;

– special conditions of sales and after-sales service for consumers;

– availability of access to limited raw materials and resources.

Step #5. Look for “false” competitive advantages

First mover. Be the first to announce the properties of competitors’ products, before they have yet communicated them to their target audience;

Performance indicator. Creating your own performance measurement indicator;

Curiosity and interest. You can stand out thanks to a factor that is not considered decisive when purchasing, but will allow you to attract the attention of the target audience.

Step #6. Make a development and control plan

After identifying a competitive advantage, you need to formulate two further plans for marketing actions - a plan for developing your competitive advantage over the next few years and a plan for maintaining the relevance of the presented advantage.

How to Analyze Current Competitive Advantages

Stage 1. Make a list of evaluation parameters

Create a list of key competitive advantages of your product and competitors.

For assessment, a three-point scale is best suited, on which the following are rated:

1 point = the parameter is not fully reflected in the competitive advantages of the product;

2 points = the parameter is not fully reflected in the competitive advantage;

3 points = the parameter is fully reflected.

Stage 3. Make a development plan

Form your action plan aimed at improving the company's competitive advantage. It is necessary to plan improvements on assessment items that received less than three points.

How to develop competitive advantages

Competitive behavior in the market can be of three types:

Creative. Implementation of measures to create new components of market relations to gain a competitive advantage in the market;

Adaptive. Taking into account innovative changes in production, ahead of competitors in terms of modernization of production;

Providing and guaranteeing. The basis is the desire to maintain and stabilize the obtained competitive advantages and market positions in the long term by adding to the range, improving quality, and additional services to consumers.

The duration of maintaining competitive advantages depends on:

Source of competitive advantage. Can be a high and low order competitive advantage. The low-order advantage is represented by the possibility of using cheap raw materials, labor, components, materials, fuel and energy resources. At the same time, competitors can easily achieve low-order advantages by copying and searching for their sources of these advantages. The advantage of cheap labor can also lead to negative consequences for the enterprise. With low salaries for repairmen and drivers, they can be lured away by competitors. The advantages of a high order are the excellent reputation of the company, specially trained personnel, and production and technical base.

The number of obvious sources of competitive advantage in the enterprise. The greater number of competitive advantages an enterprise has will more seriously complicate the tasks of its pursuers and competitors;

Constant modernization of production.

How to survive a crisis and maintain a competitive advantage

Alexander Idrisov, managing partner of StrategyPartners, Moscow

1. Keep your finger on the pulse of events. One of the employees should collect and analyze information about the state and trends of the market, how these trends can affect the business, taking into account the study of consumer preferences, demand dynamics, data on investors and competitors.

2. Develop the most pessimistic forecast for your company.

3. Focus on paying customers.

4. Focus on a narrow range of tasks. You need to carefully examine your company's business model. This does not mean that you need to abolish all areas of your activity. But it is worth focusing on a narrow range of tasks, abandoning non-core tasks or areas that can be outsourced.

• Reframing, or How to deal with customer objections

5. Consider merging with competitors. Many companies are now ready for alliances with competitors on mutually beneficial terms.

6. Maintain relationships with potential investors. Especially important condition during a crisis, you cannot lose contact with investors; it is better to activate them whenever possible.

Information about the author and company

Alexander Maryenko, project manager of the A Dan Dzo group of companies, Moscow. Graduated from the Faculty of Finance of Nizhny Novgorod state university. Participated in projects (more than 10, six of them as a manager) aimed at increasing the profitability of companies' businesses and solving their systemic problems.

John Shoal President of ServiceQualityInstitute, Minneapolis (Minnesota, USA). Considered the founder of service strategy. At the age of 25, he founded a firm specializing in teaching companies about service culture. Author of five best-selling books on the topic of service, translated into 11 languages ​​and sold in more than 40 countries.

ServiceQualityInstitute formed by John Schole in 1972. Specializes in the development and implementation of service strategies in companies. ServiceQualityInstitute specialists have trained more than 2 million people. The main office is located in Minneapolis, branches are located all over the world (in 47 countries), their share is 70% of the total number of representative offices of the company. In Russia, ServiceQualityInstitute and John Shoal are represented by ServiceFirst.

Tatiana Grigorenko, managing partner of 4B Solutions, Moscow.

4B Solutions Company founded in 2004. Provides outsourcing and consulting services. Areas of specialization: improving customer service systems, crisis management, professional legal and accounting support for business. The company's staff is over 20 people. Clients include the Business Aviation Association, Triol Corporation, Rafamet machine tool plant (Poland), ANCS Group, IFR Monitoring, MediaArtsGroup, and the Gaastra boutique chain.

Alexander Idrisov, managing partner of StrategyPartners, Moscow.

StrategyPartners. Field of activity: strategic consulting. Form of organization: LLC. Location: Moscow. Number of personnel: about 100 people. Main clients (completed projects): companies Atlant-M, Atlant Telecom, Vostok, GAZ, MTS, Press House, Razgulay, Rosenergoatom, Russian Machines, Talosto, "Tractor Plants", "Uralsvyazinform", "Tsaritsyno", publishing houses "Prosveshchenie", "Eksmo", Ministry information technologies and communications of the Russian Federation, Ministry of Regional Development of the Russian Federation, Murmansk port, Rosprirodnadzor, administrations of the Arkhangelsk, Nizhny Novgorod, Tomsk regions and Krasnoyarsk Territory, Avantix company.

Firms, not countries, compete in the international market. It is necessary to understand how a firm creates and maintains competitive advantage to understand the country's role in this process. On modern stage The competitive capabilities of firms are not limited by the borders of their home country. The role of global strategies in creating competitive advantage should be given special attention, since these strategies completely change the role of the home country.

Let's start with the basic principles of competitive strategy. In competition in domestic and international markets, many principles coincide. Then we'll look at ways to enhance competitive advantage through global competition.

Competitive strategy

To understand the nature of competition, the basic unit is the industry (whether processing or service), that is, a group of competitors producing goods or services and directly competing with each other. A strategically significant industry includes products with similar sources of competitive advantage. Examples of this include the production of facsimile machines, polyethylene, heavy-duty long-haul trucks, and plastic injection molding equipment. In addition, there may be related industries whose products have the same buyers, production technology or distribution channels, but they have their own requirements for competitive advantage. In practice, the boundaries between industries are always very blurry.

Many discussions about trade and competition use overly broad definitions of industries, such as “banking,” “chemicals,” or “engineering.” This is a very broad approach, since both the nature of competition and the sources of competitive advantage vary significantly within each such group. For example, mechanical engineering is not a single industry, but dozens of industries with different strategies, for example, the production of equipment for the weaving industry, for the manufacture of rubber products or for book printing, and each has its own special requirements to achieve a competitive advantage.

When developing a competitive strategy, firms strive to find and implement a way to compete profitably and lastingly in their industry. There is no universal competitive strategy; only a strategy matched to the conditions of a particular industry, the skills and capital possessed by a particular firm, can bring success.

The choice of competitive strategy is determined by two main points. The first is the structure of the industry in which the firm operates. The nature of competition varies widely across industries, and the likelihood of long-term profits varies across industries. For example, the average profitability in the pharmaceutical and cosmetics industries is very high, but not in steel and many types of clothing. The second main point is the position that the firm occupies within the industry. Some positions are more profitable than others, regardless of the average profitability of the industry itself.

Each of these points in itself is not sufficient for choosing a strategy. Thus, a firm in a very profitable industry may not make much profit if it chooses its position in the industry incorrectly. Both the structure of the industry and the position in it can change. An industry may become more (or less) “attractive” over time as the conditions for creating the industry in the country or other elements of the industry structure change. The position in the industry is a reflection of the never-ending war of competitors.

A company can influence both the structure of the industry and its position in its “table of ranks.” Firms that are doing well not only respond to changes in the “environment”, but also try to change it themselves to their benefit. A significant change in position in the competitive race entails changes in the structure of the industry or the emergence of new bases for competitive advantage. Thus, Japanese companies producing televisions have become world leaders thanks to the trend towards compact, portable televisions and the replacement of lamp element base with semiconductor ones. Firms in one country take over from firms in another country if they are better able to respond to such changes.

Structural analysis of industries

Competitive strategy must be based on a comprehensive understanding of industry structure and how it is changing. In any sector of the economy - it doesn’t matter whether it operates only on the domestic market or on the foreign market too - the essence of competition is expressed by five forces: 1) the threat of the emergence of new competitors; 2) the threat of the emergence of substitute goods or services; 3) the ability of suppliers of components, etc. to bargain; 4) the ability of buyers to bargain; 5) rivalry between existing competitors (see Figure 1).

Picture 1. Five forces shaping industry competition

The importance of each of the five forces varies from industry to industry and ultimately determines the profitability of industries. In those industries where the actions of these forces are favorable (say, in the production of soft drinks, industrial computers, in software trading, in manufacturing medicines or cosmetics), numerous competitors can earn high returns on the capital invested. In industries where one or more forces are unfavorable (for example, rubber, aluminum, many metal products, semiconductors, and personal computers), very few firms can maintain high profits for long.

The five forces of competition determine the profitability of an industry because they influence the prices that firms can command, the costs they must incur, and the amount of capital investment required to compete in the industry. The threat of new competitors reduces the overall profitability potential of an industry because they bring new production capacity into the industry and seek to gain market share, thereby reducing positional profits. Powerful buyers or suppliers benefit from bargaining and reduce the firm's profits. Fierce competition in the industry reduces profitability because in order to remain competitive, you have to pay (advertising, sales, research and development (R&D) costs), or profits “flow” to the buyer through lower prices.

The availability of substitute products limits the price that firms competing in the industry can charge; higher prices will encourage buyers to turn to a substitute and reduce industry output.

The significance of each of the five forces of competition is determined by the structure of the industry, that is, its basic economic and technical characteristics. For example, buyer impact is a reflection of questions such as: how many buyers the firm has; what part of the sales volume falls on one buyer; Is the price of the product a significant part of the buyer's total costs (making the product "price sensitive")? The threat of new competitors depends on how difficult it is for a new competitor to break into the industry (determined by factors such as brand loyalty, the size of the economy, and the need to tap into a network of intermediaries).

Each sector of the economy is unique and has a structure unique to it. For example, it is difficult for a new competitor to enter the pharmaceutical industry, since it requires huge R&D costs and large economics when selling products to doctors. It takes a long time to develop a substitute for an effective drug, and high prices do not frighten buyers at any time. The influence of suppliers is not significant. Finally, rivalry between competitors has been and continues to be moderate and focused not on price gouging, which reduces industry-wide profits, but on other variables, such as R&D, that increase industry-wide output. The presence of patents also discourages those who intend to compete by copying someone else's product. The structure of the pharmaceutical industry produces some of the highest returns on capital employed in major industries.

The structure of the industry is relatively stable, but can still change over time. For example, the consolidation of product distribution channels taking place in several European countries is increasing buyer power. Through their strategy, firms can also change all five forces in one direction or another. For example, the introduction of computer information systems in airlines makes it difficult for new competitors to emerge, because such a system costs hundreds of millions of dollars.

Industry structure is important to international competition for a number of reasons. First, given the different structures in different industries, different requirements must be met to compete successfully. Competing in an industry as fragmented as clothing requires very different resources and skills than in aircraft manufacturing. Country conditions for competition are more favorable in some industries than in others.

Secondly, often the industries that are important for a high standard of living are those that have an attractive structure. Industries with attractive structures and opportunities for new competitors (in terms of technology, specialized skills, access to distribution channels, brand reputation, etc.) are often associated with high productivity and high returns on capital invested. The standard of living depends to a large extent on the ability of a country's firms to successfully enter industries with a profitable structure. Reliable indicators of an industry's "attractiveness" may not be its scale, speed of growth, or newness of technology (these traits are often great importance businessmen or government officials involved in planning), and the structure of the industry. By targeting structurally disadvantaged industries, developing countries often misuse resources they don't have much of.

Finally, another reason why industry structure is important in international competition is that changing structure creates real opportunities for a country to enter new industries. Thus, Japanese companies producing copiers began to successfully compete with American leaders in this area (specifically, Xerox and IBM) due to the fact that they turned to a market sector that was left almost without attention (small-sized copiers) and applied a new approach to the buyer (selling through dealers instead of direct sales), changed production (mass production instead of small-scale production) and pricing approach (selling instead of renting, which is expensive for the customer). This new strategy made it easier to enter the industry and erased the advantage of the previous leader. How domestic conditions guide firms or force them to recognize and respond to structural changes is critical to understanding “patterns of success” in international competition.

Industry Position

Firms must not only respond to changes in industry structure and try to change it themselves in their favor, but also choose a position within the industry. This concept includes the firm's overall approach to competition. For example, in the production of chocolate, American firms (Hershey, M&M's/Mars, etc.) compete by producing and selling in huge quantities a relatively small set of varieties of chocolate. On the contrary, Swiss firms (Lindt, Sprungli, Tobler/Jacobs and etc.) sell primarily fine and expensive products through narrower and more specialized distribution channels. They produce hundreds of products, use the highest quality components and a longer production process. As this example shows, industry position is the firm's overall approach to competition , and not just its products or who they are aimed at.

Competitive advantage determines your position in an industry. Ultimately, firms outperform their rivals if they have a strong competitive advantage. Competitive advantage is divided into two main types: lower costs and product differentiation. Low costs reflect a firm's ability to develop, produce, and sell a comparable product at a lower cost than its competitors. By selling a product at the same (or approximately the same) price as its competitors, the company in this case makes a greater profit. Thus, Korean firms producing steel and semiconductor devices defeated foreign competitors in this way. They produce comparable products at very low costs, using low-paid but highly productive labor and modern technology and equipment purchased abroad or manufactured under license.

Differentiation is the ability to provide the buyer with unique and greater value in the form of new product quality, special consumer properties or after-sales service. Thus, German machine tool companies compete using a differentiation strategy based on high technical specifications products, reliability and fast technical service. Differentiation allows the company to dictate high prices, which, with equal costs to competitors, again gives greater profits.

Any type of competitive advantage results in greater productivity than competitors. A firm with a low cost of production produces a given value at a lower cost than its competitors; A firm with differentiated products has higher unit profits than its competitors. Thus, competitive advantage is directly related to the generation of national income.

It is difficult, but still possible, to gain a competitive advantage based on both lower costs and differentiation6. This is difficult to do because ensuring very high consumer properties, quality or excellent service inevitably leads to an increase in the price of the product; it will cost more than if you just strive to be on par with your competitors. Of course, firms can improve technology or production methods in ways that simultaneously reduce costs and increase differentiation, but eventually competitors will do the same and force a decision on what type of competitive advantage to focus on.

However, any effective strategy must pay attention to both types of competitive advantage, although strictly adhering to one of them. A firm that focuses on low costs must still provide acceptable quality and service. In the same way, the product of a firm that produces differentiated products should not be so much more expensive than the products of competitors that this would be to the detriment of the company.

Another important variable that determines industry position is the scope of competition, or the breadth of goals that a firm aims to achieve within its industry. A firm must decide for itself how many varieties of products it will produce, which distribution channels it will use, which customers it will serve, in which areas of the world it will sell its products, and in which related industries it will compete.

One of the reasons why the competitive field is important is that industries are segmented. Almost every industry has clearly defined product lines, multiple distribution and sales channels, and multiple types of buyers. Segmentation is important because different market sectors have different needs: an ordinary men's shirt sold without any advertising and a shirt created by a famous fashion designer are designed for buyers with very different needs and criteria. In both cases, we have shirts, but each has its own type of buyer. Different market sectors require different strategies and different capabilities; Accordingly, the sources of competitive advantage in different market sectors are also very different, although these sectors are “served” by the same industry. And the situation when firms from one country achieve success in one sector of the market (for example, Taiwanese firms in the production of cheap leather shoes), and firms from another country in the same industry - in another sector (Italian firms in the production of fashionable leather shoes) - is not rarity.

The area of ​​competition is also important because firms can sometimes gain a competitive advantage through the scale of their goals when competing globally, or through the use of linkages between industries when competing in related industries. For example, Sony benefits greatly from the fact that a wide range of electronic products bearing its brand, using its technology, and being distributed through its channels are produced throughout the world. Interrelations between clearly demarcated industries arise because of the commonality of important activities or skills among firms competing in these industries. The sources of competitive advantage around the world will be discussed below.

Firms in the same industry may choose different areas of competition. Moreover, it is typical that firms from different countries in the same industry choose different areas of competition. Basically, the choice is this: compete on a “broad front” or target one sector of the market. Thus, in the production of packaging equipment, German firms offer lines of equipment for a wide range of purposes, while Italian firms strive to focus on highly specialized equipment used only in certain market sectors. In the automotive industry, leading American and Japanese companies produce a whole range of cars of different classes, while BMW and Daimler-Benz (Germany) primarily produce powerful, high-speed and expensive cars upper class and sports cars, while Korean firms Hyundai and Daewoo focused on small and ultra-small class cars.

The type of competitive advantage and the area in which it is achieved can be combined into the concept of standard strategies, that is, completely different approaches to what high performance in the industry is. Each of these archetypal strategies, depicted in Figure 2, represents a fundamentally different concept of how to compete and succeed in competition. For example, in shipbuilding, Japanese firms have adopted a differentiation strategy and offer a wide range of high-quality ships at high prices. Korean shipbuilding firms have chosen a cost leadership strategy and also offer a variety of types of ships, but not the highest, but simply good quality; however, the cost of Korean ships is less than Japanese ones. The strategy of successful Scandinavian shipyards is focused differentiation: they produce mainly specialized types of ships, such as icebreakers or cruise ships. They are manufactured using specialized technology and are sold at a very high price to justify the cost of labor, which is expensive in Scandinavian countries. Finally, Chinese shipbuilders, who have recently begun to actively compete in the world market (strategy - focusing on the level of costs), offer relatively simple and standard ships with even lower costs and at even lower prices than Korean ones.

Figure 2. Typical strategies

Based on the example of typical strategies, it becomes clear that no single strategy is suitable for absolutely all industries. On the contrary, many industries have a great combination of multiple strategies. Moreover, industry structure limits choice possible options strategy, but you will not find an industry in which only one strategy can bring success. In addition, variants of standard strategies with different ways differentiation or focus.

The concept of generic strategies is based on the idea that each of them is based on competitive advantage and that in order to achieve it, a firm must choose its strategy. The firm must decide what type of competitive advantage it wants to achieve and in what area it is possible.

The biggest strategic mistake is the desire to “chase all the rabbits,” that is, to use all competitive strategies at the same time. This is a recipe for strategic mediocrity and poor performance, because a firm that tries to use all the strategies at once will not be able to use any of them well due to their “built-in” contradictions. An example of this is the same shipbuilding: Spanish and British shipbuilding companies are declining because their production costs are higher than those of the Koreans, they do not have a basis for differentiation compared to the Japanese (that is, they do not produce anything that the Japanese would not produce ), but they were unable to find any market segments where they could gain a competitive advantage (such as Finland in the icebreaker market). Thus, they have no competitive advantage and are supported mainly by government orders.

Sources of Competitive Advantage

Competitive advantage is achieved based on how the company organizes and performs individual activities. The activities of any company are divided into different types. For example, sales agents conduct telephone conversations, service technicians perform repairs at the request of the buyer, scientists in the laboratory develop new products or processes, and financiers raise capital.

Through these activities, firms create certain values ​​for their customers. The ultimate value created by a firm is determined by how much customers are willing to pay for the goods or services offered by the firm. If this amount exceeds the total costs of all necessary activities, the firm is profitable. To gain a competitive advantage, a firm must either provide customers with approximately the same value as its competitors but produce the product at a lower cost (lower-cost strategy), or act to provide customers with a product with greater value for which it can command a higher price (low-cost strategy). differentiation strategy).

The activities of competition in any given industry can be divided into categories, as shown in Figure 3. These are organized into what is called a value chain. All activities included in the value chain contribute to use value. They can be roughly divided into two categories: primary activities (ongoing production, sales, delivery and servicing of goods) and secondary (providing production components, such as technology, human resources, etc., or providing infrastructure functions in support of other activities ), that is, supporting activities. Each activity requires purchased “components,” human resources, a combination of certain technologies, and is based on the firm’s infrastructure, such as management and financial activities.

A firm's chosen competitive strategy determines the way the firm performs individual activities and the entire value chain. In different industries specific types activities have different importance for achieving competitive advantage. Thus, in the production of printing presses, technology development, build quality and after-sales service are mandatory for success; In the production of detergents, advertising plays a major role, since the manufacturing process here is simple, and there is no talk of after-sales service.

Firms gain competitive advantage by developing new ways of performing activities, introducing new technologies or input components of production. For example, the Japanese company Makita has become a leader in the production of power tools thanks to the use of new, cheaper materials and the sale of standard models of tools produced in a single plant in the whole world. Swiss chocolate companies have achieved recognition in the world because they were the first to introduce a number of new recipes (including creamy chocolate) and apply new technologies (for example, continuous mixing of chocolate mass), which significantly improved the quality of the finished product.

Figure 3. Value chain

But a company is not only the sum of all its activities. A company's value chain is a system of interdependent activities between which there are links. These relationships arise when the method of one activity affects the cost or efficiency of others. Connections often lead to the fact that additional costs when “adjusting” individual activities to each other pay off in the future. For example, more expensive designs and components or greater quality control can reduce after-sales service costs. Firms must incur such costs as part of their strategy for the sake of competitive advantage.

The presence of connections also requires the coordination of different types of activities. In order not to miss delivery deadlines, for example, it is necessary that production, provision of supplies of raw materials and components, and auxiliary activities (for example, commissioning) be well linked. Clear coordination ensures timely delivery of goods to the customer without the need to have expensive delivery means (that is, a large fleet of vehicles when you can get by with a small one, etc.). Coordination of related activities reduces transaction costs, provides clearer information (making it easier to manage), and allows costly activities in one activity to be replaced by lower-cost activities in another. it's the same effective way reduce the overall time required to perform different activities, which is increasingly important for competitive advantage. For example, such coordination significantly reduces the time for developing and launching new products into production, as well as accepting orders and delivering goods.

Careful relationship management can be a critical source of competitive advantage. Many of these connections are subtle and may not be noticed by competing firms. In order to benefit from these connections, complex organizational procedures and compromise decisions are needed for the sake of future benefits, including in cases where organizational lines do not intersect (such cases are rare). Japanese firms are particularly good at relationship management. With their instigation, the practice of mutually “overlapping” the stages of developing new products in order to simplify their release and reduce development time, as well as enhanced quality control “on-line” to reduce after-sales service costs, became popular.

To achieve competitive advantage, you must approach the value chain as a system rather than a collection of components. Changing the value chain by rearranging, regrouping or even eliminating certain activities from it often leads to a significant improvement in competitive position. An example of this is the production of electrical household equipment. Italian firms in this field completely changed the manufacturing process and used a completely new distribution channel, thanks to which they became world export leaders in the 1960s and 1970s. Japanese photographic equipment companies have become world leaders by putting single-lens reflex cameras on stream, introducing automated mass production and, for the first time in the world, establishing mass sales of such cameras.

An individual firm's value chain as it competes in a given industry is part of a larger system of activities that can be called a value system (see Figure 4). It includes suppliers of raw materials, components, equipment and services. On the way to the final consumer, a given company's product often passes through value chains of distribution channels. Ultimately, the product becomes an aggregate element in the value chain of the buyer, who uses it in carrying out his activities.

Figure 4. Value system

Competitive advantage is increasingly determined by how clearly a firm can organize this entire system. The above-mentioned connections not only connect different types of activities of the company, but also determine the mutual dependence of the company, allied companies and distribution channels. A firm can achieve competitive advantage by better managing these relationships. Regular and timely deliveries (a practice pioneered in Japan and known as kenban) can reduce a firm's operating costs and allow it to reduce inventory levels. However, the opportunities to save money by coordinating connections are by no means limited to ensuring supplies and accepting orders; this also includes R&D, after-sales service and many other activities. Both the company itself, its affiliates, and the distribution network can benefit if they are able to recognize and use such connections. The ability of firms in a given country to leverage relationships with suppliers and buyers in their home country largely explains the country's competitive position in the relevant industry.

The value chain allows you to better understand the sources of cost gains. The cost benefit is determined by the amount of costs in all necessary activities (compared to competitors) and can arise at any stage. Many managers view costs too narrowly, focusing on the production process. However, firms that lead by reducing costs also achieve gains by developing new, cheaper products, using less expensive marketing, reducing service costs, that is, they extract cost benefits from all parts of the value chain. In addition, to obtain cost benefits, careful “adjustment” is most often required not only of connections with suppliers and the distribution network, but also within the company.

The value chain also helps to understand the margins for differentiation. A firm creates special value for the buyer (and this is the meaning of differentiation) if it provides the buyer with savings or consumer benefits that he cannot obtain by purchasing a competitor's product. Essentially, differentiation is the result of how a product, related services, or other firm activities affect the buyer's activities. A firm and its customers have many points of contact, each of which can become a source of differentiation. The most obvious of these shows how a product affects the buyer's activity in which the product is used (say, a computer used to take orders, or a detergent for washing clothes). Creating additional value at this level can be called first-order differentiation. But almost all products have a much more complex effect on consumers. So, structural element included in a product purchased by the customer must be recorded and - if the entire product fails - repaired as part of the product sold to the final customer. At each stage of such indirect influence of the product on the buyer's activity, new opportunities for differentiation open up. In addition, almost all activities of the company affect the buyer in one way or another. For example, developers from a related company can help integrate a component into the final product. Such high-order connections between the firm and customers are another potential source of differentiation.

The basis for differentiation varies across industries, and this has important implications for countries' competitive advantage. There are several clearly different types of firm-client relationships, and firms in different countries use different approaches, improving them. Swedish, German and Swiss firms often succeed in industries that require close cooperation with customers and high demands on after-sales service. In contrast, Japanese and American firms thrive where the product is more standard.

The value chain concept allows us to better understand not only the types of competitive advantage, but also the role of competition in achieving it. The scope of competition is important because it determines the direction of the firm's activities, the way in which these activities are carried out, and the configuration of the value chain. Thus, by selecting a narrow target market segment, a firm can tailor its activities precisely to the requirements of that segment and thereby potentially gain cost or differentiation benefits over competitors serving a broader market. However, targeting a broad market can provide a competitive advantage if the firm is able to operate in different segments of an industry or even in several interrelated industries. Thus, German chemical companies (BASF, Bayer, Hoechst, etc.) compete in the production of a wide variety of chemical products, but certain product groups are produced at the same factories and have common distribution channels. Similarly, Japanese consumer electronics firms such as Sony, Matsushita, and Toshiba benefit from their activities in related industries (TVs, audio, and VCRs). They use the same brands, distribution channels around the world for these products, general technology and joint procurement.

An important reason for competitive advantage is that the company chooses an area of ​​competition that is different from that chosen by competitors (another market segment, region of the world), or by combining products from related industries. For example, Swiss hearing aid firms have focused on high-power hearing aids for people with severe hearing loss, outperforming American and Danish competitors on a broader front. Another common technique for enhancing competitive advantage is to be among the first firms to move to global competition, while other domestic firms are still limited to the domestic market. Home country plays an important role in how these differences in competition manifest themselves.

Firms achieve competitive advantage by finding new ways to compete in their industry and entering the market with them, which can be called in one word - “innovation.” Innovation in a broad sense includes both the improvement of technology and the improvement of ways and methods of doing business. Specifically, the update can be expressed in a change in product or production process, new approaches to marketing, new ways of distributing goods and new concepts of competition. Innovative firms not only recognize the opportunity for change, but also make that change happen faster. Strictly speaking, most of the changes are evolutionary rather than radical; often the accumulation of small changes adds up to more than a major technological breakthrough. Moreover, the truth is often confirmed that “the new is the well-forgotten old”: many new ideas, in fact, are not so new, they just haven’t been properly developed. Innovation is equally the result of improving the organizational structure and R&D. It always involves investment in the development of skills and knowledge, and most often in fixed assets and additional marketing efforts.

Innovation leads to a change in competitive leadership if other competitors either have not yet recognized the new way of doing things or are unable or unwilling to change their approach. There are a lot of reasons for this: complacency and complacency, inertia of thinking (wary attitude towards new things), funds invested in specialized funds and equipment (this “ties our hands”), and, finally, there may be “mixed” motives. It was precisely these “mixed” motives that Swiss watch companies had, for example, when the American company Timex launched cheap watches that could not be repaired on the market, and the Swiss were all afraid of undermining the image of their watches as the equivalent of quality and reliability. In addition, their factories turned out to be completely unsuited to the mass production of cheap products. However, without a new approach to competition, the challenger will rarely succeed (unless he changes the very nature of competition). Recognized leaders will most often immediately take decisive retaliatory actions and “avenge themselves.”

In the international market, innovations that provide competitive advantage anticipate new needs both in the home country and abroad. Thus, as global concerns about product safety grew, Swedish firms Volvo, Atlas Copco, AGA and others succeeded because they foresaw this development in advance. However, innovations undertaken in response to a situation specific to the domestic market can achieve the opposite of the desired effect - pushing back the country's success in the international market!

Opportunities for new ways to compete usually arise from some kind of “disruption” or change in the structure of an industry. And it happened that the opportunities that appeared with such changes remained unnoticed for a long time.

Here are the most typical reasons innovations that give a competitive advantage:

1. New technologies. Changes in technology can create new opportunities for product development, new ways of marketing, manufacturing or delivery, and improvements in related services. It is this that most often precedes strategically important innovations. New industries emerge when a change in technology makes a new product possible. Thus, German companies became the first in the X-ray equipment market, because X-rays were discovered in Germany. Changes in leadership are most likely to occur in industries where dramatic changes in technology render the knowledge and assets of previous industry leaders obsolete. For example, in the same X-ray and other types of medical equipment for such purposes (tomographs, etc.), Japanese companies have overtaken German and American competitors thanks to the emergence of new electronics-based technologies that have made it possible to replace traditional X-rays.

Firms that are ingrained in old technology find it difficult to understand the significance of a new technology that has just emerged, and even more difficult to respond to it. Thus, the leading American companies that produced radio tubes - RCA, General Electric, GTE-Sylvania - got involved in the production of semiconductor devices, and all without success! Those companies that took on the production of semiconductor devices from scratch (for example, Texas Instruments) turned out to be more committed to the new technology, more adapted to it in terms of personnel and management, and had the right approach to how to develop this technology.

1. New or changed customer requests. Often, competitive advantage arises or changes hands when customers have completely new needs or their views on “what is good and what is bad” change dramatically. Those firms that are already established in the market may not notice this or be unable to respond appropriately because responding to these demands requires the creation of a new value chain. Thus, American fast food companies gained an advantage in many countries because customers demanded cheap and always available food, and restaurants were slow to respond to this demand, because a fast food chain operates completely differently from a traditional restaurant.
2. The emergence of a new industry segment. Another opportunity for competitive advantage arises when an entirely new industry segment is formed or existing segments are regrouped. Here there is an opportunity not only to reach a new group of buyers, but also to find a new, more effective method release certain types of products or new approaches to a certain group of customers. A striking example of this is the production of forklifts. Japanese firms discovered an overlooked segment - small multi-purpose forklifts - and took it on. At the same time, they achieved unification of models and highly automated production. This example shows how taking on a new segment can greatly change the value chain, which can be a very difficult task for competitors who have already established themselves in the market.
3. Changes in the cost or availability of production components. Competitive advantage often changes hands due to changes in the absolute or relative costs of components such as labor, raw materials, energy, transportation, communications, media, or equipment. This indicates a change in conditions with suppliers or the possibility of using new or different components. A firm achieves competitive advantage by adapting to new conditions, while competitors are tied hand and foot by investments and tactics adapted to old conditions.

A classic example is the change in the labor cost ratio between countries. Thus, Korea, and now other Asian countries, have become strong competitors in relatively uncomplicated international construction projects when wages have risen sharply in more developed countries. Recently, a sharp drop in prices for transport and communications opens up opportunities to organize the management of firms in a new way and thus gain a competitive advantage, for example, the ability to rely on specialized subcontractors or expand production around the world.

1. Changes in government regulations. Changes in government policy in areas such as standards, environmental protection, requirements for new industries, and trade restrictions are another common stimulus for innovation that leads to competitive advantage. Existing market leaders have adapted to certain “rules of the game” from the government, and when those rules suddenly change, they may not be able to respond to these changes. American exchanges benefited from the reduction of regulation in securities markets in other countries because the United States was the first to introduce such practices, and by the time they spread throughout the world, American firms had already adapted to them.

It is important to respond quickly to changes in industry structure

The above can give firms a competitive advantage if firms understand their significance in time and take a decisive offensive. In many industries, early movers have held the leadership position for decades. Thus, German and Swiss companies producing dyes - Bayer, Hoechst, BASF, Sandoz, Ciba and Geigy (later merged into Ciba-Geigy) - became leaders even before the First World War and have not lost ground to this day. Procter & Gamble, Unilever and Colgate have been world leaders in the production of detergents since the 1930s.

Early birds gain an advantage by being the first to benefit from economies of scale, reducing costs through intensive staff training, building a brand image and customer relationships before intense competition, being able to choose distribution channels or obtaining the most advantageous plant locations and the most profitable sources of raw materials and other factors of production. Reacting quickly to a new situation can give the firm a different kind of advantage that may be easier to maintain. The innovation itself can be copied by competitors, but the benefits gained from it often remain with the innovating company.

Early birds benefit most from industries where economies of scale are important and where customers hold tight to their peers. In such conditions, it is very difficult for a well-established competitor in the market to challenge it. How long an early bird can maintain an advantage depends on how quickly changes in industry structure occur that will erase that advantage. For example, in the consumer packaged goods industry, customer loyalty to any given brand of product is very strong and changes in the situation are insignificant. Companies such as Ivory Soap, M&M's/Mars, Lindt, Nestle and Persil have maintained their positions for more than one generation.

Every major change in industry structure creates the opportunity for new early birds to emerge. Thus, in the watch industry, the emergence in the 1950s and 1960s of new sales channels, mass marketing and mass production allowed the American firms Timex and Bulova to surpass their Swiss competitors in terms of sales. Later, the transition from mechanical watches to electronic ones created a “breakthrough” that allowed the Japanese firms Seiko, Citizen, and then Casio to get ahead. That is, the “early birds” who win a technology or product in one generation may well end up losing when generations change, since their investments and skills are specialized.

But the example of the watch industry reveals another important principle: early birds will succeed only if they are able to correctly predict changes in technology. American firms (for example, Pulsar, Fairchild and Texas Instruments) were among the first to start producing electronic watches, based on their positions in the production of semiconductors. But they relied on watches with LED displays (LEDs), and LEDs were inferior to liquid crystal displays (LCDs) in cheaper watch models, and traditional pointer displays combined with quartz movements in more expensive and prestigious models. Seiko decided not to produce watches with LED, but from the very beginning focused on watches with LCD and quartz dial watches. The introduction of LCD and quartz watch movements provided Japan with leadership in the mass sale of watches, and Seiko with global leadership in the industry.

Notice something new and implement it

Information plays a big role in the renewal process: information that competitors are not looking for; information not available to them; information available to everyone, but processed in a new way. Sometimes it is obtained by investing in market research or R&D. And yet, surprisingly often, the role of innovators is played by companies that simply look in the right place, without complicating their lives with unnecessary considerations.

Innovation often comes from outsiders in the industry. The role of an innovator can be a new company whose founder came to this industry in an unusual way or was simply not appreciated in an old company with traditional thinking. Or the role of innovator can be played by managers and directors who have not previously worked in this industry, and therefore are more able to see an opportunity for innovation and are more actively implementing these innovations. In addition, innovation can occur when a firm expands its scope of activities and brings new resources, skills, or perspectives into another industry. The source of innovation may be another country with different conditions or methods of competition.

Outsiders are often more likely to see new opportunities or have different skills and resources than long-standing competitors—just the ones needed to compete in new ways. The leaders of innovative firms are often outsiders also in a hidden, social sense (not in the sense that they are the dregs of society), they simply do not belong to the industrial elite, they are not even recognized as full-fledged competitors, and therefore they will not stop before to violate established norms or even use unfair methods of competition.

With rare exceptions, innovations come at the cost of enormous effort. Success in applying new or improved methods of competition is achieved by the firm that stubbornly pursues its line, despite all the difficulties. This is where the lone wolf or small group strategy comes into play. As a result, innovation is often the result of necessity, if not the threat of failure: the fear of failure is much more motivating than the hope of victory.

For the above reasons, innovations often do not come from recognized leaders or even from large companies. Economies of scale in R&D, which play into the hands of large firms, are not so important, since many innovations do not require complex technology, and large companies, for various reasons, are often unable to see a change in the situation and quickly respond to it. In our study, along with large firms, smaller ones were also analyzed. In those cases where large firms were innovators, they often acted as newcomers in one industry while having a strong position in another.

Why are some firms able to recognize new ways of competing while others are not? Why do some companies figure out these methods before others? Why are some companies better at guessing the direction in which technology will develop? Why is such a huge effort made to find new paths? These intriguing questions will be central to subsequent chapters. The answers must be found in concepts such as the choice of direction for the firm's major efforts, the availability of the necessary resources and skills, and the forces influencing change. The national environment plays a big role in all this. Moreover, the extent to which conditions in a country favor the emergence of the aforementioned domestic outsiders and thereby prevent foreign firms from taking over the country's leadership in existing or new industries largely determines national prosperity.

Maintain the advantage

How long a competitive advantage can be maintained depends on three factors. The first factor is determined by what the source of advantage is. There is a whole hierarchy of sources of competitive advantage in terms of their retention. Low-ranking advantages, such as cheap labor or raw materials, can be obtained quite easily by competitors. They can copy these advantages by finding another source of cheap labor or raw materials, or they can nullify them by producing their own products or getting resources from the same place as the leader. For example, in the production of consumer electronics, Japan's advantage in labor costs has long been lost to Korea and Hong Kong. In turn, their firms are already threatened by even greater labor prices in Malaysia and Thailand. Therefore, Japanese electronics firms are moving production abroad. Also at the lower levels of the hierarchy there is an advantage based solely on the scale factor from the use of technology, equipment or methods taken from (or available to) competitors. Such economies of scale disappear when a new technology or method makes the old one obsolete (similarly, when a new type of product appears).

Higher order advantages (proprietary technology, differentiation based on unique products or services, firm reputation based on enhanced marketing activities, or close relationships with clients, strengthened by the fact that it will be expensive for the client to change suppliers) can be maintained for a longer time. They have certain characteristics.

First, achieving such benefits requires greater skill and ability - specialized and better trained personnel, appropriate technical equipment and, in many cases, close relationships with major clients.

Second, high-order benefits are usually possible through long-term, intensive investment in production capacity, specialized, often risky training, R&D, or marketing. The implementation of certain types of activities (advertising, product sales, R&D) creates tangible and intangible values ​​- the reputation of the company, a good relationship with clients and a knowledge base. Often the first company to react to a changed situation is the one that has invested in these activities longer than its competitors. Competitors will have to invest just as much, if not more, to get the same benefits, or come up with ways to achieve them without spending as much. Finally, the longest-lasting benefits come from a combination of large capital investments and higher quality performance, which makes the benefits dynamic. Continuous investments in new technologies, marketing, developing a worldwide branded service network, or rapidly developing new products make it even more difficult for competitors. Higher-order benefits not only last longer, but are also associated with higher levels of productivity.

Advantages based on cost alone are generally not as durable as those based on differentiation. One reason for this is that any new source of cost reduction, no matter how simple, can immediately eliminate a firm's cost advantage. Thus, if labor is cheap, you can beat a firm with much higher labor productivity, while in the case of differentiation, to beat a competitor, you usually need to offer the same range of products, if not more. In addition, cost-based advantages are also more vulnerable because the introduction of new products or other forms of differentiation may eliminate the advantage gained from producing older products.

The second determinant of the persistence of competitive advantage is the number of clear sources of competitive advantage available to firms. If a firm relies on only one advantage (say, a less expensive design or access to cheaper raw materials), competitors will try to deprive it of that advantage or find a way to circumvent it by gaining something else. Firms that have held leadership for many years strive to secure as many advantages as possible in all parts of the value chain. Thus, Japanese small-sized copiers have modern design features, increasing ease of use, they are cheap to produce due to a high degree of flexible automation, and are sold through a wide network of agents (dealers) - this provides a larger clientele than traditional direct sales. In addition, they have high reliability, which reduces after-sales service costs. Availability from the company large number advantages over competitors makes the latter's task much more difficult.

The third and most important reason for maintaining a competitive advantage is the constant modernization of production and other activities. If a leader, having achieved an advantage, rests on his laurels, almost any advantage will eventually be copied by competitors. If you want to maintain an advantage, you can't stand still: the company must create new advantages at least as quickly as competitors can copy existing ones.

The main goal is to constantly improve the company's performance in order to enhance existing advantages, for example, to operate production facilities more efficiently or organize more flexible customer service. Then it will be even more difficult for competitors to bypass it, because to do this they will need to urgently improve their own performance, which they may simply not have the strength to do.

However, ultimately, in order to maintain a competitive advantage, it is necessary to expand the set of its sources and improve them, moving to higher-order advantages that last longer. This is exactly what Japanese automobile companies did: they initially entered foreign markets with inexpensive, small-class cars of fairly high quality, achieving success through cheap labor. But even then, while still having this advantage, Japanese automakers began to improve their strategy. They began to actively invest in the construction of large factories with modern equipment and benefit from economies of scale, then began to update technology, being the first to introduce the “just in time” system and a number of other methods to improve quality and efficiency. This gave higher quality than that of foreign competitors, and, as a result, reliability and customer satisfaction with the product. Recently, Japanese automobile companies have become leaders in the field of technology and are introducing new brands with enhanced consumer properties.

Changes are needed to maintain the advantage; Firms must benefit from industry trends, but never ignore them. Firms must also invest to protect areas that are vulnerable to competitors. Thus, if biotechnology threatens to change the direction of research in the pharmaceutical industry, a pharmaceutical company seeking to maintain a competitive advantage must quickly develop a biotechnology base superior to that of its competitors. Relying on the failure of a competitor's new technology or ignoring a new market segment or distribution channel are clear signs that competitive advantage is slipping away. And such a reaction, alas, occurs all the time!

To maintain their position, firms sometimes have to give up existing advantages in order to achieve new ones. For example, Korean shipbuilding firms became world leaders only when they dramatically increased the capacity of shipyards, significantly increased efficiency through new technologies, while reducing the need for labor, and mastered the production of more complex types ships. All these measures reduced the importance of labor costs, although at that time Korea still had an advantage in this regard. The apparent paradox of giving up previous advantages often acts as a deterrent. However, if a company does not take this step, no matter how difficult and counterintuitive it may seem, its competitors will do it for it and ultimately win. How the country's “environment” encourages firms to take such steps will be discussed later.

The reason that only a few companies manage to maintain leadership lies in the fact that it is extremely difficult and unpleasant for any successful organization to change strategy. Success breeds complacency; a successful strategy becomes a routine; The search and analysis of information that could change it stops. The old strategy takes on an aura of sanctity and infallibility and becomes deeply rooted in the firm's thinking. Any proposal to make a change is regarded almost as a betrayal of the interests of the company. Successful firms often seek predictability and stability; they are entirely occupied with maintaining the achieved positions, and making changes is hampered by the fact that the company has something to lose. People think about replacing old advantages or adding new ones only when there is nothing left of the old advantages. But the old strategy has already ossified, and when changes occur in the structure of the industry, leadership changes. Small firms whose hands are not tied by history and previous investments are becoming innovators and new leaders.

In addition, a change in strategy is also blocked by the fact that the company’s previous strategy is embodied in skills organizational structures, specialized equipment and the company's reputation, and with a new strategy they may not make money. This is not surprising, because it is precisely on such specialization that the advantage is based. Rebuilding the value chain is a difficult and expensive process. In large companies, furthermore, the sheer size of the firm makes it difficult to change strategy. The process of changing strategy often requires financial sacrifice and troublesome, often painful changes in the organizational structure of the company. For firms unencumbered by the old strategy and previous capital investments, adopting a new strategy is likely to cost less (in pure terms). financially, not to mention smaller organizational problems). This is one of the reasons why the outsiders mentioned above act as innovators.

Further, tactics aimed at maintaining a competitive advantage for firms that have a foothold in the industry are in many respects something unnatural. Most often, companies overcome the inertia of thinking and obstacles to the development of advantages under pressure from competitors, the influence of customers or difficulties of a purely technical nature. Few firms make significant improvements or change strategies voluntarily; most do this out of necessity, and this happens mainly under pressure from the outside (that is, the external environment), and not from the inside.

The management of companies that maintain a competitive advantage is always in a somewhat alarming state. It acutely senses a threat to its firm's leading position from the outside and takes retaliatory action. The influence of the situation in the country on the actions of company management is an important issue that will be discussed in detail in subsequent chapters.

Competing in the global market

The given basic principles of competitive strategy exist regardless of whether the company operates in the domestic or international market. But when analyzing the role of a country in the formation of a competitive advantage, those industries where competition is international in nature are primarily of interest. It is necessary to understand how firms achieve competitive advantage through international strategies and how this enhances the advantages gained in the domestic market.

The forms of international competition vary significantly across industries. At one end of the spectrum of forms of competition is a form that can be called “multidomestic.” Competition in each country or small group of countries is essentially independent; The industry in question exists in many countries (for example, savings banks exist in Korea, Italy and the USA), but in each of them competition occurs in its own way. The reputation, range of clients and capital of a bank in one country do not affect (or have almost no effect on) the success of its operations in other countries. Competitors may include MNCs, but their competitive advantages are in most cases limited to the borders of the country in which these companies operate. Thus, an international industry is like a set of industries (each within its own country). Hence the term “multi-national” competition. Industries where competition has traditionally taken this form include many types of trade, food production, wholesale, life insurance, savings banks, manufacturing of simple metal products and caustic chemicals.

At the opposite end of the spectrum are global industries, in which a firm's competitive position in one country significantly influences its position in other countries. Here competition occurs on a truly global basis, with competing firms relying on advantages arising from their activities around the world. Firms combine the advantages achieved in the home country with those they have achieved through their presence in other countries, such as economies of scale, the ability to serve customers in many countries, or a reputation that can be established in another country. Global competition occurs in industries such as commercial aircraft, televisions, semiconductors, copiers, automobiles, and watches. The globalization of industries especially intensified after World War II.

In the extreme expression of a “multi-national” industry, achieving national advantage or competitiveness in the international market is not even a question. Almost every country has such industries. Most (if not all) firms competing in these industries are local, because when competition in each country follows its own rules, it is very difficult for foreign firms to achieve a competitive advantage. International trade in such industries is modest, if not non-existent. If the firm is owned by a foreign company (which is rare), there is very little control by the foreign owner from its headquarters. Securing jobs in the foreign subsidiary, status as a "local corporate citizen" and where the necessary research is carried out (at home or abroad) are not his concerns: the national subsidiary controls all or almost all the activities necessary to ensure competitive status. In industries such as retail or metal fabrication, heated debates about trade issues typically do not arise.

On the contrary, global industries are an arena for firms from different countries to compete in ways that significantly affect the economic prosperity of countries. The ability of the country's firms to gain a competitive advantage in global industries promises great benefits in both trade and foreign investment.

In global industries, firms must compete internationally to gain or maintain a competitive advantage in critical industry segments. True, in such industries there may well be purely national segments; due to the unique needs in such segments, firms only from this country can flourish. But focusing primarily on the domestic market while operating in a global industry is a dangerous business, no matter in which country the company is based.

Achieving competitive advantage through global strategy

A global strategy is one in which a company sells its products in many countries using a unified approach. The mere fact of transnationality does not automatically mean the presence of a global strategy; if an MNE has branches that operate independently and each in their own country, this is not yet a global strategy. Thus, many European MNCs, such as Brown Boveri (now Asea-Brown Boveri) and Phillips, and some American ones, such as General Motors and ITT, have always competed in this way, but at the same time it weakened their competitive advantage, giving competitors the opportunity to get ahead of them.

With a global strategy, the company sells its goods in all countries (or, at least, in most countries) that are an important market for its products. This creates economies of scale that reduce the burden of R&D costs and enable the use of advanced manufacturing technology. The main issue becomes the placement of different links in the value chain and ensuring its operation so that the company's product can be sold throughout the world.

In global strategy, there are two distinct methods by which a firm can achieve competitive advantage or compensate for various disadvantages due to country conditions. The first is the most advantageous location of various activities in different countries to best serve the global market. The second is the ability of a global firm to coordinate the activities of its dispersed subsidiaries. The location of the parts of the value chain directly related to the buyer (marketing, distribution and after-sales service) is usually tied to the location of the buyer. Thus, to sell its product in Japan, a company usually needs to have sales agents or distributors there and provide after-sales service on site. In addition, the location of other activities may be tied to the location of the buyer due to high transportation costs or the need for close interaction with the buyer. Thus, in many industries, production, delivery and marketing must be carried out as close as possible to the buyer. Most often, such a physical connection of activities with the client is required in all countries where the company operates.

On the contrary, activities such as production and supply of raw materials, etc., as well as auxiliary activities (development or acquisition of technology, etc.) can be located regardless of the location of the client - such activities can be performed anywhere. Under a global strategy, a firm locates these activities based on the benefits of lower costs or differentiation on a global scale. It could, for example, build one large plant designed for the global market, benefiting from economies of scale. As such, very few activities need to be performed only in the firm's home country.

Decisions unique to global strategy can be divided into two significant areas:

1. Configuration. In which and how many countries is each value chain activity performed? For example, do Sony and Matsushita make VCRs in one large plant in Japan, or do they build additional plants in the US and UK?
2. Coordination. How are dispersed activities (that is, activities carried out in different countries) coordinated? For example, do different countries use the same brand and sales tactics, or does each branch use a different brand and tactics tailored to local conditions?

In multinational competition, MNEs have autonomous branches in each country and manage them in much the same way as a bank manages securities. With global competition, firms are trying to gain a much greater competitive advantage from their presence in different countries, placing their activities with a global focus and clearly coordinating them.

Configuration of activities under the global strategy

When planning its activities around the world within a given industry, a company faces two choices. First: should activities be concentrated in one or two countries or dispersed across many countries? Second: in which countries should this or that activity be located?

Concentration of activities. In some industries, a competitive advantage is gained by concentrating activities in one country and exporting finished products or parts abroad. This occurs in the following cases: when there is a large effect of scale in performing a particular activity; when there is a sharp drop in production costs as a new product is developed, due to which it is profitable to produce products at one plant; when it is advantageous to place related activities in the same place, which will facilitate their coordination. A focused, or export-based, global strategy is typical for industries such as aircraft, heavy engineering, structural materials, or industrial products. Agriculture. As a rule, the company's activities are concentrated in its home country.

A focused global strategy is particularly common in some countries. It is common in Korea and Italy. Today, in these countries, most of the products are developed and produced within the country, and only marketing is done in foreign countries. In Japan, this strategy is followed by most of the industries in which the country is successful in the international market, although Japanese firms are now rapidly dispersing activities such as raw material purchasing or assembly operations for various reasons. The type of international competitive strategy that a country promotes and develops determines the nature of the industries in which that country successfully competes internationally.

Dispersal of activities. Other industries gain a competitive advantage or neutralize disadvantages from conditions in the home country by dispersing activities. Dispersal requires foreign direct investment. It is preferable in industries in which high transportation, communication or storage costs make concentration unprofitable or where it is risky for various reasons (political reasons, unfavorable exchange rates or risk of supply shortages).

Dispersal is also preferable where local needs for different goods vary greatly. The resulting need to carefully tailor products to local markets reduces the benefits of economies of scale or falling costs along the way that arise from using a single large plant or laboratory to develop new products. Another important reason for dispersal is the desire to improve marketing in a foreign country; In this way, the firm emphasizes its commitment to the interests of clients and/or ensures a faster and more flexible response to changing local conditions. In addition, the dispersal of activities across many countries also gives the company valuable experience and professionalism, obtained through the analysis of information from different parts of the world (however, the company must be able to coordinate the activities of its branches).

In some industries, the government can very effectively induce a firm to choose a dispersal strategy through tariffs, non-tariff barriers, and national procurement. Very often, the government wants the company to locate the entire value chain in its country (they say this will give the country additional benefits). Finally, dispersing some activities can sometimes benefit from concentrating others. Thus, by carrying out final assembly in your own country, you can “appease” your government and get more free imports of components from large-scale centralized component plants located abroad.

Ultimately, the choice between focusing and dispersing depends on the type of activity being performed. In truck manufacturing, leaders such as Daimler-Benz, Volvo and Saab-Scania do most of their R&D at home and assemble in other countries. Best options concentration-dispersion in different industries is different, they can be different even in different segments of the same industry.

Here is an illustration of the above reasoning. Swedish firms in a number of mining-related industries use a highly dispersed strategy as customers in this industry value close cooperation from equipment suppliers providing service and technical assistance. In addition, the mining industry is almost universally state owned or heavily influenced by the public sector. Therefore, for political reasons, the firm needs to have branches abroad, since the governments of other countries prefer to have an equipment supplier in the country rather than importing the equipment. Swedish firms, such as SKF (ball bearings) or Electrolux (appliances), tend to adopt a highly dispersed strategy with large foreign direct investments and essentially autonomous subsidiaries; This is the result of existing differences in the needs for certain goods between countries, the need for close interaction with customers in marketing and service, as well as pressure from the governments of the countries where the company operates. Swiss firms also tend to disperse across many industries, including trading, pharmaceuticals, food and dyes.

A global dispersal strategy with large foreign investments also characterizes industries such as consumer packaged goods, health care, telecommunications, and many services.

Placement of activities. In addition to choosing the places where a particular type of activity will be carried out, it is also necessary to select a country (or countries) for this. Typically, all activities are first concentrated in the home country. However, with a global strategy, the company can carry out assembly operations, manufacture components and parts, or even carry out R&D in any country at its discretion - where it is most profitable.

The benefits of location often manifest themselves in strictly defined activities. One of the major advantages that a global firm has is the ability to distribute different activities among countries depending on where it is preferable to produce one or another type of activity. Thus, it is possible, for example, to produce computer components in Taiwan, write programs in India, and carry out basic R&D in Silicon Valley in California.

The classic reason for locating a particular activity in a particular country is the lower cost of factors of production. Thus, assembly operations are carried out in Taiwan or Singapore to benefit from the use of well-trained, motivated, but cheap labor. Capital is accumulated wherever possible, on the most favorable terms. Thus, the Japanese company NEC, in order to necessaryly expand its production capacity for semiconductor devices, financed convertible debt not in Japan, where such a practice is not common, but in Europe. It should be noted that global competition causes increasing dispersion of activities based on precisely such considerations. Many American companies are transferring production to the Far East (for example, almost all disk drives of American companies are manufactured there), and Japanese manufacturers of sewing machines, sporting goods, radio components and some other goods are actively investing in Korea, Hong Kong, Taiwan, and now in Thailand, locating production there.

There has been a recent trend to move operations overseas not only to take advantage of production cost benefits there, but also to conduct R&D, gain access to specialized skills available in those countries, or develop relationships with key customers.

Thus, German companies producing equipment for the production of plastics and Swiss companies producing surveying equipment have located design offices in the United States to develop electronic control units. SKF (Sweden), a world leader in the production of ball bearings, now has a production and design base in Germany in close proximity to many German factories - leaders in various branches of mechanical engineering and the automotive industry, which consume ball bearings on a large scale.

Firms locate their activities abroad even if this is a necessary condition for their business operations in the respective countries. In some industries, a firm's performance of assembly, marketing, or service operations in a given country is essential to the sales of its products and services to consumers in that country. A good example is the high-tech production of industrial air conditioners: industry leaders (American firms such as Carrier and Trane) operate in many countries to best adapt products to local conditions and meet high maintenance requirements.

Government guidelines also influence the location of activities. Thus, many Japanese investments in the United States and Europe (in industries such as the production of automobiles and spare parts for them, consumer electronics, etc.) are caused by current or possible restrictions on imports into Japan. Similarly, many Swedish, Swiss and American firms moved their activities overseas before World War II because trade restrictions were more important and transport costs were higher (which is why their activities are often more dispersed than Japanese or German firms in those days). same industry). Once dispersed, the firm is difficult to bring together under unified control as branch managers in different countries try to maintain the power and autonomy of their affiliates. The resulting failure of a firm to adopt the more focused and coordinated strategies needed to gain competitive advantage is one of the reasons for the loss of competitive advantage in some industries.

However, this is not all the discussion about the best placement of a particular type of activity. After all, choosing the best location to locate the activities that determine a firm's home country (primarily strategy, R&D, and the most complex production processes) is one of the central issues addressed in this book. Suffice it to say that the motivations for choosing countries to carry out a particular activity are by no means limited to the classical explanations given here.

Global coordination

Another important means of achieving competitive advantage through global strategy is the coordination of the firm's activities in different countries. Coordination (harmonization) of activities includes the exchange of information, distribution of responsibilities and coordination of the efforts of the company. It may provide some benefits; one of them is the accumulation of knowledge and experience gained in different places. If a company learns to better organize production in Germany, the transfer of this experience may be useful at the company's factories in the USA and Japan. Conditions in different countries are always different, and this provides a basis for comparison and the ability to evaluate knowledge acquired in different countries.

Data from different countries provides information not only about the product or its production technology, but also about customer requests and marketing methods. By coordinating the marketing activities of all its divisions, a firm with a truly global strategy can get early warning of expected changes in industry structure, seeing industry trends pinpointed before they become apparent to everyone. Coordination of activities while dispersing them can provide economies of scale by dividing the task into separate tasks for branches that determine their specialization. For example, the company SKF (Sweden) produces different sets of ball bearings at each of its foreign factories and, by organizing mutual supplies between countries, ensures the availability of the entire range of products in each of them.

The dispersal of activities, if agreed upon, may allow the firm to respond quickly to changes in exchange rates or factor costs. Thus, gradually increasing production in a country with a favorable exchange rate can reduce overall costs; This tactic was used by Japanese firms in a number of industries in the late 1980s because the Japanese yen was then highly valued.

In addition, coordination can enhance product differentiation for a firm whose customers are mobile or multinational buyers. Consistency in the location of production of a particular product and in the approach to doing business on a global scale strengthens the reputation of the brand. The ability to serve multinational or mobile clients where they want is often critical. Coordinating the activities of subsidiaries in different countries can make it easier for a firm to influence the governments of those countries if the firm is able to expand or contract activities in one country at the expense of others.

Finally, coordinating activities in different countries allows you to respond flexibly to the actions of competitors. A global firm can choose where and how to fight a competitor. It could, for example, give it a decisive battle where it has the largest output or cash flow, and thereby reduce the resources the rival needs to compete in other countries. IBM and Caterpillar used precisely these defensive tactics in Japan. A company focusing only on the domestic market does not have such flexibility.

Consumer needs and local conditions vary dramatically from country to country, making it difficult to harmonize activities across countries, making the experience gained in one country inapplicable to others. In such conditions, the industry becomes multinational.

However, although coordination provides significant benefits, achieving it in the implementation of a global strategy is a rather difficult task in organizational terms due to its scale, language barriers, differences in culture and the need to exchange open and reliable information at a high level. Another serious difficulty is reconciling the interests of the managers of the company's branches with the interests of the company as a whole. Let's say a company's subsidiary in Germany does not want to inform its US subsidiary about its latest advances in technology for fear that the American subsidiary will bypass it in the annual summing up. In other words, a company's branches in different countries often see each other not as allies, but as competitors. Such vexing organizational problems mean that full coordination in global firms is the exception rather than the rule.

Advantages due to location and due to the company structure

The competitive advantage of a global firm can be usefully divided into two types: location-derived (in which country is it located) and location-independent (based on the firm's pattern of operations around the world). Advantages based on locating operations in a particular country derive either from the firm's home country or from other countries in which the firm operates. A global firm tries to use advantages obtained in the home country to penetrate foreign markets, and may also use advantages obtained from performing certain activities abroad to enhance advantages or offset disadvantages in the home country.

Advantages based on the firm's structure arise from the firm's total volume of trade, the speed of product development in all of the firm's plants around the world, and the firm's ability to coordinate activities at home and abroad. Economies of scale in production or R&D are not in themselves tied to a country - a large plant or research center can be located anywhere.

For global competition to begin, it is necessary for some firms to achieve an advantage in their countries that allows them to enter foreign markets. A competitive advantage achieved solely in the firm's home country is sufficient to initiate global competition. Over time, however, successful global firms begin to combine the advantages achieved at home with the advantages of locating certain activities in other countries and of the firm's system of operations around the world. These additional advantages, combined with those achieved at home, make the latter more resilient, and at the same time compensate for the disadvantages of the situation in the home country. Thus, the advantages of different sources are mutually reinforcing. The overall economies of scale from being located around the world have enabled, for example, the German firms Zeiss (optics) and Schott (glass) to devote more resources to R&D and to take fuller advantage of the technology and demand available in their home country.

Practice shows that firms that do not use and develop the advantages of their home country through a global strategy are vulnerable to competitors. It is the combination of advantages from conditions in the home country, from the location of certain activities abroad and from the system of the firm's global activities, and not each separately, that creates international success.

Now that the globalization of competition has become a generally accepted fact, the benefits of firm structure and of locating operations in other countries have come into focus. In fact, the benefits of home country conditions are usually more important than others (a topic we will return to in later chapters).

Choosing a global strategy

There is no single type of global strategy. There are many ways to compete, and each requires choices about where to locate activities and how to coordinate them. Each industry has its own optimal combination. Most global strategies are an inextricable combination of trade and foreign direct investment. Finished products are exported from countries that import components, and vice versa. Foreign investment reflects the location of production and marketing activities. Trade and foreign investment are complementary rather than substitutes.

The degree of globalization often varies across industry segments, and the optimal global strategy varies accordingly. For example, in the lubricating oil industry there are two distinct strategies. In the production of automobile motor oils, competition is multinational in nature, that is, it is carried out separately in each country. Character traffic, climatic conditions and local legislation are different everywhere. Mixed during production different brands base oils and additives. Economies of scale are small and transport costs are high. Distribution and marketing channels, which are very important for competitive success, vary greatly from country to country. In most countries, the leaders are firms operating on the domestic market (for example, Quaker State and Pennzoil in the USA) or MNCs with autonomous branches (for example, Castrol in the UK). In the production of oils for marine engines, everything is different: here there is a global strategy; ships move freely from country to country, and it is necessary that the correct brand of oil be available at each port they call at. Therefore, the brand’s reputation has become global, and successful companies producing oils for marine engines (Shell, Exxon, British Petroleum, etc.) are global companies.

Another example is the hotel industry: competition in many segments is multinational, since most parts of the value chain are tied to customer location, and differences in needs and conditions between countries reduce the benefits of coordination. However, if we consider hotels of the highest class or those designed primarily for businessmen, then the competition here is more global in nature. Global competitors such as Hilton, Marriott or Sheraton have properties dispersed throughout the world, but use a single brand, a single look, a single standard of service and a system for booking rooms from anywhere in the world, which gives them an advantage in serving business travelers, constantly traveling around the world.

When the production process is broken down into stages, it is also common to see different degrees and patterns of globalization. Thus, in aluminum production, the initial stages (beneficiation and smelting of the metal) are global industries. The further stage (production of semi-finished products, for example castings or stampings from aluminum) is already a number of industries with multinational competition. The need for different products varies from country to country, transportation costs are high, and so are the requirements for on-site customer service. Economies of scale throughout the value chain are quite modest. In general, the production of raw materials and components tends to be more global than the production of finished products.

Differences in the types of globalization of different industry segments, stages of the production process and groups of countries create the possibility of drawing up focused global strategies aimed at a specific segment of the industry on a global scale. Thus, the companies Daimler-Benz and BMW, having chosen such a strategy, focused on premium and business-class cars with high technical performance, and the Japanese companies Toyota, Isuzu, Hino, etc. - on light trucks.

A firm pursuing a focused global strategy focuses on some segment of the industry that has been neglected by firms with broad specializations. Global competition can give rise to entirely new industry segments because a firm operating in a sector of its industry around the world can benefit from economies of scale. The reasons for this strategy may be different. For example, working in this industry segment in only one country is unprofitable due to high costs. In some industries, this is the only correct strategy, since the benefits of globalization are achievable only in one segment (for example, luxury hotels for businessmen).

A global focus can be the first step towards a broader global strategy. A firm enters into global competition in a given segment when its home country offers unique advantages. For example, in industries such as automobiles, forklifts, and televisions, Japanese firms initially gained footholds by focusing on an overlooked market sector—the most compact products in each industry. They then expanded their product range and became world leaders in their respective industries.

Comparatively small firms, not just large ones, can compete globally. Small and medium-sized firms account for a significant share of international trade volume, especially in countries such as Germany, Italy and Switzerland. They often focus on narrow segments of an industry or operate in relatively small-scale industries. A focused global strategy is also characteristic of MNEs from small countries such as Finland or Switzerland, and of small and medium-sized firms from all countries. Thus, the Montblanc company (Germany) pursues such a policy in the production of expensive writing instruments, and most Italian companies producing shoes, clothing and furniture also compete around the world in a narrow segment of their industries.

Small and medium-sized firms tend to build their strategy mainly on exports - foreign direct investment is of a modest scale. However, the number of mid-market MNEs is growing. For example, Denmark, Switzerland and Germany have many relatively modest-sized MNEs that focus on specific segments of their industries. With limited resources, small firms have difficulty entering foreign markets, identifying needs in those markets, and providing after-sales service. Different industries solve these problems in different ways. One way is to sell goods through sales agents or their importers (typical of Italian firms), the other is to act through distributors or trading companies (typical of Japanese and Korean firms). Another way is to use industry associations to create a common distribution infrastructure, organize sales exhibitions and fairs and conduct market research. Thus, without cooperatives, the success of agricultural industries in Denmark would not be possible. Recently, small firms have been forming alliances with foreign firms in order to be able to compete globally.

Industry globalization process

The globalization of industries occurs because changes in technology, customer demands, government policies, or infrastructure within a country enable firms in some countries to differentiate themselves from competitors in other countries or increase the importance of advantages stemming from a global strategy. Thus, in the automotive industry, globalization began when Japanese firms achieved a significant competitive advantage through quality and productivity, the needs for cars in different countries became more similar (in no small part due to rising fuel prices in the United States), and transport costs for international transport fell ( and these are just some of the reasons).

The strategic innovation itself often opens up opportunities for industry globalization. International industry leadership is often the result of a firm discovering a way to make a global strategy viable. For example, it may find a way to cheaper adapt a product developed and produced in one place to the conditions of different countries (for example, modifying a standard product for a different voltage on the local electrical grid). Thus, in the production of intercom systems, computers and other systems used in telecommunications, Northern Telecom, NEC and Ericsson won thanks to the design of their equipment, which allows the use of modular software and requiring only minor modifications to integrate with the local telephone network. In addition, a firm may develop a new product that is widely popular or a marketing method that makes the product popular. Finally, innovative solutions can be found to remove barriers to global strategy. For example, American firms were not only the first to produce plastic disposable syringes, which immediately gained wide popularity, but also reduced transportation costs compared to glass syringes and gained economies of scale by producing products in one global plant.

Emerging leaders in global industries always start with some advantage achieved at home, be it a more advanced design, higher quality workmanship, a new marketing method, or a factor cost advantage. But as a rule, to maintain an advantage, a company must go further: the advantage achieved “at home” must become a tool for entering a foreign market. And once established there, successful firms complement the initial advantages with new ones - based on economies of scale or brand reputation gained from operations around the world. Over time, competitive advantage is enhanced (or disadvantages are offset) by locating certain activities abroad.

Although home country gains are difficult to sustain, a global strategy can complement and enhance them. A good example is consumer electronics. Matsushita, Sanyo, Sharp and other Japanese firms initially focused on low cost by producing simple portable televisions. By entering the foreign market, they gained economies of scale and further reduced costs by cutting costs when introducing new models. By trading around the world, they were then able to invest heavily in marketing, new equipment and R&D, and ownership of the technology. Japanese firms moved away from a cost-focused strategy a long time ago and now produce a wide range of increasingly differentiated televisions, VCRs, etc., using the highest quality materials and technology. And today the strategy of focusing on costs has been adopted by their Korean competitors - Samsung, Gold Star, etc. - and are producing simpler, standard models using cheap labor.

The cost of factors is a low-order advantage and, moreover, very variable, both for a firm competing in the domestic market and for one competing internationally. This can be seen in industries such as clothing or construction. By moving operations abroad, a firm with a global strategy can neutralize or even exploit changes in the cost of factors that harm the interests of its country. Thus, Swedish companies producing heavy trucks (Volvo and Saab-Scania) have long transferred part of their production to countries such as Brazil and Argentina. Moreover, firms whose only advantage is gain in factor costs rarely become new industry leaders. It is too easy for a leadership role-playing strategy to be rendered ineffective by offshoring or offshoring. Firms with low factor costs can become leaders only if they combine this advantage with a focus on some segment of the industry that has been ignored or neglected by the leaders, and/or with investment in large factories equipped with the latest technology. this moment technology. And they will be able to maintain their advantage only by competing globally and constantly strengthening this advantage. The influence of national conditions on firms' initial advantages, the latter's ability to develop these advantages through global strategy, and the ability and will of firms to achieve new advantages over time are the main topics of subsequent chapters.

Staying ahead of others in global strategy

Immediate response to any change in industry structure is just as important in global competition as in domestic competition, if not more so. Ultimately, the leaders in many global industries are those firms that are the first to recognize a new strategy and apply it on a global scale. Thus, Boeing was the first to apply a global strategy in the production of aircraft, Honda - motorcycles, IBM - computers, and Kodak - photographic film. American and British firms producing a wide range of packaged consumer goods maintain leadership in no small part due to the fact that they were the first to apply a global strategy.

Global competition enhances the benefits of responding quickly to change. Early Birds are the first to spread their activities around the world; this added benefit, in turn, leads to advantages in reputation, scale and speed of adoption. And positions won on the basis of such advantages can be maintained for decades or even longer. Thus, English firms have been leaders in the production of tobacco products, whiskey and high-quality porcelain for more than a century, despite the decline in the British economy as a whole. Similar examples of long-term leadership can be found in Germany (printing presses, chemicals), the United States (soft drinks, movies, computers) and almost every other developed country.

The reasons for changes in the positions of countries in the competitive race are the same as in the more general cases discussed above. Established international leaders lose ground if they do not respond to changes in industry structure that give other firms the opportunity to overtake them by quickly moving to new technologies or products. Thus, economies of scale, reputation and connections with the distribution channels of established leaders are lost. Thus, the traditional leaders of some industries gave way to Japanese firms in those industries that were greatly changed by the advent of electronics (for example, the production of machine tools and tools) or where mass production replaced traditional small-scale production (the production of cameras, forklifts, etc.). Existing leaders also fail if other firms discover new market segments that have been ignored by the leaders. Thus, Italian companies producing household electrical equipment saw an opportunity to produce compact, standardized models using mass production, and sell them to newly emerging retail chains, so that they would sell them under their own brand. By actively developing this rapidly growing new segment, Italian manufacturers of electrical household appliances have become European leaders. Firms that are the first to exploit changes in industry structure often become the new leaders because they take advantage of the next change in industry structure. Home country has a significant impact on a firm's ability to respond to these changes, and, as previously discussed, firms in one or two countries often emerge as global leaders in an industry.

The ability of firms to maintain the advantages gained from a previous strategy is often the result of simple luck, namely, that there are no major changes in the industry. But still, more often it is the result of constant updating in order to adapt to changing conditions. Subsequent chapters explore in detail the country characteristics that explain this adaptability. The forces that allow a country's firms to maintain a competitive advantage once achieved are the main pillars of a country's prosperity.

Alliances and global strategy

Strategic alliances, which can also be called coalitions, are an important means of pursuing global strategies. These are long-term agreements between firms that go beyond ordinary trading operations, but do not lead to a merger of firms. The term “alliance” refers to a number of types of cooperation, including joint ventures, sales of licenses, long-term supply agreements and other types of intercompany relationships24. They are found in many industries, but especially often in the automotive industry, aircraft manufacturing, aircraft engine production, industrial robots, consumer electronics, semiconductor devices and pharmaceuticals.

International alliances (firms in the same industry based in different countries) are one of the means of global competition. In an alliance, the activities involved in the value chain are shared across the world between the partners. Alliances have been around for quite some time, but their nature has changed over time. Previously, firms from developed countries entered into alliances with firms from less developed countries to conduct marketing (often such a maneuver was required to gain market access). Now, more and more companies from highly developed countries are entering into alliances in order to act together in large regions or throughout the world. In addition, alliances are now concluded not only for marketing, but also for other activities. Thus, all American automobile companies have alliances with Japanese (and in some cases with Korean) firms to produce cars sold in the United States.

Companies enter into alliances to gain advantages. One of them is economies of scale, or reductions in time and costs for product development, achieved by joint efforts in marketing, the production of components, or the assembly of certain models of finished products. Another advantage is access to local markets, necessary technologies, or satisfying the requirements of the government of the country in which the company operates that the firm operating in the country be owned by that country. For example, the alliance between General Motors Corporation and Toyota - NUMMI - was conceived by General Motors in order to adopt Toyota's production experience. Another advantage of alliances is risk sharing. For example, some pharmaceutical companies have entered into cross-licensing agreements when developing new drugs to reduce the risk that each individual company's research will fail. Finally, firms with complex and advanced technologies often resort to alliances to influence the nature of competition in an industry (for example, by licensing a technology in high demand to achieve standardization). Alliances can compensate for disadvantages in competition, be it the high cost of production factors or outdated technology, while maintaining the independence of the companies and eliminating the need for an expensive merger.

However, alliances come at a cost, strategically and organizationally. Take, for starters, the very real problems of coordinating the activities of independent partners who have significantly different and even contradictory goals. Coordination difficulties jeopardize the benefits of a global strategy. In addition, today's partners may well turn out to be tomorrow's competitors; This is especially true for partners with more enduring or faster-growing competitive advantages. Japanese companies have confirmed this idea many times. To top it all off, the partner gets a share of the company's profits, sometimes quite substantial. Alliances are fragile things and can fall apart or fail. Often everything starts out great, but soon the alliance breaks up or ends with a merger of companies.

Alliances are often temporary measures and are common in industries that are undergoing structural changes or intensifying competition and firm managers fear they cannot cope alone. Alliances are the result of firms’ lack of confidence in their abilities and are most often found among “second-tier” firms trying to catch up with the leaders; At first, they give weak competitors hope of maintaining their independence, but in the end it may well come to the sale of the company or its merger with another.

As can be seen from the above, the alliance is not a panacea. And to stay ahead in the competitive race, a firm must develop internal capabilities in the areas most critical to achieving competitive advantage. As a result, global leaders rarely, if at all, rely on partners when they need the funds and skills needed to gain a competitive advantage in their industry.

The most successful alliances are very specific. Alliances formed by global leaders such as IBM, Novo Industry (an insulin company) and Canon are narrowly focused, aiming to enter certain markets or access certain technologies. Alliances in general are a means of enhancing competitive advantage, but they are rarely an effective means of creating it.

The influence of national conditions on success in competition

The principles of competitive strategy outlined above show how much needs to be taken into account when highlighting the role of the home country in international competition. Different strategies are more suitable for different industries, since the structure of industries and the sources of competitive advantage in them are not the same. And within the same industry, firms may choose different strategies (and implement them successfully) if they seek different types of competitive advantage or target different segments of the industry.

A country succeeds when conditions in the country are conducive to pursuing the best strategy for an industry or its segment. A strategy that works well in that country should lead to a competitive advantage. Many of the country's characteristics make it easier or, conversely, more difficult to implement a particular strategy. These features are heterogeneous - from behavioral norms that determine the methods of managing firms, to the presence or absence of certain types of skilled labor in the country, the nature of demand in the domestic market and the goals that local investors set for themselves.

Gaining a competitive advantage in complex industries requires improvement and innovation—finding new and better ways to compete and applying those ways across the board—and continually improving products and technologies. A country is successful in these industries if its conditions are conducive to such activities. Gaining an advantage requires the anticipation of new ways to compete and a willingness to take risks (and invest in risky ventures). And the countries that succeed are those whose conditions provide firms with a unique opportunity to recognize new competitive strategies and an incentive to immediately implement those strategies. Those countries whose firms do not respond properly to changes in the environment or do not have the necessary capabilities are the losers.

Maintaining competitive advantage over the long term requires improving its sources. Improving the advantage, in turn, requires more sophisticated technologies, skills and production methods and constant capital investment. Countries succeed in industries that have the skills and resources needed to change strategy. Firms that rest on their laurels, using a once and for all established concept of competitive advantage, quickly lose ground as competitors copy the techniques that once allowed these firms to get ahead.

The constant change required to maintain a competitive advantage is organizationally awkward and difficult. Countries succeed in industries where firms are under pressure to overcome inertia and engage in continuous improvement and innovation rather than sit idly by. And in those industries where firms stop improving, the country loses.

A country succeeds in those industries where its advantages as a national base carry weight in other countries and where improvements and innovations anticipate international needs. To achieve international success, firms must transform domestic leadership into international leadership. This allows you to leverage the benefits gained at home with a global strategy. Countries succeed in industries where domestic firms compete globally, either through government encouragement or pressure. In searching for the determinants of countries' competitive advantage in different industries, it is necessary to identify the conditions in the country that are conducive to success in competition.

Strategic management is designed to ensure the company's survival in the long term. Of course, when it comes to survival in a competitive market environment, there is no question that a company can eke out a miserable existence. It is very important to understand that as soon as someone connected with a company becomes unhappy with this connection, he leaves the company, and after a while it dies. Therefore, survival in the long term automatically means that the company copes with its tasks quite successfully, bringing satisfaction with its activities to those who enter the sphere of its business interaction. First of all, this concerns customers, employees of the company and its owners.

Concept of competitive advantage

How can an organization ensure its survival in the long term, what must be inherent in it so that it can cope with its tasks? The answer to this question is completely obvious: the organization must produce a product that will consistently find buyers. This means that the product must, firstly, be so interesting to the buyer that he is willing to pay money for it, and, secondly, it must be more interesting to the buyer than a similar or similar product in consumer qualities produced by other companies. If a product has these two properties, then the product is said to have competitive advantages.

Consequently, a company can successfully exist and develop only if its product has competitive advantages. Strategic management is designed to create competitive advantages.

Consideration of the issue of creating and maintaining competitive advantages involves analyzing the relationships and, accordingly, the interaction of three subjects of the market environment. The first subject is “our” company producing a certain product. The second subject Ekt is a buyer who may or may not buy this product. The third buyer is competitors who are ready to sell their products to the buyer, which can satisfy the same need as and a product produced by “our” company. The main thing in this market “love” triangle is the buyer. Therefore, the competitive advantages of a product are the value contained in the product for the buyer, which encourages him to buy this product. Competitive advantages do not necessarily arise from comparing the product of “our” company with the products of competitors. It may be that there are no firms on the market offering a competitive product, but nevertheless the product of “our” company is not sold. This means that it does not have sufficient customer value or competitive advantage.

Types of competitive advantages

What creates competitive advantages? It is believed that there are two possibilities for this. First, the product itself may have a competitive advantage. One type of competitive advantage of a product is its price characteristics. Very often, a buyer purchases a product only because it is cheaper than other products that have similar consumer properties. Sometimes a product is purchased only because it is very cheap. Such purchases can occur even if the product has no consumer utility for the buyer.

The second type of competitive advantage is differentiation. In this case, we are talking about the fact that the product has distinctive features that make it attractive to the buyer. Differentiation is not necessarily related to the consumer (utilitarian) qualities of the product (reliability, ease of use, good functional characteristics, etc.). It can be achieved due to such characteristics that have nothing to do with its utilitarian consumer properties, for example, due to the brand.

Secondly, in addition to creating a competitive advantage in a product, a firm may try to create a competitive advantage for its product in its market position. This is achieved by securing the buyer or, in other words, by monopolizing part of the market. In principle, this situation contradicts market relations, since in it the buyer is deprived of the opportunity to choose. However, in real practice, many companies manage not only to create such a competitive advantage for their product, but also to maintain it for quite a long time.

Strategy for creating competitive advantages

There are three strategies for creating competitive advantage. The first strategy is price leadership. With this strategy, the company's focus when developing and manufacturing a product is costs. The main sources of creating price advantages are:

Rational business management based on accumulated experience;

Economies of scale due to lower costs per unit of production as production volumes increase;

Savings on variety as a result of cost reduction due to the synergistic effect that occurs in the production of various products;

Optimization of intra-company communications, helping to reduce company-wide costs;

Integration of distribution networks and supply systems;

Optimization of the company's activities over time;

Geographical location of the company's activities, allowing to achieve cost reduction through the use of local characteristics.

Implementing pricing strategy creating competitive advantages for a product, the company must not forget that its product at the same time must correspond to a certain level of goodness and differentiation. Only in this case can price leadership bring a significant effect. If the quality of the price leader's product is significantly lower than the quality of similar products, then creating a price competitive advantage may require such a strong price reduction that it can lead to negative consequences for the company. However, it should be kept in mind that cost leadership and differentiation strategies should not be mixed, and certainly should not be attempted at the same time.

Differentiationis the second strategy for creating competitive advantage. With this strategy, the company tries to give the product something distinctive, unusual, that the buyer may like and for which the buyer is willing to pay. A differentiation strategy aims to make a product different from its competitors. To achieve this, the company has to go beyond the functional properties of the product.

Firms do not necessarily use differentiation to obtain price premiums. Differentiation can help expand sales by increasing the number of products sold or by stabilizing consumption, regardless of fluctuations in market demand.

In the case of implementing a strategy for creating competitive advantages through differentiation, it is very important to focus on consumer priorities and interests of the buyer. It was previously said that a differentiation strategy involves creating a product that is unique in its own way, different from the products of competitors. But it is important to remember that for a competitive advantage to emerge, the product's unusualness, novelty, or uniqueness must be of value to the buyer. Therefore, the differentiation strategy assumes the study of consumer interests as a starting point. To do this you need:

It is enough to clearly imagine not just who the buyer is, but who makes the decision on purchase issues;

Study the consumer criteria by which the choice is made when purchasing a product (price, functional properties, guarantees, delivery time, etc.);

Determine the factors that form the buyer’s understanding of the product (sources of information about the properties of the product, image, etc.).

After this, based on the ability to create a product with the appropriate degree of differentiation and the appropriate price (the price should allow the buyer to purchase the differentiated product), the firm can begin to develop and produce this product.

The third strategy a firm can use to create a competitive advantage in its product is focusing on the interests of specific consumers. In this case, the company creates its product specifically for specific customers. Concentrated product creation is associated with the fact that either some unusual need of a certain group of people is satisfied (in this case, the company's product is very specialized), or a specific system of access to the product is created (a system for selling and delivering the product). By pursuing a strategy of concentrated creation of competitive advantages, a company can use both price attraction and differentiation at the same time.

As you can see, all three strategies for creating competitive advantages have significant distinctive features, allowing us to conclude that the company must clearly define for itself what strategy it is going to implement, and in no case mix these strategies. At the same time, it should be noted that there is a certain connection between these strategies, and this should also be taken into account by firms when creating competitive advantages.

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For an enterprise to operate successfully in the market, it needs to have an advantage over organizations that produce similar products or provide similar services. Competitive advantage is a concentrated manifestation of superiority over competitors in various areas of work specific organization, measured by economic as well as financial indicators. It should not be understood as a potential enterprise opportunity. This is not a possibility, but a fact that occurs as a result of the real preferences of a certain circle of buyers. In business, competitive advantage is one of the main, main goals and results. economic activity enterprises. To achieve this goal, the efforts of the entire team of the organization are necessary.

A competitive advantage can appear if your enterprise has a low cost of goods or services, a high level of product differentiation, optimal innovation, and a fairly quick response to market needs. This includes labor productivity and personnel qualifications, high professionalism of managers, and a high level of strategic management.

Competitive advantage is comparative in nature because it can only be identified by influencing sales performance.

The number of preferred choices on the part of respondents can serve as a reflection of the product rating, which is the result of marketing analysis.

In a special position are products that have unique characteristics that have no analogues. Such products, having absolute competitive advantages, also have (in addition to unique value) the fact that they overcome the boundaries of competition for some time and are monopolists in the market. But this type of monopoly, supported by the state, is consolidated by the method of patenting new product characteristics. These absolute advantages will create an additional incentive for scientific and technological development, which will help competition develop.

The competitive advantage of any economic entity cannot be universal; it can only be relative.

To achieve it, a whole range of measures is required, however, they may not be sufficient, since external factors may be stronger.

Porter's theory of competitive advantage is devoted to the analysis of the influence of various factors on the organization. In his work “International Competition” (1990), he came to the following conclusion: the global competitive advantages of national enterprises depend most of all on the macroeconomic and social environment in which they operate in the country. The macroenvironment is determined not only by production factors, but also by factors such as demand in the domestic market; development of related industries; level of management in the country; level of competition; government economic policy; random events (war, unexpected discoveries, etc.). The presence of these six factors largely determines the competitive advantages of organizations, industries and countries in the global market.

⏱ reading time: 15 minutes

The goal of a marketing strategy is to understand and cope with the competition. Some companies are always ahead of others. Industry affiliation does not matter - the gap in the profitability of companies within one industry is higher than the differences between industries.

The differences between companies are especially important during times of crisis, when the created competitive advantage is an excellent foundation for profitable growth.

Competitive advantages of the company

• Advantage Any success factor that increases a consumer's willingness to pay or reduces a company's costs.
• Competitive advantage- a success factor that is significant for the consumer, in which the company surpasses all competitors

Building a competitive advantage means achieving a greater gap between costs and customer willingness to pay for a product than your competitors.

Step 1. Determine success factors

The answer to the question “how to create a company’s competitive advantage” is not so important. If you are confident that you will achieve competitive advantage through 24/7 delivery, then you will find a solution to realize this competitive advantage. It is much more difficult to determine what exactly they will become.

To do this, first of all, we write down all the advantages, or success factors, that are important for buyers. For example, like this.

Step 2. Segment the target audience

A separate shuttle for business class passengers is an advantage. But achieving this competitive advantage is completely irrelevant to those flying in the economy segment. Determining competitive advantages always occurs for a specific segment of the target audience - with its specific needs and desires.

The decision to sell to “everyone” leads to questions about where to look for these “everyone” and what to offer them. It turns out that “everyone” must be searched “everywhere” and offered “everyone”. This strategy will kill the budget of any company.

Let's take the example of achieving competitive advantages for a company selling flowers. Among the target audience, we will highlight the segments of those who buy flowers impulsively, prepare a pre-planned gift or, say, decorate their homes.

Having determined for whom we are going to create a competitive advantage, we will evaluate whether it is worth it - we will give an assessment of the market capacity and the intensity of competition in each segment.

Read more about segmentation criteria in our article: “”

Step 3. Determine key success factors

The buyer is demanding. Many factors are important to him - from the consultant’s smile and website design to low prices. But just because a buyer wants something doesn’t mean he’s willing to pay for it.

The value of a competitive advantage is the buyer's willingness to pay for it. The more money they are willing to pay for the development of a competitive advantage, the higher its significance.

Our task is to form a very short list of key success factors from the long list of various consumer “wants” that can determine the company’s competitive advantages.

In our example, the key success factors are the same for all three target audience segments. In real life, each segment usually has 1-2 of its own factors.

Step 4. Assess the importance of key success factors for target audience segments

What is important to one segment of the target audience may be a weak competitive advantage for consumers from another segment.

If you have an idea to buy flowers to give them this evening, then for an impulsive decision the main thing is appearance (fullness of bud opening) and speed of purchase. This is more important than the ability to choose from a large assortment, the lifespan of the bouquet - it is necessary that the flowers be present and look good this evening.

The opposite situation is buying flowers to decorate your home. Delivery is not a problem, but the question of how long the flowers will last comes to the fore.

Therefore, the importance of key success factors is determined for each segment of the target audience separately.

*) we clarify - CFUs are taken as an example, close to life, but do not reflect the real case.

For our company, identifying the right competitive advantages that allow our clients to attract more consumers, get more money from them and interact with them longer is one of the main blocks of the developed marketing strategy. Therefore, we strive to achieve an ideal situation - when every cell of all tables in this article is expressed in money. You can create a working marketing strategy only by understanding the cost of CFU from the buyer’s point of view, market volume, costs, etc.

All this information can be obtained. But sometimes there is no time or resources for this. Then we recommend using a comparison on a 5 or 10 point scale. In this case, remember that any factual data is better than guesswork. Hypotheses must be put forward based on the company’s big data, monitoring customer reviews, monitoring the sales process of competitors, and not taken from the head “because it seems so to me.” Expert forecasts too often fail.

Step 5. Compare the achieved competitive advantages

At this point, we have figured out what is important to your consumers. This is good. It’s bad that competitors are also aware.

To understand the starting conditions, it is necessary to assess the current degree of development of the company's competitive advantages. Strictly speaking, you only have a competitive advantage when your offering outperforms all of your direct competitors on some key success factor.

The assessment of competitive advantages is made exclusively from the point of view of consumers. The opinion of the company's employees, and especially the management, does not say anything. The director may be proud of the website developed according to his idea, on which millions were spent, but this in no way indicates the convenience of the site for clients.

Step 6. Determine sources of competitive advantage

Any competitive advantage is the result of a company’s activities. Each action incurs costs and at the same time affects the buyer's willingness to purchase the product. Differences in the results of these actions form competitive advantages.

Therefore, we compile a list of all the company’s activities by desegregating its activities into separate processes. In projects, we begin the analysis with the activities that are necessary to produce the basic product or service, and only then add related activities.

Step 7. Linking key success factors and company activities

Competitive advantage is formed at the intersection of various activities. For example, an increase in the assortment in the flower trade requires an increase in working capital, the availability of storage space for products, a sufficient area of ​​sales points, additional qualifications of sellers and service personnel, etc.

We determine which business processes are associated with the development of each of the found competitive advantages and the size of their contribution.

Step 8. Assess the company’s costs for creating competitive advantages

At this step, we look at how much it costs to achieve a competitive advantage. Any company activity has its costs.

In our example, we estimate the level of costs on a 10-point scale, but in real life, a company must more or less accurately know its costs. Pay attention to the calculation methodology - usually accountants tend to record most of the costs in production, thereby reducing indirect costs.

Having understood the size of costs, we determine their drivers. Why are the costs what they are? Maybe we pay a lot for shipping because the business size is small and we don't have enough freight? There are many cost drivers. They depend on the size of the firm, its geographical location, institutional factors, access to resources, etc.

Cost driver analysis helps estimate the costs competitors will have to create a similar competitive advantage. It is difficult to obtain data directly, but by understanding the drivers that influence the amount of costs, we can predict the volume of competitors' expenses.

Step 9. Looking for resources to create a competitive advantage

Maintaining the achieved competitive advantage at a constant level is only possible if sufficient resources are available. In addition, analysis of the resources that the company has helps to choose an area for quickly developing a competitive advantage.

Step 10. Choosing a direction for developing a competitive advantage

We look at the two resulting final pictures and think. There are only three possibilities for achieving competitive advantage:

• increase willingness to buy a product without significantly increasing costs
• dramatically reduce costs with virtually no impact on willingness to buy
• increase willingness to buy and reduce costs at the same time.

The third direction looks the most attractive. But finding such a solution is extremely difficult. Typically, companies simply waste valuable resources trying to create a competitive advantage across the board.

Basic rules for determining competitive advantage.

• We are looking for options that create the largest gap between the buyer’s desire to pay and our costs.
• We don’t try to select all the attractive options at once. Having decided to occupy one peak, we will no longer climb another. It is most profitable to choose a peak that is not crowded with competitors.
• We remember our competitors and what motivates each of them. If you decide to change some business process, how will your closest competitor react to this?

• Success factors. The more you find, the better. Typically, managers tend to focus on a few product features. This reduces the perception of the benefits that the consumer receives and brings your marketing strategy closer to that of your competitors. To find competitive advantages that are less competitive, think about the benefits a company creates for all its stakeholders: customers, employees, suppliers, dealers, and so on.
• Key success factors. The more significant the factor, the more restructuring of the company’s activities it requires. If you are not one of the industry leaders, it is better not to immediately try to compete on the main factors, or groups of factors (“best in quality”)
• Market. The question should not be “can we create a competitive advantage for this segment of the target audience”, but “can we create a competitive advantage for this segment of the target audience and remain profitable.” Having current costs in hand, we assume how much the company will pay to turn a key success factor into a full-fledged competitive advantage
• Current competitive position. It's difficult to build a competitive advantage in which you're hopelessly behind. Especially if it is a capital-intensive or time-consuming process.
• Costs. Competitive advantage can be achieved by focusing on costs that are most different from competitors, are large enough to influence the overall cost structure and are associated with discrete activities.

Fear often gets in the way of building a competitive advantage. The desire to become the best will certainly entail an increase in prices or, conversely, a decrease in the desire to buy our product. Reducing costs reduces the client’s desire to use our service (a ticket to a low-cost airline is cheap, but you can’t take luggage with you, there’s no food, airports are far away). Improving product characteristics leads to increased costs. This is absolutely normal. All that matters is the widening gap between the buyer's willingness to pay and the company's costs.

Step 11. We create competitive advantages by changing the company’s actions

As I wrote above, the creation of competitive advantages is the result of the company’s actions. To make the offer superior to all competitors, it is necessary to reconfigure some of the activities.

For example, achieving a “low cost” competitive advantage. There is no point in trying to compete with a discounter by simply lowering prices. A successful discounter has become so due to the fact that most of the company's activities are subordinated to creating this competitive advantage. If a Walmart employee wants to get a new pen, he returns the old one, which is covered in writing. There are no small details in creating a competitive advantage.

Again we look at the connection between the chosen competitive advantage and the company’s activities. Where is this competitive advantage created? And we invest specifically in the development of selected business processes.

Ask yourself the following questions

• Are our actions different from those of our competitors?
• Are we doing the same things but in a different way?
• How can we change our actions to gain competitive advantage?

As a result, determine the minimum and sufficient set of activities that the company must perform in order to form a competitive advantage. Usually they try to copy only obvious things, forgetting that much is hidden under water. It is the complex of activities that creates a competitive advantage that cannot be copied.

Actions aimed at developing a competitive advantage must be connected by a single logic. M. Porter's classic example is the set of actions of SouthWest Airlines that created its competitive advantage. As a result, the airline was the only low-cost airline on the market for 25 years. It is impossible to achieve a similar competitive advantage overnight.

In essence, this is a marketing strategy. This set of actions is almost impossible to copy and surpass.