Growth Strategy – Workshop 3 (Competitive Environment)
The Appleton Greene Corporate Training Program (CTP) for Growth Strategy is provided by Mr. Ardila Certified Learning Provider (CLP). Program Specifications: Monthly cost USD$2,500.00; Monthly Workshops 6 hours; Monthly Support 4 hours; Program Duration 27 months; Program orders subject to ongoing availability.
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Learning Provider Profile
Mr Ardila is the co-founder of The Hawksbill Group, a business consulting and investment firm advising medium and large clients in the public and private sectors. Mr. Ardila is also a member of the Board of Directors of Accenture, Goldman Sachs BDCs, Nexa Resources and Ola Electric Mobility. Prior to his current activities, he was Executive Vice President of General Motors and CEO of Latin America from 2010-2016 (March). In his 30-year career with GM, he held several important positions, including country CEO in Ecuador, Colombia, Argentina and Brazil, as well as CFO of Latin America, Africa and the Middle East. He also worked as an investment banker for the Rothschild Group from 1996-1998 and Secretary General at the Ministry of Industry and Trade in Colombia (1983-84).
Mr. Ardila is a graduate of the London School of Economics where he obtained a MSc. Degree in Economics. He has lived in 10 countries and speaks English, Spanish, Portuguese and German.
MOST Analysis
Mission Statement
A system where numerous businesses compete with one another utilizing diverse marketing channels, advertising strategies, pricing approaches, etc. is referred to as a competitive environment. Businesses should abide by the rules contained in this system. Your business and your decisions may be directly impacted by your rivals. Consider two rival online clothes retailers who compete with one another for customers and financial gain. Before Christmas, one of them decides to hold a flash sale where buyers may get 40% off anything on the website. The competing store will also need to develop a compelling offer to draw leads and consumers, boost sales, move off-brand merchandise, and ultimately increase profits. Similar to this, if a coffee firm releases a new product, its rival will need to think about growth hacking. Therefore, competition can be advantageous because it spurs businesses to improve themselves and their goods. Customers benefit from a competitive environment as well. Businesses frequently provide premium products at competitive prices to attract customers. Additionally, corporations must innovate in order to release their products. However, competition can occasionally make it more difficult for a business to survive. Consider two businesses that are housed in the same place. It will be challenging for the second company to compete if one of them sets low prices and discounts. It’s time to move on to the many sorts of competition that define the relationships between and among sellers and customers now that you understand how a competitive environment affects your business and customers.
Objectives
01. Competitive Environment Analysis: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
02. Identify Potential Competitive Offerings: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
03. Intellectual Property Reviews: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
04. Technology Stack Assessment: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
05. Porters Five Forces Analysis: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
06. Identify Competitor’s Team Members: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
07. Identify Competitor’s Investors: departmental SWOT analysis; strategy research & development. 1 Month
08. Identify Competitor’s Customers: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
09. Monopolistic competition: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
10. Monopoly: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
11. Oligopoly: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
12. Pure Competition: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
Strategies
01. Competitive Environment Analysis: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
02. Identify Potential Competitive Offerings: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
03. Intellectual Property Reviews: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
04. Technology Stack Assessment: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
05. Porters Five Forces Analysis: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
06. Identify Competitor’s Team Members: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
07. Identify Competitor’s Investors: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
08. Identify Competitor’s Customers: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
09. Monopolistic competition: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
10. Monopoly: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
11. Oligopoly: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
12. Pure Competition: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
Tasks
01. Create a task on your calendar, to be completed within the next month, to analyze Competitive Environment Analysis.
02. Create a task on your calendar, to be completed within the next month, to analyze Identify Potential Competitive Offerings.
03. Create a task on your calendar, to be completed within the next month, to analyze Intellectual Property Reviews.
04. Create a task on your calendar, to be completed within the next month, to analyze Technology Stack Assessment.
05. Create a task on your calendar, to be completed within the next month, to analyze Porters Five Forces Analysis.
06. Create a task on your calendar, to be completed within the next month, to analyze Identify Competitor’s Team Members.
07. Create a task on your calendar, to be completed within the next month, to analyze Identify Competitor’s Investors.
08. Create a task on your calendar, to be completed within the next month, to analyze Identify Competitor’s Customers.
09. Create a task on your calendar, to be completed within the next month, to analyze Monopolistic competition.
10. Create a task on your calendar, to be completed within the next month, to analyze Monopoly.
11. Create a task on your calendar, to be completed within the next month, to analyze Oligopoly.
12. Create a task on your calendar, to be completed within the next month, to analyze Pure Competition.
Introduction
A system where numerous businesses compete with one another utilizing diverse marketing channels, advertising strategies, pricing approaches, etc. is referred to as a competitive environment. Businesses should abide by the rules contained in this system.
How does a competitive environment affect businesses?
Your business and your decisions may be directly impacted by your rivals. Consider two rival online clothes retailers who compete with one another for customers and financial gain. One of them chooses to offer 40% off the entire website during a flash sale right before Christmas. The competing store will also need to develop a compelling offer to draw leads and consumers, boost sales, move off-brand merchandise, and ultimately increase profits.
Similar to this, if a coffee firm releases a new product, its rival will need to think about growth hacking. Therefore, competition can be advantageous because it spurs businesses to improve themselves and their goods.
Customers benefit from a competitive environment as well. Businesses frequently provide premium products at competitive prices to attract customers. Additionally, corporations must innovate in order to release their products. However, competition can occasionally make it more difficult for a business to survive. Consider two businesses that are housed in the same place. It will be challenging for the second company to compete if one of them sets low prices and discounts.
It’s time to move on to the many sorts of competition that define the relationships between and among sellers and customers now that you understand how a competitive environment affects your business and customers.
Types of Competitive Environment
To evaluate the business environment’s economic climate, it is crucial to comprehend the different types of competitive situations. To be able to understand industry and market news, policy shifts, and legislation in the future, you need be familiar with how businesses and markets operate. Let’s identify the primary categories of competitive situations and examine each one in greater detail.
• Pure competition. In an environment where competition is fierce, numerous small businesses manufacture comparable goods that are in high demand. Due to their modest size, these producers have no ability to change the price, which is determined by supply and demand for the product. For instance, when a farmer takes dairy products to the neighborhood market, he or she cannot alter the going price and must accept it.
• Monopolistic competition. In this setting, numerous producers create various goods that may or may not have the same function. Because of the variations in quality, features, and other factors, customers can discern between the products. Businesses actively utilize advertising to market their goods and persuade customers that they are superior to competing goods. Companies engaged in monopolistic competition have the power to set prices for their products because they are price makers. To differentiate themselves from other enterprises, they need offer something unique to support the price increase on their items, such raising the caliber of their goods.
• Oligopoly. There are typically two or more small enterprises in this market model. Companies cooperate rather than compete in order to gain high market returns, hence it is seen as steady. Prices are jointly set and maintained high by businesses or under the direction of a single business. Profit margins are higher in an oligopoly than they are in a more competitive setting. The primary issue with this market structure is that businesses frequently experience the prisoner’s dilemma, which provides an incentive to deceive and behave in their own best interests at the expense of other enterprises.
• Monopoly. One business creates a distinctive product. There is no competition for this company, and there are no alternatives for the product. A monopolist also establishes hurdles for new businesses to enter the market and determines the product’s pricing.
When joining the market, you should be aware of the four primary market structures: monopoly, monopolistic competition, oligopoly, and perfect competition. It’s time to move on to the study of the competitive environment.
Case Study: Beating the competition – Amazon Web Services
AWS provides a range of goods and services that are primarily classified into two categories: cloud computing and cloud storage. Although other businesses offer a lot of the same services, AWS stands out for its exceptional scalability and versatility.
AWS came to the realization that a business with processing peaks lasting only a few hours per day does not need to invest in pricey infrastructure around-the-clock. Similar to this, if just 5,000 people choose to use a company’s services after renting server space for a forecasted 10,000 consumers, the company stands to lose a lot of money.
Because of this, AWS customers only pay for what they really use. A company’s cost is automatically and proportionally reduced if it doesn’t use the available processing power at specific periods of the day (or week, or year). All AWS services can be quickly and simply terminated or added in accordance with the requirements of the client, according to a similar approach. AWS services are astonishingly affordable and practical for small, medium, and big businesses thanks to a customer-focused approach, which has helped them gain a 32% market share in the global cloud computing market.
Competitive Environment Analysis
Understanding your rivals’ strategies will help you create a winning marketing plan. To reach your company rivals at this point, you require a competitive analysis framework. Let’s talk about a few of the most common frameworks.
• SWOT Analysis. You can evaluate the internal and external forces affecting your business. With the use of this framework, you may pinpoint competitive advantages, assess your competitors’ strengths and weaknesses across various marketing channels, and determine your next marketing moves.
• Strategic Group Analysis. This framework describes the many strategic characteristics of all effective competitors’ strategies. It enables you to determine the positions of your rivals in the market and the elements that make your company profitable. Additionally, it enables you to measure your position among rivals and pinpoint the essential elements of success.
• Porter’s Five Forces. This framework’s foundation is based on an examination of the industry’s competitive market dynamics and a contribution to the identification of the sector’s advantages and disadvantages. It has five components: substitutes, new competitors, buyers, suppliers, and suppliers. These five factors affect how fierce the rivalry is in your sector.
• Growth-Share Matrix. Using this framework, you may choose whether items are worthwhile investments based on their market attractiveness and competitiveness. Large businesses find it particularly helpful because it enables them to define their product portfolios and determine which goods are still worthwhile to invest in and which are no longer.
• Perceptual Mapping. You can use this framework to compare your product to those offered by your competitors. You can use it to determine whether your positioning strategy is appropriate for your target market and how buyers view your product in comparison to that of your competitors. It can also assist you in identifying the holes you need to fill.
To fully understand different market structures, let’s walk you through some examples.
Examples of Competitive Environment
Even tiny businesses include a component on competitive environment analysis in their business plans. It comprises all the outside circumstances that have an impact on your business and the goods or services you provide, as you are already aware from the information above.
Take electronics as an illustration. The South Korean corporation Samsung, which specializes in electrical and smart appliance technology, was created. Apple, Sony, Huawei, Intel, and many other companies are among their rivals, therefore Samsung’s team works to produce a product that is superior to alternatives employing innovations that might draw customers.
The types of competitive environments might change as a result of advancements in technology or changes in consumer purchasing patterns. As an illustration, Amazon altered product distribution and client expectations. New breakthroughs increased the number of consumer goods businesses and provided new markets for startups that previously had no chance to compete with more established businesses.
Your company could be exposed to several competitive environments. Because of this, it’s essential to recognize how they differ and to be prepared to evaluate news about the market, the business, and government regulations.
Competitive environment in marketing
• Samsung. There are several direct competitors for Samsung in its competitive landscape. Similar products like smartphones, cameras, computers, etc. are offered by several businesses all over the world. These businesses include, among others, Huawei, Apple, and Xiaomi. These businesses are constantly in competition with one another. Samsung must develop fresh, cutting-edge concepts and marketing strategies that will draw people and persuade them to buy its goods if it is to prosper.
• McDonald’s. McDonald’s has a lot of rivals, including Burger King, KFC, Five Guys, and more. Nevertheless, despite the fact that all of these eateries serve quick food, the food they provide is distinct. Each of them has a distinct menu that features dishes with a variety of flavors and recipes. Fans of McDonald’s are therefore unlikely to choose any of the other eateries instead. McDonald’s may also set prices due to all of the aforementioned factors.
• American Airlines. There aren’t many monopolizing businesses in American Airlines’ market. Examples of this are United Airlines, Southwest Airlines, and Delta Air Lines. They make up the top four domestic flight providers in the United States along with American Airlines. As a result, they are able to work together and set rates.
• Railways. Since no other businesses are creating the goods, there is no competitive environment. Government-run railways cannot be operated by new partners or privately held businesses because they are public services.
Case Study: Beating the competition – Etsy
IOspace, a small software development startup, first introduced Etsy in 2005. Etsy, in contrast to Amazon, which stores and delivers goods, brings together consumers and sellers from all over the world and earns money by keeping 5% of the purchase price.
From the beginning, Etsy attracted notice for its cutting-edge business methods from both consumers and merchants. The business frequently added new features and tools, making considerable use of tags and categories and flash animations.
With up to 30 updates released every day by their technical team, the company’s innovation pace increased in 2010. This was made possible by modifications to the implementation procedure, which eliminated the need for management approval for each modification to the website. Instead, software was utilized to track website modifications while the same engineers who planned the improvements oversaw their execution.
Their R&D expenditure for 2018 was $97.2 million, a 30% increase over 2017. Regular updates add new features, automatic suggestions for landing page optimization, buyer customization tools, and enhancements to Etsy’s mobile app. Additionally, the business has used machine learning to translate transactions into ten different languages and assist users with item browsing.
Despite Amazon’s efforts to surpass them, all of this helped Etsy dominate the market for handmade goods.
Benefits and Drawbacks of Business Competition
For practically any firm, competition, whether direct or indirect, is a given. Even innovators who are the first in their industry must accept the fact that competitors will eventually emerge, such as start-ups or established businesses expanding their product lines.
Although it can appear that competition in business gives businesses a lesser part of the market and a smaller piece of the metaphorical pie, competition can also be advantageous for both businesses and customers.
Advantages of Competition for Businesses
Although commercial competition reduces your individual market share, it can also push you to improve as a company. When you’re the only choice, it’s simple to take it easy. However, “competition creates excellence,” they claim.
A common example is a restaurant that attracts customers primarily because it is the most practical option. As a result, even if the meal isn’t great, customers will still patronize the establishment. However, if a rival eatery starts up close by, the first one will have to fight for customers and upgrade to survive.
The same idea underpins all businesses and benefits both enterprises and customers. But in the end, businesses benefit the most from this aspect of competition since it spurs them on to innovate and pursue better standards. Clients should never seek you out; you want them to do business with you.
7 Reasons that Competition is Good for Business
Many companies view competition as their enemy. In some circumstances, this might increase workers’ motivation. You must not disregard the numerous ways in which your rivals support the expansion and development of your company.
1. Inspiration
Capitalism is based on competition. You cannot argue against the fact that competition spurs workers to put in more effort, even if you believe there are better ways to organize an economy. It compels companies to innovate their offerings. It fosters a sense of unity among workers at an organization. Many teams become closer when they have a same objective. One of these objectives can include outperforming the competitors in terms of revenue, new clients, or market share. When there is more competition around them, your employees—especially if they are paid on commission—will be more driven to keep clients. The introduction of new products, marketing strategies, or business models by the competitors keeps your organization on its toes and spurs innovation. Growth, innovation, and progress are stimulated by competition. You might take a higher risk when conditions are competitive in the hopes of earning a significant profit. As circumstances change and new players enter your industry, you can’t just stay the same and hope to keep your clients.
2. Partnerships
Many businesses dislike their rivals because they believe they steal their clients. The market for your sector will really grow as more businesses enter it. You should make an effort to maintain cordial relations with your rivals. A positive working relationship with rivals can have many advantages for both parties. Sharing advice, providing relevant content, or attending events together can all result from networking. Not every company in your neighborhood is a rival. That eatery next to your theater is not in direct competition with you. In fact, your traffic is probably rising as a result. Who wouldn’t want to watch a movie after filling their bellies with delectable food? Everywhere, complementary firms are working together to organize events or give their clients promotions for the other company. Through exposure and increased sales, this collaboration tremendously benefits both companies.
3. Customers
Consumers benefit from competition since it results in lower pricing and more options. Competition benefits your business because it makes customers happier. How would you feel if Snickers and Reese’s peanut butter cups had never been created, and all you could eat for the rest of your life were Almond Joys? People who enjoy peanuts or dislike coconuts would have an unhappy life if they lived it that way. It’s true that this additional competition would cause sales of Almond Joys to decline. Customers would, however, be considerably pleased. Almond Joy currently caters to people who genuinely adore their candy in a world where there are many candy bar options. Brand loyalty is produced by competition when it would not otherwise exist. There are now supporters of Almond Joys and Reese’s peanut butter cups, respectively.
4. SWOT
Companies are prompted by competition to do a SWOT analysis to determine their strengths, weaknesses, opportunities, and threats. Businesses should be aware of and build upon their strengths. It is important to acknowledge and correct weaknesses. Without acknowledging what needs improvement, improvement is impossible. Every business has room for improvement, whether it is in terms of their offerings, offerings, customer service, internet presence, or something else. Research should be done to examine various prospects that your business might exploit. Your threats can also include your rivals or a sluggish economy. Once you have established all of these factors, take them into account while making crucial business decisions.
5. Learning
What better approach to learn how to successfully attract clients than by looking at another prosperous company in your sector? If your company is that successful, then don’t feel frightened when other businesses imitate you. The fact that people are copying your firm should make you feel honored. Even if you’re at the top, there’s always something you can pick up from your rivals. Perhaps you can make one small adjustment to greatly increase your chances of success. Whether or whether your rival is prosperous, you can still learn from their wise choices and failures.
6. Customer service
How can you retain your clients while luring away business from your rivals? Better customer support is a good place to start. Consumer service is more crucial the more expensive the purchase a customer is making. Since there are so many alternatives, your employees will need to work much harder to maintain client interest in your company. Because of this, you must carefully select your customer service personnel and ensure that they are driven to assist clients in any manner possible. Customers should be treated with the same consideration and respect as those who are making purchases, regardless of whether they do so. This can entice them to visit again or recommend your company to others. Your company’s reputation improves as your customer service does.
7. Niche
Your company may stand out from the competition in a crowded market with similar competitors. Pay attention to what makes your business unique. Customers should be able to tell that you have a competitive advantage, offer excellent customer service, or produce high-quality goods. Market segments that are devoted to distinct brands are created by competition. You will get some devoted clients if your business is truly unique and provides value to customers.
Although competition might challenge your company, it also has numerous positive effects. Customers benefit and continue to visit your store when you are compelled to be innovative and provide excellent service. When you serve your consumers well, even in a competitive market, you may build some fairly strong brand loyalty.
Disadvantages for Businesses
In business, competition reduces a company’s market share and reduces the pool of potential customers, particularly if demand is constrained. Reduced profit margins for each sale or service might result from a competitive market’s need to cut prices in order to remain competitive.
A flooded market is an extreme case. Inventories grow as products are overproduced. When inventory reaches unmanageable levels, too much capital is locked up in goods that are simply sitting in storage, leaving little left over for expenses like rent and wages. Employee layoffs or hours cutbacks become necessary if the inventory continues to be chronically overstocked in order to keep payroll expenditures within the budget’s tightening limits.
Advantages of Competition for Customers
It’s beneficial for customers to have options. There will be more options for potential customers to pick from if there are more businesses in a sector offering comparable goods or services. Market competition forces companies to enhance their offers, which are then passed on to customers as more specialized, effective, and superior possibilities. The most obvious advantages for customers are cheaper costs and more purchasing power.
Disadvantages for Customers
Customers must also contend with the negative effects of competition. Due to how brutally competitive the business world may be, it may hurt brands that customers frequently support. For instance, you won’t be able to eat at your preferred restaurant ever again if it closes down due to excessive competition.
Having too many options can make choosing products more difficult. For instance, toothpaste. Even though toothpaste has an entire store lane dedicated to possibilities, most people do not have a strong preference for features in a bottle of toothpaste.
On the other hand, a market monopoly ultimately results in fewer, worse options.
Case Study: Beating the competition – Nike
Each advertisement is a painstakingly created composition that only occasionally refers to Nike’s products but is instead intended to arouse emotions and wants. Nike is conveying a story in all of its advertisements that motivates common people to pursue their sporting ambitions.
The demand for running shoes extends beyond simple footwear for the buyer. Instead, they want to improve their health, endurance, sports performance, or some other aspect of their lives. And the motto for Nike speaks directly to this objective. Instead of selling items, it promotes the advantages those products will have.
When a customer expresses hesitation or concern, Nike advises them to “Just do it.”
They consistently develop fresh and creative marketing messages that are consistent with Nike’s culture and brand language because their product emphasis is varied and segmented. For instance, the new slogan “Find Your Fast” is gradually but surely gaining traction among athletes.
The 9 Rules for Business Competition
Those of us in B2B sales frequently find ourselves vying for a client with a rival. Both winners and losers are present. The game must be played in order to win because this is true. The following nine guidelines will help you compete and outperform your rivals.
• Respect Your Competition: Underestimating your competition when vying for business is one of the biggest blunders you can do. The part of you that wants—and needs—to think you are superior should make some place for the notion that your rival will be difficult to beat. Being disrespectful to your rivals indicates that you are arrogant. History books are replete with tales of people whose arrogance cost them victories they otherwise would have had.
• Know Your Competition: According to businessman Anthony Iannarino, “I never checked in without checking the customer’s guest book to see which of my competitors had visited the client. The lady behind the counter would occasionally stare at me as though I were doing something incorrectly, but in my opinion, it would have been incorrect not to look. Regardless of how you learn this information, understanding who else is vying for the business of your ideal client will help you better understand how to compete, which is the focus of our following rule.
• Remove Threats Proactively: You are aware that your low-cost, bottom-feeding rival will undoubtedly undercut your price by a considerable margin. You are aware that your enormous competition, whose market share encompasses the majority of the known universe, will make their size and scale a problem that they think you are unable to solve. When your price is greater, let your client know right away and utilize that information to explain how it pertains to what they desire. Make sure your client is aware of your boutique, neighborhood location so they won’t have to wait for Lord Vader to weigh in on the services they require from the neighborhood team and that just two of the Death Star’s satellites are in their orbit.
• Your Sales Approach Is Your Advantage: If you compete at Level 1, the lowest level of value, you are nearly certain to lose to a salesperson who adds more value throughout the process. You might think that your solution should be enough to win you a transaction. It’s almost guaranteed that your sales strategy isn’t a contemporary, consultative strategy if you have any doubts. Your most important competitive advantage—or lack thereof—lies in how you sell.
• Spend Time with Your Prospective Client: Due to the rapid advancement of technology, salespeople are increasingly spending less time with their clients. You must enjoy competing against others who wish to fudge the results. Reject that. Make the change to “email it in.” Your competitive edge grows the more time you spend with your ideal client. Who wants to buy from someone who doesn’t want to meet with them in person and goes out of their way to avoid doing so?
• Control the Process: It’s unlikely that anyone has ever been taught, trained, or coached to control the process, which entails assisting your client in having the necessary discussions and making the necessary commitments in order to achieve the better results they require. In order to distinguish yourself from your “also-rans,” you should provide them more suggestions on how to achieve the results they require, including the best way to manage their internal process.
• Make Consensus Job One: In huge, complex sales, you are selling everyone who will have an opinion on your idea, not just the decision-maker. She who creates consensus outperforms her rivals. You become more well-known the more people you know. The better you can personalize your solution to their demands, the more you will grasp what they need. Your competitors won’t put in the same amount of effort as you because most of them won’t bother to spend the time or effort. You advance in a competition by consensus.
• Engage Your Team: Getting your team involved in a contest is one approach to advance your cause. When your operations staff tells the client they are going to offer them exactly what they want and how they want it, you will see the room light up. Operations personnel are excellent salesmen because their daily tasks have taught them what clients want and how to assist them in obtaining it.
• Play to Win: Why settle for less? Why not invite your leadership team to show your dedication? Why not make the most of every instrument in your arsenal to guarantee victory? In the game of selling, only one person can win, and everyone else will inevitably lose. If you don’t compete to win, doing everything in your power to obtain the “W,” there is no reason to think you will succeed. Make sure your rival receives the “L” by assuming they are bringing their best effort.
Executive Summary
Chapter 1: Competitive Environment Analysis
This course manual will include an analysis of how to approach an assessment of the competitive environment when developing the company’s growth strategy. In the previous workshop, we lightly covered topics such as number and size of market participants, market dominance, market niches not covered by competitors as well as those that are well served. In course manual 1 and 2, we will discuss these points in more depth and how they relate to competititve environment more specifically. We will also take a look at whether competition in the industry is based on price, technology, product differentiation or a combination of all three?
Examples of Competitive Environment
Even tiny businesses include a component on competitive environment analysis in their business plans.
Take electronics as an illustration. The South Korean corporation Samsung, which specializes in electrical and smart appliance technology, was created. Apple, Sony, Huawei, Intel, and many other companies are among their rivals, therefore Samsung’s team works to produce a product that is superior to alternatives employing innovations that might draw customers.
The types of competitive environments might change as a result of advancements in technology or changes in consumer purchasing patterns. As an illustration, Amazon altered product distribution and client expectations. New breakthroughs increased the number of consumer goods businesses and provided new markets for startups that previously had no chance to compete with more established businesses.
Your company could be exposed to several competitive environments. Because of this, it’s essential to recognize how they differ and to be prepared to evaluate news about the market, the business, and government regulations.
Frameworks for competitive analysis
Understanding your rivals’ strategies will help you create a winning marketing plan. To reach your company rivals at this point, you require a competitive analysis framework. Let’s quickly go over a few of the most common frameworks.
• SWOT analysis. You can evaluate the internal and external forces affecting your business. With the use of this framework, you may pinpoint competitive advantages, assess your competitors’ strengths and weaknesses across various marketing channels, and determine your next marketing moves.
• Strategic Group Analysis. This framework describes the many strategic characteristics of all effective competitors’ strategies. It enables you to determine the positions of your rivals in the market and the elements that make your company profitable. Additionally, it enables you to measure your position among rivals and pinpoint the essential elements of success.
• Porter’s Five Forces. This framework’s foundation is based on an examination of the industry’s competitive market dynamics and a contribution to the identification of the sector’s advantages and disadvantages. It has five components: substitutes, new competitors, buyers, suppliers, and suppliers. These five factors affect how fierce the rivalry is in your sector.
• Growth-Share Matrix. Using this framework, you may choose whether items are worthwhile investments based on their market attractiveness and competitiveness. Large businesses find it particularly helpful because it enables them to define their product portfolios and determine which goods are still worthwhile to invest in and which are no longer.
• Perceptual Mapping. You can use this framework to compare your product to those offered by your competitors. You can use it to determine whether your positioning strategy is appropriate for your target market and how buyers view your product in comparison to that of your competitors. It can also assist you in identifying the holes you need to fill.
Chapter 2: Identify Potential Competitive Offerings
The analysis of market niches will help identify potential product offerings for the company. Depending on the industry, this may refer to offering similar products with a better service or a different distribution or financing strategy, or simply at a lower cost. This course manual will provide tools that help define the best approach for the company.
The portion of the market that a particular product is targeted toward is known as a niche market. The product attributes that are meant to address certain market needs, as well as the price range, production standards, and target demographics, are all defined by the market niche. Additionally, there is a small market area. A product or service may occasionally be created specifically to appeal to a specific niche market.
Not every product’s market niche can be used to define it. The highly specialized niche market competes against multiple super firms and strives to survive. Even established organizations develop products for specific markets. For example, Hewlett-Packard offers all-in-one machines for printing, scanning, and faxing that are aimed at the home office market while also offering separate machines with just one of these features for large corporations. Although you might have explicitly moved certain items to the top of the priority list. Although starting in a niche market will increase your chances of success.
In reality, the terms “mainstream providers” or “narrow demographics niche market providers” are used to describe goods suppliers and trade businesses (colloquially shortened to just niche market providers). Small capital providers typically choose a niche market with a limited population as a way to boost their profit margins.
The specific needs that the product is intended to meet and, in some situations, factors of brand recognition determine the ultimate product quality (low or high), not the price elasticity of demand (e.g. prestige, practicability, money saving, expensiveness, environmental conscience, or social status). The market niche requires expert providers that are able to match such expectations when there are needs or desires with distinct and even complex qualities.
Niche audience
A niche audience is a powerful, smaller audience as opposed to mainstream audiences, which represent a vast number of people. The post-network period in television brought about changes in technology and many business processes, giving specialized audiences far more power over what they watch. Television networks and production companies are looking for new methods to make money through fresh scheduling, new programming, and relying on syndication in this environment of increased viewer control. By “narrowcasting,” advertisers can target a more focused audience with their messages.
It is uncommon for a sizable crowd to watch a program at once, with a few exceptions like American Idol, the Super Bowl, and the Olympics. Networks do, however, focus on specific populations. MTV targets young people, whereas Lifetime targets women. The niche market of sports aficionados is targeted by sports networks including STAR Sports, ESPN, ESPN 2, ESPNU, STAR Cricket, FS1, FS2, and CBS Sports Network.
Product Offerings
Companies can maintain their viability and please clients by producing the greatest goods and services. Increased brand loyalty and recommendations may result from this, which could enhance your revenue. You may put your business in a better position to outperform your rivals by learning how to develop and deliver excellent marketing offerings. We will also go through the definition of a marketing/product offering, the significance of marketing offers, how to make an effective marketing offer, and suggestions for enhancing these offerings in this course manual.
What is a marketing offering?
A company’s marketing offering is a good or service it offers customers in order to fill their demands. A product or service is only one aspect of an offering. It covers the added value that a company provides in the form of convenience, superiority, and support to its products. To appeal to as many customers as possible, it’s critical to have a variety of features and benefits with any offering. Customers may rank these components differently.
Why is a marketing offer important?
An effective marketing offer can raise awareness of your goods and services. You may boost sales and encourage client brand loyalty by creating items that are in line with the needs and desires of your target market. You set your company apart from rivals when you provide goods or services that appeal to customers.
Chapter 3: Intellectual Property Reviews
Intellectual Property In industries where technology and processes are typically patented, or where intellectual property is an instrument of market dominance, it is necessary to understand the barriers to entry posed by existing intellectual property protection for our competitors. Furthermore, we should look at the opportunities that may exist for the company to protect its processes or technology from possible market predators to ensure access to the market on the basis of a levelled playing field.
What Is Intellectual Property?
The term “intellectual property” refers to the collection of intangible assets that a business or individual owns and is legally entitled to protect against unauthorized use or application by third parties. A firm or individual may own intangible assets, which are non-physical assets.
The idea of intellectual property stems from the idea that some creations of human brain ought to have the same legal protections as tangible goods, or tangible property. Legal protections for both types of property are in place in the majority of developed economies.
Understanding Intellectual Property
Because intellectual property is so highly valued in today’s increasingly knowledge-based economy, businesses take great care to identify it and protect it. Additionally, generating valuable intellectual property involves significant brainpower and labor-intensive time inputs. This translates into significant expenditures made by businesses and people, which should not be used without permission by others.
It is crucial for any business to derive value from intellectual property while prohibiting others from doing the same. There are many different types of intellectual property. Despite being an intangible asset, intellectual property sometimes has a far higher value than a company’s concrete assets. Because it can be a source of competitive advantage, intellectual property is jealously guarded and protected by the businesses that possess it.
Intellectual Property and Competition Policy
Consumers can choose between competing business owners and the products and services they offer because to intellectual property (IP). As a result of ensuring the protection of distinctive intangible corporate assets, IP is fundamentally pro-competitive.
Without IP, less effective producers and service providers would attempt to entice customers by imitating the products and offerings of more effective rivals. The latter would no longer have any motivation to enhance or provide fresh goods and services. The entire society would suffer. But IP only ensures competition in that key way when it safeguards real differences.
What Are Some Examples of Violations of Intellectual Property?
Infringement, counterfeiting, and misappropriation of trade secrets are the main intellectual property crimes. Intellectual property violations include:
• Creating a logo or name meant to confuse buyers into thinking they’re buying the original brand
• Recording video or music without authorization or copying copyrighted materials (yes, even on a photocopier, for private use)
• Copying another person’s patent and marketing it as a new patent
• Manufacturing patented goods without a license to do so
Intellectual property affords numerous protections comparable to real property ownership because it may be purchased, sold, or leased. Likewise, there are similar treatments. The resolution of a disagreement may involve the seizure of property, the assessment of monetary damages, or cease-and-desist orders.
Chapter 4: Technology Stack Assessment
What is the state of technology development in the industry? Can the company tailor its product or service offerings based on new technologies or improvements to existing technologies? If we enter the market today with the current technology stack, what are the chances that new technologies will make it obsolete before our investment is recovered? This course manual will offer some guidance on how to answers these questions and how those answers would influence the company’s strategy.
What is a tech stack?
The group of tools, platforms, apps, and software that a business utilizes to create its goods, run its operations, and track its performance indicators is known as its technology stack, or tech stack. Coding languages can also be a part of a tech stack.
A single piece of software or application cannot fulfill all of a business’s requirements. Successful businesses use a variety of apps and assemble a technology stack to accomplish their objectives.
However, they audit their current tech stack first, which is a crucial step before redesigning or creating a whole new tech stack.
Why is it important to audit your tech stack?
There is no one size fits all answer to the platform requirements for your business. Every business has different objectives, products, and difficulties.
On the other hand, new programs and upgrades are released every day, which is why we advise routinely assessing your tech stack. Examining the apps your company utilizes can help you find methods to:
• Save employees’ time
• Save money on apps
• Consolidate apps
• Maintain a single source of truth for data
Consider all the equipment required for your company to operate efficiently. This covers everything, including the social media accounts you use to increase the visibility of your brand and the content management system your website is built on.
Your company’s business plan should be reflected in the apps your employees utilize. Your company’s requirements will evolve and increase as it expands. It may be unnecessary for you to utilize some programs you once used, or it may be time to get a new tool.
But when your list of apps grows, the law of decreasing returns takes effect, making it harder to sustain optimal performance. An audit might help you reenergize your toolkit in this situation.
Signs you should update your business technology
Here are five indicators that it may be time to upgrade your company’s technology if you’re on the fence:
1. The business is growing quickly.
When a business is expanding quickly, many adjustments are needed, particularly in the IT department. You’ll need to employ new methods and technologies created for larger scale businesses as you have more personnel, locations, and opportunities. However, it’s crucial to consider all of your options before making a quick technology purchase.
Create a budget to make sure you won’t spend money on technologies that you don’t need to. Your purchase should be economical and capable of expanding along with your business.
2. Security has become an issue.
The security of your business is crucial, and if it’s jeopardized in any manner, it’s essential to upgrade your company’s technology. Outdated or less compatible antivirus software makes older hardware more susceptible to security breaches. The data of your clients and business may be at risk due to outdated software, which could have major consequences for you. To avoid falling victim to cybercrime, it’s imperative that you maintain your system updated because hackers are continuously coming up with new ways to steal data.
3. Productivity is suffering.
Using outdated technology can hinder your business. It’s time to invest in new technology if your PCs or network are too slow or unreliable. Perhaps your system can’t access data that collaborators are trying to share with you, or your network can’t handle the amount of online traffic you’re experiencing. Whatever the reason, your technology is impeding your ability to produce high-quality work, which may irritate both customers and staff.
It’s critical to hear what problems managers and employees are having in this situation. After that, seek the advice of an IT expert to identify the issue and create a strategy for moving forward.
4. You’ve ignored software updates.
You might get a signal from within if you haven’t already noticed that your program is outdated due to problems with partners on the outside. It’s imperative to update your software whenever new versions are released. If software isn’t updated, it might become not only outdated but also potentially hazardous to your machine. Keep abreast of any updates from your software provider, and make sure to act when alerted when a new version is available.
5. The company is changing directions.
Don’t forget to consider your technology if you’ve decided to move your company in a new route. You might think about upgrading the company’s technology by installing new online systems or purchasing new tablets, laptops, and smartphones. Technology may assist you in achieving your goals, no matter what they may be. You’ll need to choose if you want to update your present technology or maybe buy whole new equipment depending on what you’re trying to achieve.
Chapter 5: Porter’s Five Forces Analysis
Professor Michael Porter of the HBS developed in the late 1970’s a framework for the evaluation of a company’s competitive strength and position in the market. While the business world has changed dramatically since its publication, this tool is still used very often by businesses to measure their relative market power before deciding to enter a new market or increases presence in an existing market. The course manual will provide an updated model based on Porter’s framework.
Porter’s Five Forces Explained
A framework for examining the competitive forces at work in an industry—which affect how economic value is distributed among industry participants—is suggested by the Porter’s five forces definition. The Porter’s Five Forces model is used to assess the industry’s competitive climate. Porter’s five forces are extremely important since each one of them is a key component in developing a corporate plan that takes the market into account.
Using Porter’s Five Forces analysis, a business owner can determine how competitive the market is.
If these influences are really strong, they can make the industry as a whole less appealing. This is so because each has a negative effect on the likelihood of overall profitability. Therefore, a desirable industry is one in which “pure competition” takes place and everyone can profit fairly.
The conclusions of American academic Michael Porter, who first published them in his seminal 1979 Harvard Corporate Review essay, led to a breakthrough in the field of strategy and still have an impact on contemporary business thought and academia. Its research may help companies assess the attractiveness of the market, how industry developments will impact competition, which markets they should target, and how to best position themselves for success.
To better comprehend the company’s position in the market, combine a SWOT analysis with Porter’s Five Forces. A SWOT analysis is a microanalytical tool that focuses on the data and analysis of a single firm. Porter’s Five Forces, in contrast, is a macro analytical tool that concentrates on the industry’s economy. As a result, one of Porter’s five forces’ drawbacks is that it could encourage excessive planning and obstruct quick decision-making.
Is Porter’s five forces still relevant today?
Porter’s Five Forces cannot hardly be considered outdated. Contrarily, the fundamental idea that every organization functions within a network of customers, suppliers, competitors, and replacements still holds true today.
Chapter 6: Identify Competitor’s Team Members
Competition in a specific market is preceded by competition for resources, people, capital and technology. In this section of the workshop, we will spend time looking at the so called “war for talent”. Initially, the company wants to evaluate the strength and composition of the skill set of its main competitors and analyze what are the key success factors in attracting, developing and retaining talent in the industry. Would it be a good strategy to attract people from our competitors, or is it better to train and develop the required skill set internally?
If you want to win big in the war for talent, you have to be able to attract and retain the best talent.
Every employer today knows that the war for talent is very real.
All perceptions on the workforce have shifted as a result of the millennial generation. Millennials are very clear about their preferences: 88 percent say they want to live in an urban setting near their places of employment. The C-Suite should also be worried since, according to a LinkedIn talent blog, 85% of the world’s workforce is either actively or passively looking for a new job!
The hiring of the next generation of leaders is the unanimous response from C-suite executives when asked what keeps them up at night. Because they are aware that they will be in a competitive market for qualified workers for the foreseeable future, employers realize that the location of the real estate they choose will have a significant impact on the future of their businesses.
What is the impact on this war for talent?
Zero-sum labor was dubbed the “C-next suite’s terrible dilemma” by Mark Lautman of Lautman Economic Architecture several years ago, who warned that the impending chronic shortage of qualified workers is forcing firms to reconsider their business models. Employers in a zero-sum system would have to steal qualified workers from their rivals if they wanted to expand or survive. According to Lautman, a zero-sum game alters everything since it transfers control of the recruiting process from the employer to the employee.
All baby boomers will be at least 65 years old by 2030, which will make matters worse. There just won’t be enough baby-boom generation workers who are qualified to take their position as they leave the workforce.
One innovative strategy for competing is to have transferrable talent.
The hiring of “transferrable talent,” where workers are hired for a role that doesn’t even exist, is one of the innovative strategies employers are now developing in an effort to increase employee attractiveness and retention. Employers will find positions for new hires after they have hired. Companies like Facebook and Google are making offers without having a specific job available for them or even a beginning wage in mind as they compete for college recruits.
Companies will hire first and find out jobs for recruits afterwards in order to compete for college recruits.
According to recruiters, so-called “transferrable or program recruiting” aids businesses in securing promising personnel before rivals. The company can then locate a position that puts a person’s transferrable skills, such as problem-solving or analytical aptitude, to the test. Companies are hiring for intrinsic abilities, such as high motivation, rather than skills relevant to a particular job, and they are emphasizing on a candidate’s raw talent, not the job duties, as they search for people who can adapt to ever-changing technological advancements.
About 200 recent grads are hired by Intuit each year as part of its hiring program, which started several years ago. This aims to match the hire’s skills and interests with an open position. Teams who assist with recruiting on college campuses are aware that they frequently receive the first crack at new hires.
What are the potential threats to retention?
Everyone is aware of the persistent shortage of competent workers we have in the United States, which will force the majority of firms to reconsider their locations and business methods. Location will therefore become very important. Compensation, business culture, and fostering a supportive workplace environment that is mirrored in a company’s sense of “place” or its location will come to define retention.
The location of the company’s real estate will have a significant impact on the greater degree of choice that employees will have on where they work. Companies will need to discover ways to restructure their space to lower occupancy costs if they want to stay competitive, as the obligation to choose more prominent areas where people wish to work is often where rental rates are dramatically rising.
The majority of analysts also concur that wages, particularly for STEM expertise, are anticipated to rise in most markets in the upcoming months. Long-term employees haven’t had much salary negotiating leverage, but that’s going to change.
All perceptions on the workforce have shifted as a result of the millennial generation.
The need for qualified employees to fill occupations that don’t require four-year degrees is also addressed by terms like “middle skills,” “skills gap,” and “career pathways.” It is well acknowledged that government initiatives alone cannot address the skills gap. The greatest strategy to address the skilled worker shortage is stakeholder collaboration between state and local government agencies, universities, unions, and other organizations.
Chapter 7: Identify Competitor’s Investors
Following the talent analysis, we will look at capital. How are our competitors typically funded? What is the profile of investors in the industry? Is it better to be a public or a private company in our particular industry to attract capital? What are the expected leverage ratios in the industry? The answers will vary by industry and type of business, and will depend on factors such as capital intensity, product cycle, risk analysis and expected returns over time. We will offer a methodology to develop this analysis.
How to bring in the appropriate funding for effective growth
How do you draw in money? More significantly, how do you draw in the appropriate funding for expansion that succeeds?
1. How should we approach investors – and when?
Simply put, you should raise money when you don’t need it. It normally takes three months or less to raise money, but it sometimes takes six to twelve months. Start interacting with the investment community much before you actually need that money. When it comes time to raise money, you want people to be following you rather than you chasing them, so tell them your narrative and get them engaged.
Spend some time getting to know investors and cultivating connections with them. How can they aid you in achieving your objectives? Which investor would benefit you and your business more?
Have your narrative ready to share when the time comes. Be explicit about why you are seeking growth finance, display market knowledge, comprehend and concentrate on your unique selling features, and be realistic in your financial projections. Are you looking at a merger or acquisition, are you looking to remove some risk by selling some of your shareholding, or are you focusing on organic expansion by adding additional tools or growing geographically? Simply put, be ready.
2. How much should we raise?
Too many times, businesses undervalue how much they should raise because they want to minimize dilution. However, raising money can be a significant diversion from regular operations. If you don’t raise enough money, you’ll have to look for more, which could weaken your valuation and force you to continue fundraising, talking to investors, and keeping an eye on your back rather than concentrating on building and expanding your business.
For businesses that don’t want to raise a lot of money at once, investors are frequently willing to place tranches of capital or warrants at a fixed or increasing price.
2. Should we bring in a CFO?
Smaller businesses frequently believe they do not need a CFO or that the controller can manage the work in the early stages of expansion due to a misconception about the position. Our definition of a CFO goes beyond accounting. They are anticipating. They are making plans. They are the CEO’s strategic partner. Your CFO may assist you in contract negotiations with possible investors and provide you more negotiating power, which will help you achieve a better deal.
Bringing in a CFO early is heavily advised by many prosperous businesses. CFOs typically do more than just examine financial data for most companies.
A capable CFO gives the company direction and structure while allowing the CEO and founders to concentrate more on the business.
4. What should we look for in a good CFO?
Of course, you should search for solid financial modeling abilities, particularly in the areas of cash management and estimates for the future. A CFO should invest the time to understand the industry and technology, have a strategic attitude, and be able to work closely with the CEO to create a growth strategy. Last but not least, they should be honest, which is a characteristic we value highly.
5. Do I need to bring in an advisor when raising funds?
To raise funds, several businesses work with investment banks and corporate finance consultants. These might be of great assistance in developing the narrative and connecting with a sizable investment group. As a result, there will be competition, which could increase valuation. However, even if you might receive a larger price, you risk alienating the ideal partner and losing out on greater long-term worth. My recommendation is to be upfront with your adviser about what you’re after and try to tie the success fee for the advisor to factors other than merely valuation.
6. What are the alternatives to growth equity?
A possibility that can appear less expensive than stock is debt. The financial institutions will (typically) enforce their rights if you begin to fall short of your covenant targets, which will cause a distraction for the company. If you do borrow money, don’t do it too soon. Put your energy towards creating a long-lasting company with steady cash flow. The CFO of your firm should still focus on cultivating strong bonds with financial institutions, and in this regard, the connections and networks of your investors can be quite useful in gaining access.
Chapter 8: Identify Competitor’s Customers
Once we have looked at competition for resources and done our competitive analysis in terms of product, service, distribution and technology, we will want to understand the profile of our competitors’ customers. Is brand loyalty strong in the industry such that “stealing customers” from our competitors will take a great deal of time and resources (automotive for example), or are we talking about products and services where the customer switches back and forth between brands? (airline tickets for example). Are customers changing rapidly in terms of preferences? What is the best way to reach them and provide a unique customer experience? These are the type of questions we will review in this section.
The corporate environment is fundamentally and unavoidably characterized by competition. It is without a doubt more difficult for any individual company to draw customers and hence increase their sales when there are multiple players in the same industry. But most consumers are unaware of the fact that businesses also gain from this competition. Customers are spoiled with options when there are several businesses offering the same kind of good or service. Additionally, when clients have more options, they naturally start looking for something newer and better. Because of this, they experiment with new goods and services, which eventually strengthens their brand loyalty.
Can You Win Your Competitor’s Customers?
This inquiry has a loud YES as the answer. It is always possible for your firm to steal consumers from your competitors by simply employing the proper marketing and customer service methods, regardless of the type of business or industry you are in. You should always make an effort to draw people to your firm even if your rival has an advantage over you because they have established their brand name or because they began operating earlier than you did.
Competitors Are a Research Point
The chance for research is the finest thing about having more than one company in your field. The fact that numerous businesses provide the same kind of good or service makes them excellent sources for your market research. You may find out how your rivals are drawing in clients and what tactics they employ to keep them coming back for more. In order to apply the same ideas in your company, you will be able to determine which marketing strategies genuinely work and which don’t.
Chapter 9: Monopolistic Competition
There are different forms of competition. The so-called monopolistic competition occurs when the market has several competitors but the products are not identical and consumers don’t consider them perfect substitutes. In this case, each participant exercises a certain monopoly power over its group of customers that gives it certain pricing power and dominance over a niche of the market. On the other hand, barriers to entry in this environment tend to be relatively low. We will offer a methodology to determine if the company faces this type of competition.
What is Monopolistic Competition
Monopolistic Competition is defined as an environment wherein the market participants sell differentiated products, yet serve the same end market.
In economics, monopolistic competition is considered to be a hybrid between a monopoly and perfect competition, as the market structure blends the characteristics of each.
Characteristics of Monopolistic Competition
A market structure known as monopolistic competition involves numerous businesses (i.e., sellers) providing a differentiated good with essentially the same usefulness to the consumer.
Although the intended use of the products, or the benefit to the consumer, may be basically the same, there are still characteristics that make the products slightly distinct.
The common characteristics of monopolistic competition are as follows:
• High Number of Market Participants: In monopolistic competition, there are many independent companies involved that actively compete within the market.
• Differentiated Products to Serve an Identical End-Market: Each company produces and sells a differentiated product, but the function of the product is comparable, i.e. the product has many close substitutes although there is no perfect substitute.
• Low Barriers to Entry: Another unique feature of monopolistic competition is the freedom of entry and exit present in the market. Entrance and competing in the market are relatively easy for new companies (and it is also easy to exit), but of course, there is the opportunity cost of time to consider.
Therefore, in an environment of monopolistic competition, market participants compete on quality, price, and marketing.
Businesses engaged in monopolistic competition frequently have surplus capacity, which results in a mismatch between supply and demand.
Due to the need to develop strategies to set their products apart from those of their competitors, these businesses are inefficient.
For instance, a business may spend excessive amounts of money on marketing and promotion, or it may place too much emphasis on a product’s packaging or other minor features rather than its primary functions.
Consumers can recognize differentiated items by their distinctive marketing strategies, branding, and quality. The following characteristics can affect how the products are sold:
• Product Quality
• Marketing Tactics
• Branding, i.e. Public Perception
• Stylistic Add-On Features
• End-User Convenience
• Geographical Location
Notably, monopolistic competition is characterized by a high concentration of active rivals selling product(s) to the same or a nearby end-market. In practice, buyers have more choices when deciding which goods to buy.
The market players compete on many of the aforementioned characteristics and work to enhance their products in order to increase market share. The specifics that make a product or service stand out from the competition tend to determine a company’s marketing and sales approach.
The disadvantage of being able to enter a market with such ease is that as word of selling goods at high profit margins spreads, more and more new businesses will eventually enter the market.
Low entry barriers suggest that new competitors face few obstacles when joining the market, or at least not as many as they would in the case of a monopoly. No business is able to generate astronomical long-term economic gains due to the lack of significant entry barriers.
Chapter 10: Monopoly
As is well known, a monopoly occurs when one market player tends to dominate the market and barriers to entry are high. While this is often the case in sectors of the economy with large initial investments and low or zero marginal costs, It has recently been argued that this is the case in some technology sectors where network effects exist. Again, the workshop will help you determine if a an industry faces or may face in the future a monopolistic situation.
A market arrangement in which a firm has complete control over the production and sale of a good or service for which there are no suitable alternatives. A monopolized market is one where a single supplier caters to a sizable number of customers with a product that has no close substitutes. It is a single-firm industry because in a monopolistic market, the firm and the industry are one and the same thing. For a monopoly product, the cross elasticity of demand is either zero or negative. Public utility services like telephone, power, and others can exhibit monopoly.
In this marketing scenario, a firm is in charge of setting prices, but this price setting takes into account the product’s elasticity of demand in order to maximize both demand and profit. View the illustration below:
Where MR = Marginal Revenue
AR = Average Revenue
MC = Marginal Cost
AC = Average Cost
Key Differences Between Monopoly and Monopolistic Competition
The following points are noteworthy so far as the difference between monopoly and monopolistic competition is concerned:
1. A monopoly is a market arrangement where a single vendor produces/sells the goods to a lot of different customers. Monopolistic competition refers to a competitive market environment when multiple merchants supply unique products to numerous customers.
2. In a monopoly market, there is only one seller or producer, whereas in monopolistic competition, there may be two to 10 or more participants.
3. In a monopoly market structure, the seller only offers one product, and there is significant product differentiation. In contrast, there is just a tiny difference under the products offered by different sellers in monopolistic competition since they are close substitutes.
4. In a monopoly market, there is substantial but controlled pricing regulation. Under contrast, there is some price control in monopolistic competition.
5. In a monopoly market, there is no competition, however there is fierce struggle in a monopolistically competitive market between firms due to non-price competition.
6. Because there are no comparable products, monopoly product demand is inelastic. In contrast to monopolistic competition, its demand is quite elastic because the products offered by the various sellers are comparable rather than identical.
7. Due to institutional, legal, and economic factors, monopolies have substantial entrance and exit barriers. The entry and leave from the industry are unfettered in monopolistic competition, in contrast.
8. In a monopoly, there is no distinction between a corporation and an industry because one company controls the whole market. It is a single-firm industry as a result. Contrary to monopolistic competition, there is a distinction between a firm and an industry; a firm is a single entity, and an industry is a collection of enterprises.
A company may set different rates for the same product from different clients in a market when there is a monopoly. Thus, the company may implement a policy of price discrimination. However, because there is so much non-price competition in the market, it is impossible to discriminate between consumers’ pricing, hence no business is allowed to do so.
Chapter 11: Oligopoly
A variation of the monopolistic situation is an oligopoly, where a limited number of players exists, often two (duopoly) or three. Such is the case nowadays in smart phones, where Apple and Samsung dominate the market along with a couple of smaller players. Barriers to entry are high, as is the pricing power of these companies.
The number of businesses on the market’s supply side and the number of consumers on its demand side can be used to classify various market types. An oligopoly is a market with a small number of suppliers (but more than one supplier) and a very large number of consumers, each of whom contributes very little to the market’s demand function. A buyer will accept market conditions as given because he has little control over them, whereas a seller will invariably be worried with predicting the conduct of competitors. Furthermore, an oligopolistic firm will naturally be concerned with how its current activities may affect the conduct of its competitors in the future in a market that will be in existence for a long period.
Because oligopolists are strategically connected to one another, oligopoly stands out from both competition and (textbook) monopoly. The optimum policy for one company depends on the strategies employed by its competitors. Imagine, for instance, a country with no national mortgage market and a town with four mortgage providers. Let’s imagine that each mortgage lender will choose a mortgage interest rate and provide money to every qualified applicant.
Differences between Monopoly and Oligolpoly
Monopolistic and oligopolistic competition both show ineffective competition. Some of the key distinctions between these two market models include the following:
Market Size and Control
The primary distinction between the two market structures is the relative size and market control of these enterprises based on the quantity of rivals in a given market. There is no clear distinction between these arrangements, though, and there is no set number of firms necessary for a market to be classified as either an oligopoly or a monopolistic competition.
Dominance – An Indicator of the Structure
In a few instances, the dominant position of a few companies defines the kind of market structure. For instance, a market with 4000 virtually identical enterprises is typically referred to as a monopolistic competition, whereas a market with the same number of firms, but only 4 that are comparatively large and dominant, is referred to as an oligopoly market. The petroleum business is the most well-known example of an oligopoly market, when a small number of powerful companies control a huge number of smaller ones.
Geographical Area
A geographical area is another characteristic that sets monopolistic competition apart from oligopoly. It is crucial for determining a market structure. If a certain industry is located in a small city or a large metropolis, it may come under the definition of an oligopoly market or a monopolistic competition. A retail market is an illustration of this. If you choose to shop in a big city, you will have a huge variety of options, including malls, markets, mini-marts, and national retail chains. A market like that exhibits monopolistic competition.
Small towns typically have fewer of these retail establishments and fewer businesses. It might simply feature one retail center and a few stores in the downtown area. Oligopoly is the name given to such a structure.
Barriers to Entry
As has already been mentioned, oligopoly has higher entry barriers than monopolistic competition, but the difference is only in the degree. A necessity for government approval is the primary factor that can lead to an oligopoly market, particularly when entrance is constrained to a small number of businesses. On the other side, if several businesses are permitted to enter a market, it can also be an example of monopolistic competition.
In addition to requiring government approval, resource ownership and beginning costs prevent businesses from entering the market at different levels, resulting in either of the two models. These obstacles are always shifting, converting oligopolistic competition into monopolistic competition and vice versa.
Overall, each market structure reflects its own distinctive characteristics and has a propensity to vary over time due to changes in geographic location, market size, trends, and desires for a certain product. For a corporation, and even for a consumer, understanding each structure is crucial to making effective strategic decisions. In both markets, businesses gain power by either limiting the supply of their particular goods or services to boost demand or by limiting prices, which in turn affects how much consumers are required to pay for those goods.
Chapter 12: Perfect Competition
At the other extreme, is the competitive landscape where pure or total competition exists and no single company has any power. Prices and margins tend to be lower and competition is largely based on cost or product differentiation. In the real world there isn’t perfect or pure competition, but some industries with low entry barriers do present most of its characteristics and we need to understand if such is the case in our industry before embarking on an aggressive growth strategy.
What Is Perfect Competition?
According to economic theory, perfect competition exists when all businesses sell the same goods, market share has no bearing on prices, businesses can enter or quit the market without any obstacles, consumers have perfect or complete information, and businesses are unable to set prices. It is a market that is solely influenced by market forces, in other words. It is opposed to imperfect competition, which more accurately reflects the nature of the market at the time.
What Is an Example of Perfect Competition?
Take into account a farmers market where every seller is selling the same brand of jam. Since they all use the same recipe and charge the same price for their products, there is little difference between them. Sellers are few and can freely participate in the market without any restrictions at the same time. In this scenario, customers would be completely aware of the product’s recipe and any other pertinent details.
What Is the Difference Between Perfect Competition and Imperfect Competition?
Imperfect competition can be seen in monopolies and real-world examples, whereas perfect competition is an idealistic market structure where equal and identical products are sold. For instance, imperfect competition entails businesses vying for market share, significant entry obstacles, and consumers who lack comprehensive knowledge of a good or service. Contrary to ideal competition, this fosters innovation and leads to the production of better goods, as well as higher profit margins as a result of supply and demand.
Why is pure competition considered an unsustainable system?
There are four different market structures. First of all, let’s review pure competition and the reasons why it’s considered an unsustainable system:
• The difference in price is often too minimal to have an influence;
• It’s easy to enter and leave the market, hence the market is crowded with manufacturers;
• It’s difficult for customers to distinguish goods of one manufacturer from another;
• Sellers can’t gain profit due to the low prices they offer.
To fully understand this concept, let’s consider the following characteristics.
• Many competing companies. Many businesses fight with one another in a market with pure competition. Because there are so many enterprises selling the same goods, prices cannot rise. Therefore, in order to remain competitive, companies sell their goods at a fair price. Customers benefit from this approach since it saves them money if they decide to switch sellers.
• The same products are offered. The fact that businesses sell comparable goods is one of pure competition’s key characteristics. Customers find it challenging to identify between various brands as a result. Because of this, they can quickly switch the brand of the item they need without incurring additional costs.
• Same market share for all businesses. Each company has an equal market share because they are unable to compete on the market due to identical prices. As a result, one business will lose money if it decides to cut its pricing. On the other hand, if a business decides to raise prices, it will lose clients because many other businesses are selling the same product for less money.
• Buyers have full information. A customer is aware that one of the businesses can offer the product for less money. As a result, firms are reluctant to raise prices before their rivals. Some businesses choose to produce goods of poorer quality in order to lower the price of the product in order to make more profit. Consumers who possess information, however, won’t purchase such things because they are aware of how bad their quality is compared to that of rivals. Customers will afterwards migrate to another brand that offers the benefit of high-quality products.
• Companies can easily enter and leave the market. Companies don’t need to invest a lot of money, time, or effort to enter the industry. When a seller wishes to leave the market, the circumstances are the same. It is not necessary to pay for some big expenses.
Knowing the five characteristics above you can easily identify pure competition.
Key to abbreviations: AC – Average cost AR – Average revenue MC – Marginal cost MR – Marginal revenue P – Price Q1 – Quantity produced
The MC is the cost of producing additional (marginal) units of output. It falls at first due to the law of diminishing returns, then rises as output rises. The average cost curve is the standard U-shaped curve. MC cuts the AC curve at its lowest point because of the mathematical relationship between marginal and average values. Given the assumption of profit maximisation, the firm produces at an output where MC = MR (marked as Q1 on the graph). This output level is a fraction of the total industry supply, because every firm in the market is also doing this. At this output, the firm is making normal profit. This is a long-run equilibrium position.
Curriculum
Growth Strategy – Workshop 3 – Competitive Environment
- Competitive Environment Analysis
- Identify Potential Competitive Offerings
- Intellectual Property Reviews
- Technology Stack Assessment
- Porters Five Forces Analysis
- Identify Competitor’s Team Members
- Identify Competitor’s Investors
- Identify Competitor’s Customers
- Monopolistic competition
- Monopoly
- Oligopoly
- Pure Competition
Distance Learning
Introduction
Welcome to Appleton Greene and thank you for enrolling on the Growth Strategy corporate training program. You will be learning through our unique facilitation via distance-learning method, which will enable you to practically implement everything that you learn academically. The methods and materials used in your program have been designed and developed to ensure that you derive the maximum benefits and enjoyment possible. We hope that you find the program challenging and fun to do. However, if you have never been a distance-learner before, you may be experiencing some trepidation at the task before you. So we will get you started by giving you some basic information and guidance on how you can make the best use of the modules, how you should manage the materials and what you should be doing as you work through them. This guide is designed to point you in the right direction and help you to become an effective distance-learner. Take a few hours or so to study this guide and your guide to tutorial support for students, while making notes, before you start to study in earnest.
Study environment
You will need to locate a quiet and private place to study, preferably a room where you can easily be isolated from external disturbances or distractions. Make sure the room is well-lit and incorporates a relaxed, pleasant feel. If you can spoil yourself within your study environment, you will have much more of a chance to ensure that you are always in the right frame of mind when you do devote time to study. For example, a nice fire, the ability to play soft soothing background music, soft but effective lighting, perhaps a nice view if possible and a good size desk with a comfortable chair. Make sure that your family know when you are studying and understand your study rules. Your study environment is very important. The ideal situation, if at all possible, is to have a separate study, which can be devoted to you. If this is not possible then you will need to pay a lot more attention to developing and managing your study schedule, because it will affect other people as well as yourself. The better your study environment, the more productive you will be.
Study tools & rules
Try and make sure that your study tools are sufficient and in good working order. You will need to have access to a computer, scanner and printer, with access to the internet. You will need a very comfortable chair, which supports your lower back, and you will need a good filing system. It can be very frustrating if you are spending valuable study time trying to fix study tools that are unreliable, or unsuitable for the task. Make sure that your study tools are up to date. You will also need to consider some study rules. Some of these rules will apply to you and will be intended to help you to be more disciplined about when and how you study. This distance-learning guide will help you and after you have read it you can put some thought into what your study rules should be. You will also need to negotiate some study rules for your family, friends or anyone who lives with you. They too will need to be disciplined in order to ensure that they can support you while you study. It is important to ensure that your family and friends are an integral part of your study team. Having their support and encouragement can prove to be a crucial contribution to your successful completion of the program. Involve them in as much as you can.
Successful distance-learning
Distance-learners are freed from the necessity of attending regular classes or workshops, since they can study in their own way, at their own pace and for their own purposes. But unlike traditional internal training courses, it is the student’s responsibility, with a distance-learning program, to ensure that they manage their own study contribution. This requires strong self-discipline and self-motivation skills and there must be a clear will to succeed. Those students who are used to managing themselves, are good at managing others and who enjoy working in isolation, are more likely to be good distance-learners. It is also important to be aware of the main reasons why you are studying and of the main objectives that you are hoping to achieve as a result. You will need to remind yourself of these objectives at times when you need to motivate yourself. Never lose sight of your long-term goals and your short-term objectives. There is nobody available here to pamper you, or to look after you, or to spoon-feed you with information, so you will need to find ways to encourage and appreciate yourself while you are studying. Make sure that you chart your study progress, so that you can be sure of your achievements and re-evaluate your goals and objectives regularly.
Self-assessment
Appleton Greene training programs are in all cases post-graduate programs. Consequently, you should already have obtained a business-related degree and be an experienced learner. You should therefore already be aware of your study strengths and weaknesses. For example, which time of the day are you at your most productive? Are you a lark or an owl? What study methods do you respond to the most? Are you a consistent learner? How do you discipline yourself? How do you ensure that you enjoy yourself while studying? It is important to understand yourself as a learner and so some self-assessment early on will be necessary if you are to apply yourself correctly. Perform a SWOT analysis on yourself as a student. List your internal strengths and weaknesses as a student and your external opportunities and threats. This will help you later on when you are creating a study plan. You can then incorporate features within your study plan that can ensure that you are playing to your strengths, while compensating for your weaknesses. You can also ensure that you make the most of your opportunities, while avoiding the potential threats to your success.
Accepting responsibility as a student
Training programs invariably require a significant investment, both in terms of what they cost and in the time that you need to contribute to study and the responsibility for successful completion of training programs rests entirely with the student. This is never more apparent than when a student is learning via distance-learning. Accepting responsibility as a student is an important step towards ensuring that you can successfully complete your training program. It is easy to instantly blame other people or factors when things go wrong. But the fact of the matter is that if a failure is your failure, then you have the power to do something about it, it is entirely in your own hands. If it is always someone else’s failure, then you are powerless to do anything about it. All students study in entirely different ways, this is because we are all individuals and what is right for one student, is not necessarily right for another. In order to succeed, you will have to accept personal responsibility for finding a way to plan, implement and manage a personal study plan that works for you. If you do not succeed, you only have yourself to blame.
Planning
By far the most critical contribution to stress, is the feeling of not being in control. In the absence of planning we tend to be reactive and can stumble from pillar to post in the hope that things will turn out fine in the end. Invariably they don’t! In order to be in control, we need to have firm ideas about how and when we want to do things. We also need to consider as many possible eventualities as we can, so that we are prepared for them when they happen. Prescriptive Change, is far easier to manage and control, than Emergent Change. The same is true with distance-learning. It is much easier and much more enjoyable, if you feel that you are in control and that things are going to plan. Even when things do go wrong, you are prepared for them and can act accordingly without any unnecessary stress. It is important therefore that you do take time to plan your studies properly.
Management
Once you have developed a clear study plan, it is of equal importance to ensure that you manage the implementation of it. Most of us usually enjoy planning, but it is usually during implementation when things go wrong. Targets are not met and we do not understand why. Sometimes we do not even know if targets are being met. It is not enough for us to conclude that the study plan just failed. If it is failing, you will need to understand what you can do about it. Similarly if your study plan is succeeding, it is still important to understand why, so that you can improve upon your success. You therefore need to have guidelines for self-assessment so that you can be consistent with performance improvement throughout the program. If you manage things correctly, then your performance should constantly improve throughout the program.
Study objectives & tasks
The first place to start is developing your program objectives. These should feature your reasons for undertaking the training program in order of priority. Keep them succinct and to the point in order to avoid confusion. Do not just write the first things that come into your head because they are likely to be too similar to each other. Make a list of possible departmental headings, such as: Customer Service; E-business; Finance; Globalization; Human Resources; Technology; Legal; Management; Marketing and Production. Then brainstorm for ideas by listing as many things that you want to achieve under each heading and later re-arrange these things in order of priority. Finally, select the top item from each department heading and choose these as your program objectives. Try and restrict yourself to five because it will enable you to focus clearly. It is likely that the other things that you listed will be achieved if each of the top objectives are achieved. If this does not prove to be the case, then simply work through the process again.
Study forecast
As a guide, the Appleton Greene Growth Strategy corporate training program should take 12-18 months to complete, depending upon your availability and current commitments. The reason why there is such a variance in time estimates is because every student is an individual, with differing productivity levels and different commitments. These differentiations are then exaggerated by the fact that this is a distance-learning program, which incorporates the practical integration of academic theory as an as a part of the training program. Consequently all of the project studies are real, which means that important decisions and compromises need to be made. You will want to get things right and will need to be patient with your expectations in order to ensure that they are. We would always recommend that you are prudent with your own task and time forecasts, but you still need to develop them and have a clear indication of what are realistic expectations in your case. With reference to your time planning: consider the time that you can realistically dedicate towards study with the program every week; calculate how long it should take you to complete the program, using the guidelines featured here; then break the program down into logical modules and allocate a suitable proportion of time to each of them, these will be your milestones; you can create a time plan by using a spreadsheet on your computer, or a personal organizer such as MS Outlook, you could also use a financial forecasting software; break your time forecasts down into manageable chunks of time, the more specific you can be, the more productive and accurate your time management will be; finally, use formulas where possible to do your time calculations for you, because this will help later on when your forecasts need to change in line with actual performance. With reference to your task planning: refer to your list of tasks that need to be undertaken in order to achieve your program objectives; with reference to your time plan, calculate when each task should be implemented; remember that you are not estimating when your objectives will be achieved, but when you will need to focus upon implementing the corresponding tasks; you also need to ensure that each task is implemented in conjunction with the associated training modules which are relevant; then break each single task down into a list of specific to do’s, say approximately ten to do’s for each task and enter these into your study plan; once again you could use MS Outlook to incorporate both your time and task planning and this could constitute your study plan; you could also use a project management software like MS Project. You should now have a clear and realistic forecast detailing when you can expect to be able to do something about undertaking the tasks to achieve your program objectives.
Performance management
It is one thing to develop your study forecast, it is quite another to monitor your progress. Ultimately it is less important whether you achieve your original study forecast and more important that you update it so that it constantly remains realistic in line with your performance. As you begin to work through the program, you will begin to have more of an idea about your own personal performance and productivity levels as a distance-learner. Once you have completed your first study module, you should re-evaluate your study forecast for both time and tasks, so that they reflect your actual performance level achieved. In order to achieve this you must first time yourself while training by using an alarm clock. Set the alarm for hourly intervals and make a note of how far you have come within that time. You can then make a note of your actual performance on your study plan and then compare your performance against your forecast. Then consider the reasons that have contributed towards your performance level, whether they are positive or negative and make a considered adjustment to your future forecasts as a result. Given time, you should start achieving your forecasts regularly.
With reference to time management: time yourself while you are studying and make a note of the actual time taken in your study plan; consider your successes with time-efficiency and the reasons for the success in each case and take this into consideration when reviewing future time planning; consider your failures with time-efficiency and the reasons for the failures in each case and take this into consideration when reviewing future time planning; re-evaluate your study forecast in relation to time planning for the remainder of your training program to ensure that you continue to be realistic about your time expectations. You need to be consistent with your time management, otherwise you will never complete your studies. This will either be because you are not contributing enough time to your studies, or you will become less efficient with the time that you do allocate to your studies. Remember, if you are not in control of your studies, they can just become yet another cause of stress for you.
With reference to your task management: time yourself while you are studying and make a note of the actual tasks that you have undertaken in your study plan; consider your successes with task-efficiency and the reasons for the success in each case; take this into consideration when reviewing future task planning; consider your failures with task-efficiency and the reasons for the failures in each case and take this into consideration when reviewing future task planning; re-evaluate your study forecast in relation to task planning for the remainder of your training program to ensure that you continue to be realistic about your task expectations. You need to be consistent with your task management, otherwise you will never know whether you are achieving your program objectives or not.
Keeping in touch
You will have access to qualified and experienced professors and tutors who are responsible for providing tutorial support for your particular training program. So don’t be shy about letting them know how you are getting on. We keep electronic records of all tutorial support emails so that professors and tutors can review previous correspondence before considering an individual response. It also means that there is a record of all communications between you and your professors and tutors and this helps to avoid any unnecessary duplication, misunderstanding, or misinterpretation. If you have a problem relating to the program, share it with them via email. It is likely that they have come across the same problem before and are usually able to make helpful suggestions and steer you in the right direction. To learn more about when and how to use tutorial support, please refer to the Tutorial Support section of this student information guide. This will help you to ensure that you are making the most of tutorial support that is available to you and will ultimately contribute towards your success and enjoyment with your training program.
Work colleagues and family
You should certainly discuss your program study progress with your colleagues, friends and your family. Appleton Greene training programs are very practical. They require you to seek information from other people, to plan, develop and implement processes with other people and to achieve feedback from other people in relation to viability and productivity. You will therefore have plenty of opportunities to test your ideas and enlist the views of others. People tend to be sympathetic towards distance-learners, so don’t bottle it all up in yourself. Get out there and share it! It is also likely that your family and colleagues are going to benefit from your labors with the program, so they are likely to be much more interested in being involved than you might think. Be bold about delegating work to those who might benefit themselves. This is a great way to achieve understanding and commitment from people who you may later rely upon for process implementation. Share your experiences with your friends and family.
Making it relevant
The key to successful learning is to make it relevant to your own individual circumstances. At all times you should be trying to make bridges between the content of the program and your own situation. Whether you achieve this through quiet reflection or through interactive discussion with your colleagues, client partners or your family, remember that it is the most important and rewarding aspect of translating your studies into real self-improvement. You should be clear about how you want the program to benefit you. This involves setting clear study objectives in relation to the content of the course in terms of understanding, concepts, completing research or reviewing activities and relating the content of the modules to your own situation. Your objectives may understandably change as you work through the program, in which case you should enter the revised objectives on your study plan so that you have a permanent reminder of what you are trying to achieve, when and why.
Distance-learning check-list
Prepare your study environment, your study tools and rules.
Undertake detailed self-assessment in terms of your ability as a learner.
Create a format for your study plan.
Consider your study objectives and tasks.
Create a study forecast.
Assess your study performance.
Re-evaluate your study forecast.
Be consistent when managing your study plan.
Use your Appleton Greene Certified Learning Provider (CLP) for tutorial support.
Make sure you keep in touch with those around you.
Tutorial Support
Programs
Appleton Greene uses standard and bespoke corporate training programs as vessels to transfer business process improvement knowledge into the heart of our clients’ organizations. Each individual program focuses upon the implementation of a specific business process, which enables clients to easily quantify their return on investment. There are hundreds of established Appleton Greene corporate training products now available to clients within customer services, e-business, finance, globalization, human resources, information technology, legal, management, marketing and production. It does not matter whether a client’s employees are located within one office, or an unlimited number of international offices, we can still bring them together to learn and implement specific business processes collectively. Our approach to global localization enables us to provide clients with a truly international service with that all important personal touch. Appleton Greene corporate training programs can be provided virtually or locally and they are all unique in that they individually focus upon a specific business function. They are implemented over a sustainable period of time and professional support is consistently provided by qualified learning providers and specialist consultants.
Support available
You will have a designated Certified Learning Provider (CLP) and an Accredited Consultant and we encourage you to communicate with them as much as possible. In all cases tutorial support is provided online because we can then keep a record of all communications to ensure that tutorial support remains consistent. You would also be forwarding your work to the tutorial support unit for evaluation and assessment. You will receive individual feedback on all of the work that you undertake on a one-to-one basis, together with specific recommendations for anything that may need to be changed in order to achieve a pass with merit or a pass with distinction and you then have as many opportunities as you may need to re-submit project studies until they meet with the required standard. Consequently the only reason that you should really fail (CLP) is if you do not do the work. It makes no difference to us whether a student takes 12 months or 18 months to complete the program, what matters is that in all cases the same quality standard will have been achieved.
Support Process
Please forward all of your future emails to the designated (CLP) Tutorial Support Unit email address that has been provided and please do not duplicate or copy your emails to other AGC email accounts as this will just cause unnecessary administration. Please note that emails are always answered as quickly as possible but you will need to allow a period of up to 20 business days for responses to general tutorial support emails during busy periods, because emails are answered strictly within the order in which they are received. You will also need to allow a period of up to 30 business days for the evaluation and assessment of project studies. This does not include weekends or public holidays. Please therefore kindly allow for this within your time planning. All communications are managed online via email because it enables tutorial service support managers to review other communications which have been received before responding and it ensures that there is a copy of all communications retained on file for future reference. All communications will be stored within your personal (CLP) study file here at Appleton Greene throughout your designated study period. If you need any assistance or clarification at any time, please do not hesitate to contact us by forwarding an email and remember that we are here to help. If you have any questions, please list and number your questions succinctly and you can then be sure of receiving specific answers to each and every query.
Time Management
It takes approximately 1 Year to complete the Growth Strategy corporate training program, incorporating 12 x 6-hour monthly workshops. Each student will also need to contribute approximately 4 hours per week over 1 Year of their personal time. Students can study from home or work at their own pace and are responsible for managing their own study plan. There are no formal examinations and students are evaluated and assessed based upon their project study submissions, together with the quality of their internal analysis and supporting documents. They can contribute more time towards study when they have the time to do so and can contribute less time when they are busy. All students tend to be in full time employment while studying and the Growth Strategy program is purposely designed to accommodate this, so there is plenty of flexibility in terms of time management. It makes no difference to us at Appleton Greene, whether individuals take 12-18 months to complete this program. What matters is that in all cases the same standard of quality will have been achieved with the standard and bespoke programs that have been developed.
Distance Learning Guide
The distance learning guide should be your first port of call when starting your training program. It will help you when you are planning how and when to study, how to create the right environment and how to establish the right frame of mind. If you can lay the foundations properly during the planning stage, then it will contribute to your enjoyment and productivity while training later. The guide helps to change your lifestyle in order to accommodate time for study and to cultivate good study habits. It helps you to chart your progress so that you can measure your performance and achieve your goals. It explains the tools that you will need for study and how to make them work. It also explains how to translate academic theory into practical reality. Spend some time now working through your distance learning guide and make sure that you have firm foundations in place so that you can make the most of your distance learning program. There is no requirement for you to attend training workshops or classes at Appleton Greene offices. The entire program is undertaken online, program course manuals and project studies are administered via the Appleton Greene web site and via email, so you are able to study at your own pace and in the comfort of your own home or office as long as you have a computer and access to the internet.
How To Study
The how to study guide provides students with a clear understanding of the Appleton Greene facilitation via distance learning training methods and enables students to obtain a clear overview of the training program content. It enables students to understand the step-by-step training methods used by Appleton Greene and how course manuals are integrated with project studies. It explains the research and development that is required and the need to provide evidence and references to support your statements. It also enables students to understand precisely what will be required of them in order to achieve a pass with merit and a pass with distinction for individual project studies and provides useful guidance on how to be innovative and creative when developing your Unique Program Proposition (UPP).
Tutorial Support
Tutorial support for the Appleton Greene Growth Strategy corporate training program is provided online either through the Appleton Greene Client Support Portal (CSP), or via email. All tutorial support requests are facilitated by a designated Program Administration Manager (PAM). They are responsible for deciding which professor or tutor is the most appropriate option relating to the support required and then the tutorial support request is forwarded onto them. Once the professor or tutor has completed the tutorial support request and answered any questions that have been asked, this communication is then returned to the student via email by the designated Program Administration Manager (PAM). This enables all tutorial support, between students, professors and tutors, to be facilitated by the designated Program Administration Manager (PAM) efficiently and securely through the email account. You will therefore need to allow a period of up to 20 business days for responses to general support queries and up to 30 business days for the evaluation and assessment of project studies, because all tutorial support requests are answered strictly within the order in which they are received. This does not include weekends or public holidays. Consequently you need to put some thought into the management of your tutorial support procedure in order to ensure that your study plan is feasible and to obtain the maximum possible benefit from tutorial support during your period of study. Please retain copies of your tutorial support emails for future reference. Please ensure that ALL of your tutorial support emails are set out using the format as suggested within your guide to tutorial support. Your tutorial support emails need to be referenced clearly to the specific part of the course manual or project study which you are working on at any given time. You also need to list and number any questions that you would like to ask, up to a maximum of five questions within each tutorial support email. Remember the more specific you can be with your questions the more specific your answers will be too and this will help you to avoid any unnecessary misunderstanding, misinterpretation, or duplication. The guide to tutorial support is intended to help you to understand how and when to use support in order to ensure that you get the most out of your training program. Appleton Greene training programs are designed to enable you to do things for yourself. They provide you with a structure or a framework and we use tutorial support to facilitate students while they practically implement what they learn. In other words, we are enabling students to do things for themselves. The benefits of distance learning via facilitation are considerable and are much more sustainable in the long-term than traditional short-term knowledge sharing programs. Consequently you should learn how and when to use tutorial support so that you can maximize the benefits from your learning experience with Appleton Greene. This guide describes the purpose of each training function and how to use them and how to use tutorial support in relation to each aspect of the training program. It also provides useful tips and guidance with regard to best practice.
Tutorial Support Tips
Students are often unsure about how and when to use tutorial support with Appleton Greene. This Tip List will help you to understand more about how to achieve the most from using tutorial support. Refer to it regularly to ensure that you are continuing to use the service properly. Tutorial support is critical to the success of your training experience, but it is important to understand when and how to use it in order to maximize the benefit that you receive. It is no coincidence that those students who succeed are those that learn how to be positive, proactive and productive when using tutorial support.
Be positive and friendly with your tutorial support emails
Remember that if you forward an email to the tutorial support unit, you are dealing with real people. “Do unto others as you would expect others to do unto you”. If you are positive, complimentary and generally friendly in your emails, you will generate a similar response in return. This will be more enjoyable, productive and rewarding for you in the long-term.
Think about the impression that you want to create
Every time that you communicate, you create an impression, which can be either positive or negative, so put some thought into the impression that you want to create. Remember that copies of all tutorial support emails are stored electronically and tutors will always refer to prior correspondence before responding to any current emails. Over a period of time, a general opinion will be arrived at in relation to your character, attitude and ability. Try to manage your own frustrations, mood swings and temperament professionally, without involving the tutorial support team. Demonstrating frustration or a lack of patience is a weakness and will be interpreted as such. The good thing about communicating in writing, is that you will have the time to consider your content carefully, you can review it and proof-read it before sending your email to Appleton Greene and this should help you to communicate more professionally, consistently and to avoid any unnecessary knee-jerk reactions to individual situations as and when they may arise. Please also remember that the CLP Tutorial Support Unit will not just be responsible for evaluating and assessing the quality of your work, they will also be responsible for providing recommendations to other learning providers and to client contacts within the Appleton Greene global client network, so do be in control of your own emotions and try to create a good impression.
Remember that quality is preferred to quantity
Please remember that when you send an email to the tutorial support team, you are not using Twitter or Text Messaging. Try not to forward an email every time that you have a thought. This will not prove to be productive either for you or for the tutorial support team. Take time to prepare your communications properly, as if you were writing a professional letter to a business colleague and make a list of queries that you are likely to have and then incorporate them within one email, say once every month, so that the tutorial support team can understand more about context, application and your methodology for study. Get yourself into a consistent routine with your tutorial support requests and use the tutorial support template provided with ALL of your emails. The (CLP) Tutorial Support Unit will not spoon-feed you with information. They need to be able to evaluate and assess your tutorial support requests carefully and professionally.
Be specific about your questions in order to receive specific answers
Try not to write essays by thinking as you are writing tutorial support emails. The tutorial support unit can be unclear about what in fact you are asking, or what you are looking to achieve. Be specific about asking questions that you want answers to. Number your questions. You will then receive specific answers to each and every question. This is the main purpose of tutorial support via email.
Keep a record of your tutorial support emails
It is important that you keep a record of all tutorial support emails that are forwarded to you. You can then refer to them when necessary and it avoids any unnecessary duplication, misunderstanding, or misinterpretation.
Individual training workshops or telephone support
Please be advised that Appleton Greene does not provide separate or individual tutorial support meetings, workshops, or provide telephone support for individual students. Appleton Greene is an equal opportunities learning and service provider and we are therefore understandably bound to treat all students equally. We cannot therefore broker special financial or study arrangements with individual students regardless of the circumstances. All tutorial support is provided online and this enables Appleton Greene to keep a record of all communications between students, professors and tutors on file for future reference, in accordance with our quality management procedure and your terms and conditions of enrolment. All tutorial support is provided online via email because it enables us to have time to consider support content carefully, it ensures that you receive a considered and detailed response to your queries. You can number questions that you would like to ask, which relate to things that you do not understand or where clarification may be required. You can then be sure of receiving specific answers to each individual query. You will also then have a record of these communications and of all tutorial support, which has been provided to you. This makes tutorial support administration more productive by avoiding any unnecessary duplication, misunderstanding, or misinterpretation.
Tutorial Support Email Format
You should use this tutorial support format if you need to request clarification or assistance while studying with your training program. Please note that ALL of your tutorial support request emails should use the same format. You should therefore set up a standard email template, which you can then use as and when you need to. Emails that are forwarded to Appleton Greene, which do not use the following format, may be rejected and returned to you by the (CLP) Program Administration Manager. A detailed response will then be forwarded to you via email usually within 20 business days of receipt for general support queries and 30 business days for the evaluation and assessment of project studies. This does not include weekends or public holidays. Your tutorial support request, together with the corresponding TSU reply, will then be saved and stored within your electronic TSU file at Appleton Greene for future reference.
Subject line of your email
Please insert: Appleton Greene (CLP) Tutorial Support Request: (Your Full Name) (Date), within the subject line of your email.
Main body of your email
Please insert:
1. Appleton Greene Certified Learning Provider (CLP) Tutorial Support Request
2. Your Full Name
3. Date of TS request
4. Preferred email address
5. Backup email address
6. Course manual page name or number (reference)
7. Project study page name or number (reference)
Subject of enquiry
Please insert a maximum of 50 words (please be succinct)
Briefly outline the subject matter of your inquiry, or what your questions relate to.
Question 1
Maximum of 50 words (please be succinct)
Maximum of 50 words (please be succinct)
Question 3
Maximum of 50 words (please be succinct)
Question 4
Maximum of 50 words (please be succinct)
Question 5
Maximum of 50 words (please be succinct)
Please note that a maximum of 5 questions is permitted with each individual tutorial support request email.
Procedure
* List the questions that you want to ask first, then re-arrange them in order of priority. Make sure that you reference them, where necessary, to the course manuals or project studies.
* Make sure that you are specific about your questions and number them. Try to plan the content within your emails to make sure that it is relevant.
* Make sure that your tutorial support emails are set out correctly, using the Tutorial Support Email Format provided here.
* Save a copy of your email and incorporate the date sent after the subject title. Keep your tutorial support emails within the same file and in date order for easy reference.
* Allow up to 20 business days for a response to general tutorial support emails and up to 30 business days for the evaluation and assessment of project studies, because detailed individual responses will be made in all cases and tutorial support emails are answered strictly within the order in which they are received.
* Emails can and do get lost. So if you have not received a reply within the appropriate time, forward another copy or a reminder to the tutorial support unit to be sure that it has been received but do not forward reminders unless the appropriate time has elapsed.
* When you receive a reply, save it immediately featuring the date of receipt after the subject heading for easy reference. In most cases the tutorial support unit replies to your questions individually, so you will have a record of the questions that you asked as well as the answers offered. With project studies however, separate emails are usually forwarded by the tutorial support unit, so do keep a record of your own original emails as well.
* Remember to be positive and friendly in your emails. You are dealing with real people who will respond to the same things that you respond to.
* Try not to repeat questions that have already been asked in previous emails. If this happens the tutorial support unit will probably just refer you to the appropriate answers that have already been provided within previous emails.
* If you lose your tutorial support email records you can write to Appleton Greene to receive a copy of your tutorial support file, but a separate administration charge may be levied for this service.
How To Study
Your Certified Learning Provider (CLP) and Accredited Consultant can help you to plan a task list for getting started so that you can be clear about your direction and your priorities in relation to your training program. It is also a good way to introduce yourself to the tutorial support team.
Planning your study environment
Your study conditions are of great importance and will have a direct effect on how much you enjoy your training program. Consider how much space you will have, whether it is comfortable and private and whether you are likely to be disturbed. The study tools and facilities at your disposal are also important to the success of your distance-learning experience. Your tutorial support unit can help with useful tips and guidance, regardless of your starting position. It is important to get this right before you start working on your training program.
Planning your program objectives
It is important that you have a clear list of study objectives, in order of priority, before you start working on your training program. Your tutorial support unit can offer assistance here to ensure that your study objectives have been afforded due consideration and priority.
Planning how and when to study
Distance-learners are freed from the necessity of attending regular classes, since they can study in their own way, at their own pace and for their own purposes. This approach is designed to let you study efficiently away from the traditional classroom environment. It is important however, that you plan how and when to study, so that you are making the most of your natural attributes, strengths and opportunities. Your tutorial support unit can offer assistance and useful tips to ensure that you are playing to your strengths.
Planning your study tasks
You should have a clear understanding of the study tasks that you should be undertaking and the priority associated with each task. These tasks should also be integrated with your program objectives. The distance learning guide and the guide to tutorial support for students should help you here, but if you need any clarification or assistance, please contact your tutorial support unit.
Planning your time
You will need to allocate specific times during your calendar when you intend to study if you are to have a realistic chance of completing your program on time. You are responsible for planning and managing your own study time, so it is important that you are successful with this. Your tutorial support unit can help you with this if your time plan is not working.
Keeping in touch
Consistency is the key here. If you communicate too frequently in short bursts, or too infrequently with no pattern, then your management ability with your studies will be questioned, both by you and by your tutorial support unit. It is obvious when a student is in control and when one is not and this will depend how able you are at sticking with your study plan. Inconsistency invariably leads to in-completion.
Charting your progress
Your tutorial support team can help you to chart your own study progress. Refer to your distance learning guide for further details.
Making it work
To succeed, all that you will need to do is apply yourself to undertaking your training program and interpreting it correctly. Success or failure lies in your hands and your hands alone, so be sure that you have a strategy for making it work. Your Certified Learning Provider (CLP) and Accredited Consultant can guide you through the process of program planning, development and implementation.
Reading methods
Interpretation is often unique to the individual but it can be improved and even quantified by implementing consistent interpretation methods. Interpretation can be affected by outside interference such as family members, TV, or the Internet, or simply by other thoughts which are demanding priority in our minds. One thing that can improve our productivity is using recognized reading methods. This helps us to focus and to be more structured when reading information for reasons of importance, rather than relaxation.
Speed reading
When reading through course manuals for the first time, subconsciously set your reading speed to be just fast enough that you cannot dwell on individual words or tables. With practice, you should be able to read an A4 sheet of paper in one minute. You will not achieve much in the way of a detailed understanding, but your brain will retain a useful overview. This overview will be important later on and will enable you to keep individual issues in perspective with a more generic picture because speed reading appeals to the memory part of the brain. Do not worry about what you do or do not remember at this stage.
Content reading
Once you have speed read everything, you can then start work in earnest. You now need to read a particular section of your course manual thoroughly, by making detailed notes while you read. This process is called Content Reading and it will help to consolidate your understanding and interpretation of the information that has been provided.
Making structured notes on the course manuals
When you are content reading, you should be making detailed notes, which are both structured and informative. Make these notes in a MS Word document on your computer, because you can then amend and update these as and when you deem it to be necessary. List your notes under three headings: 1. Interpretation – 2. Questions – 3. Tasks. The purpose of the 1st section is to clarify your interpretation by writing it down. The purpose of the 2nd section is to list any questions that the issue raises for you. The purpose of the 3rd section is to list any tasks that you should undertake as a result. Anyone who has graduated with a business-related degree should already be familiar with this process.
Organizing structured notes separately
You should then transfer your notes to a separate study notebook, preferably one that enables easy referencing, such as a MS Word Document, a MS Excel Spreadsheet, a MS Access Database, or a personal organizer on your cell phone. Transferring your notes allows you to have the opportunity of cross-checking and verifying them, which assists considerably with understanding and interpretation. You will also find that the better you are at doing this, the more chance you will have of ensuring that you achieve your study objectives.
Question your understanding
Do challenge your understanding. Explain things to yourself in your own words by writing things down.
Clarifying your understanding
If you are at all unsure, forward an email to your tutorial support unit and they will help to clarify your understanding.
Question your interpretation
Do challenge your interpretation. Qualify your interpretation by writing it down.
Clarifying your interpretation
If you are at all unsure, forward an email to your tutorial support unit and they will help to clarify your interpretation.
Qualification Requirements
The student will need to successfully complete the project study and all of the exercises relating to the Growth Strategy corporate training program, achieving a pass with merit or distinction in each case, in order to qualify as an Accredited Growth Strategy Specialist (AGSS). All monthly workshops need to be tried and tested within your company. These project studies can be completed in your own time and at your own pace and in the comfort of your own home or office. There are no formal examinations, assessment is based upon the successful completion of the project studies. They are called project studies because, unlike case studies, these projects are not theoretical, they incorporate real program processes that need to be properly researched and developed. The project studies assist us in measuring your understanding and interpretation of the training program and enable us to assess qualification merits. All of the project studies are based entirely upon the content within the training program and they enable you to integrate what you have learnt into your corporate training practice.
Growth Strategy – Grading Contribution
Project Study – Grading Contribution
Customer Service – 10%
E-business – 05%
Finance – 10%
Globalization – 10%
Human Resources – 10%
Information Technology – 10%
Legal – 05%
Management – 10%
Marketing – 10%
Production – 10%
Education – 05%
Logistics – 05%
TOTAL GRADING – 100%
Qualification grades
A mark of 90% = Pass with Distinction.
A mark of 75% = Pass with Merit.
A mark of less than 75% = Fail.
If you fail to achieve a mark of 75% with a project study, you will receive detailed feedback from the Certified Learning Provider (CLP) and/or Accredited Consultant, together with a list of tasks which you will need to complete, in order to ensure that your project study meets with the minimum quality standard that is required by Appleton Greene. You can then re-submit your project study for further evaluation and assessment. Indeed you can re-submit as many drafts of your project studies as you need to, until such a time as they eventually meet with the required standard by Appleton Greene, so you need not worry about this, it is all part of the learning process.
When marking project studies, Appleton Greene is looking for sufficient evidence of the following:
Pass with merit
A satisfactory level of program understanding
A satisfactory level of program interpretation
A satisfactory level of project study content presentation
A satisfactory level of Unique Program Proposition (UPP) quality
A satisfactory level of the practical integration of academic theory
Pass with distinction
An exceptional level of program understanding
An exceptional level of program interpretation
An exceptional level of project study content presentation
An exceptional level of Unique Program Proposition (UPP) quality
An exceptional level of the practical integration of academic theory
Preliminary Analysis
Online Article
“Does Your Strategy Match Your Competitive Environment?
By Martin Reeves,
Harvard Business Review,
August 28, 2012
How predictable are competitive conditions in your industry? How much power does your company have to shape its underlying competitive environment? These questions are critical to strategists, since clearly the kinds of strategies that work in predictable industries are likely to be worlds apart from those geared to shaping highly volatile environments.
This should hardly surprise you. In our recent research, we’ve found that fully three-quarters of the executives we surveyed at 120 companies around the world in 10 major industry sectors were well aware of the need to match their strategies — and the process by which they create them — to the specific conditions of their competitive environment. And yet, our research also found far too many were employing strategies suited only for predictable and immutable industries.
To understand the scope of this problem, take a look at this chart:
What it shows is how accurately executives in various industries estimated how predictable and how malleable their industries are. Each dot is a response of an executive we surveyed from a particular company in a certain industry. The closer the dot is to the middle of the chart, the more accurate the estimate. Thus, you can see, one executive from the consumer discretionary industry was spot on, right in the middle. But you can also see three IT executives, in the lower left-hand corner, who overestimated how unpredictable their industry is while also overestimating their companies’ ability to change those conditions. And up in the upper right-hand corner, you’ll see a fair number of financial executives underestimating how unpredictable their industry is and also underestimating their ability to influence it.
The problem with this is obvious, of course: You can’t begin to tailor your strategy to the conditions of your industry if you don’t perceive them correctly.
What’s more, as we’ve just done, many executives lump “predictable” and “malleable” together, and divide the universe of competitive environments very broadly into two parts, assuming that a predictable environment is one they can control and an unpredictable one is one they can’t.
But in fact, our research shows that it’s far more fruitful to think of those factors separately, and consider all four possibilities — that is, to consider not only strategies suited to predictable environments you can control but those geared to predictable environments that you can’t influence. Similarly, it’s important to distinguish between strategies suited to unpredictable environments you can’t control and those that can capitalize on the possibilities of unpredictable environments your company is in a position to shape to its advantage.
These distinctions are so important because the four different strategic environments require four different styles of strategy execution. For companies operating in predictable and immutable environments, a classical strategy — the one everyone learned in business school — works well. When immutable environments are unpredictable, adaptive, experimental strategies work far better. Predictable environments that you have the power to change call for visionary strategies (the entrepreneurial if-we-build-it-they-will-come approach). And shaping strategies are best for unpredictable environments you have the power to control, as many Internet players do.
Our research on this point is unequivocal. We found that firms that match their style of strategy formulation to their environment achieve annual total shareholder return that is 4% to 8% higher.
That’s why it’s so alarming that in our survey we found fully six out of 10 companies either misperceived their environment, used the wrong style for their environment, or deployed strategy-development practices inconsistent with their intended style.
Where does that leave you?
To help you understand the style your firm deploys and the style most suited to your firm’s environment we have developed a short, interactive survey. Comprising 23 questions, that you can complete in about five minutes, the survey is a great opportunity to test your strategic practices against our framework and to gain useful insight into the style most suited to your firm’s competitive conditions. Aligning your strategy formulation practices to your environment can help you unlock real value.”
If you would like to view the original article, please visit: www.hbr.org
Journal Article
“How a Firm’s Competitive Environment and Digital Strategic Posture Influence Digital Business Strategy
By Sunil Mithas, Ali Tafti and Will Mitchell,
MIS Quarterly,
June 2013
In this paper, we examine how the competitive industry environment shapes the way that digital strategic posture (defined as a focal firm ‘s degree of engagement in a particular class of digital business practices relative to the industry norm) influences firms realized digital business strategy. We focus on two forms of digital strategy : general IT investment and IT outsourcing investment. Drawing from prior literature on determinants of IT activity and competitive dynamics, we argue that three elements of the industry environment determine whether digital strategic posture has an increasingly convergent or divergent influence on digital business strategy. By divergent influence , we mean an influence that leads to spending substantially more or less on a particular strategic activity than industry norms. We predict that a digital strategic posture (difference from the industry mean) has an increasingly divergent effect on digital business strategy under higher industry turbulence, while having an increasingly convergent effect on digital business strategy under higher industry concentration and higher industry growth. The study uses archival data for 400 U.S. -based firms from 1999 to 2006. Our findings imply that digital business strategy is not solely a matter of optimizing firm operations internally or of responding to one or two focal competitors, but also arises strikingly from awareness and responsiveness to the digital business competitive environment. Collectively, the findings provide insights on how strategic posture and industry environment influence firms ‘digital business’.
Introduction
Increasing digitization of business processes, products, and services makes it imperative to develop a better understanding of digital business strategies. Digital strategies such as investments in general information technology and IT out- sourcing are major elements of overall business strategy, sometimes allowing firms to differentiate from competitors and other times creating demands to conform with competi- tive norms (see, for instance, Barua and Mukhopadhyay 2000; Han and Mithas 20 1 3 ; Kohli and Grover 2008 ; Kulatilaka and Venkatraman 2001; Mithas and’Lucas 2010, 2014; Mithas et al. 2012b; Pavlou and El Sawy 2010; Rai et al. 2006; Samba- murthy et al. 2003; Saraf et al. 2007; Tafti et al. 2013). How- ever, strategie management research and the IT strategy litera- ture have only begun to investigate when firms focus on simply converging to competitive norms in their IT invest- ments, and when they will view digital business strategies as opportunities to diverge from industry norms by spending substantially more or less than industry averages. In this paper, we develop the concept of a firm’s strategic posture relative to the average in its industry. We argue that the degree to which firms choose to diverge from industry norms in their ongoing digital business strategies is influenced by the interaction of current digital strategic posture with three key aspects of the competitive environment: turbulence, concen- tration, and growth.
At the most general level, strategic posture is a firm’s level of activity in a given strategic dimension relative to industry average. Research in strategic management argues that a firm’s strategic posture relative to its competitors at any point in time influences ongoing choices about R&D, marketing, innovation, and other activities (Mol and Birkinshaw 2009; Porter 1979; Smith et al. 2001). Drawing from this research as well as the literature on the role of IT investment and IT infrastructure in corporate strategy, this paper focuses on digital strategic posture, which we define as the difference in a firm’s engagement in a particular IT activity relative to the industry average of its competitors. Specifically, a firm with lower investment in IT outsourcing activities than its industry average has a low IT outsourcing digital strategic posture, while a firm with above-average investment in IT activities has a high IT digital strategic posture. A firm’s digital strategic posture – that is, the degree to which it lags or leads industry investment patterns – can create either divergent or convergent pressures on its ongoing digital business strategy.
Digital business strategy is the extent to which a firm engages in any category of IT activity. Consider several examples. Amidst forecasts of economic recession in the early 2000s, American Airlines invested in software that enhanced fuel efficiency by tailoring routes, flight paths, and baggage loading. This investment was a strategic move to which other airlines would need to respond, whether by choosing to imitate or by differentiating (Lohr 2008). Likewise, Sprint’s outsourcing of its IT services raised questions for other tele- com providers in the United States on whether to imitate such a strategic move or to differentiate by keeping IT services in- house. These examples in the evolving digital business envi- ronment suggest that firms contend with a tension between the tendency to converge to industry norms in digital business strategy and the opportunity to diverge from industry norms.
We propose that differences in these opposing divergent and convergent tendencies in a firm’s ongoing digital business strategies arise from interactions between its current digital strategic posture and variations in its industry environment. We predict that digital strategic posture (distance from the industry mean) has an increasingly divergent effect on digital business strategy under higher industry turbulence, while having an increasingly convergent effect on digital business strategy under higher industry concentration and higher industry growth. Thus, in contrast to approaches that focus on the dyad of focal and rival firms (e.g., Derfiis et al. 2008), we consider normative forces in which managers respond not just to a single competitor but rather to the larger set of industry competitors.
This approach has particular salience in the case of digital business strategy for two reasons. First, managers often have better information on an industry norm for particular IT activities, such as general IT investment norms or outsourcing norms, than on the actions of a particular competitor. For example, while many research firms (e.g., Gartner, Forrester, and IDC) and business publications (e.g., InformationWeek and Computerworld ) publish average industry investments on IT or allocations of IT budgets to outsourcing, they usually do not reveal details on the digital business practices of a specific competitor.
Second, managers typically have imperfect information and limited foresight on the optimal level of engagement in any digital strategy, due to the underlying complexities of digitally enabled business processes and inherent uncertainties regarding IT strategy. Under conditions of complexity and uncertainty, managers look to industry peers for frames of reference in determining firm strategy (Feigenbaum and Thomas 1994; Mol and Birkinshaw 2009). We examine how firms respond to the industry norms of digital business strategy by updating their own strategy in the subsequent year either toward or away from the norm, considering how industry turbulence, concentration, and growth shape firms’ responsiveness to the industry norm.
This paper examines how the industry environment makes digital strategic posture a convergent or divergent force in shaping firms’ digital business strategies. To our knowledge, this is the first study that establishes the links between com- petitive actions, industry environment, and digital business strategy. We extend prior work on competitive actions that has largely focused on visible, externally focused, frequent, and discrete (i.e., a firm either responds or does not respond to a competitive move) decisions such as pricing, capacity, geographic, marketing, and product introductions (Chen and Miller 1994; Derfus et al. 2008; Smith et al. 2001; Young et al. 1996). Smith et al. (2001, p. 340) note that prior compe- titive dynamics studies “excluded the firm’s internal actions (such as using new information systems, . . .).” Understanding these decisions is critical to advancing our knowledge of digital business strategy.
The paper also considers specific aspects of the industry environment and examines its dynamic interaction with specific organizational factors. Instead of treating an environ- ment as a single variable, we bring three environmental variables that are widely used in strategic management studies to the information technology strategy model, and examine their moderating effects on the main causal relationship. In addition, we use an extensive archivai dataset of large U.S. firms to generate novel insights on the major issues related to IT investments and IT outsourcing, which are among the central artifacts in information systems research. Because IT investments and IT outsourcing have significant implications for competitive advantage, by understanding how digital stra- tegic posture and industry environment fuse together to influence firms’ strategic actions, we contribute to and extend the “fusion” view of digital business strategy (El Sawy et al. 2010; Mithas and Lucas 2010).”
If you would like to continue reading this paper, please visit: www.jstor.org
Online Article
“Strategic Management for Competitive Advantage
By Frederick W. Gluck, Stephen P. Kaufman and A. Steven Walleck,
Harvard Business Review
For the better part of a decade, strategy has been a business buzzword. Top executives ponder strategic objectives and missions. Managers down the line rough out product/market strategies. Functional chiefs lay out “strategies” for everything from R&D to raw-materials sourcing and distributor relations. Mere planning has lost its glamor; the planners have all turned into strategists.
All this may have blurred the concept of strategy, but it has also helped to shift the attention of managers from the technicalities of the planning process to substantive issues affecting the long-term well-being of their enterprises. Signs that a real change has been taking place in business’s planning focus have been visible for some time in the performance of some large, complex multinational corporations—General Electric, Northern Telecom, Mitsubishi Heavy Industries, and Siemens A.G., to name four.
Instead of behaving like large unwieldy bureaucracies, they have been nimbly leapfrogging smaller competitors with technical or market innovations, in true entrepreneurial style. They have been executing what appear to be well-thought-out business strategies coherently, consistently, and often with surprising speed. Repeatedly, they have been winning market shares away from more traditionally managed competitors.
What is the source of these giant companies’ remarkable entrepreneurial vigor? Is it the result of their substantial investments in strategic planning, which appear to have produced something like a quantum jump in the sophistication of their strategic planning processes? If so, what lessons can be drawn from the steps they have taken and the experience they have gained?
To explore these questions, we embarked on a systematic examination of the relation between formal planning and strategic performance across a broad spectrum of companies (see the sidebar). We looked for common patterns in the development of planning systems over time. In particular, we examined their evolution in those giant companies where formal planning and strategic decision-making appeared to be most closely and effectively interwoven.
Our findings indicate that formal strategic planning does indeed evolve along similar lines in different companies, albeit at varying rates of progress. This progression can be segmented into four sequential phases, each marked by clear advances over its predecessor in terms of explicit formulation of issues and alternatives, quality of preparatory staff work, readiness of top management to participate in and guide the strategic decision process, and effectiveness of implementation.
The four-phase model evolution we shall be describing has already proved useful in evaluating corporate planning systems and processes and for indicating ways of improving their effectiveness.
In this article, we describe each of the four phases, with special emphasis on Phase IV, the stage we have chosen to call strategic management. In order to highlight the differences between the four stages, each will be sketched in somewhat bold strokes. Obviously, not all the companies in our sample fit the pattern precisely, but the generalizations are broadly applicable to all.
Phase I: Basic Financial Planning
Most companies trace the origins of a formal planning system to the annual budgeting process where everything is reduced to a financial problem. Procedures develop to forecast revenue, costs, and capital needs and to identify limits for expense budgets on an annual basis. Information systems report on functional performance as compared with budgetary targets.
Companies in Phase I often display powerful business strategies, but they are rarely formalized. Instead, they exist. The only concrete indication that a business strategy exists may be a projected earnings growth rate, occasionally qualified by certain debt/equity targets or other explicit financial objectives.
The quality of Phase I strategy depends largely on the CEO and the top team. Do they really know their company’s products and markets and have a good sense of what major competitors will do next? Based on their knowledge of their own cost structure, can they estimate what the impact of a product or marketing change will be on their plants, their distribution system, or their sales force? If so, and if they do not plan for the business to grow beyond traditional limits, they may not need to set up an expensive planning apparatus.
Phase II: Forecast-Based Planning
The complexities of most large enterprises, however, demand more explicit documentation of the implicitly understood strategies of Phase I. The number of products and markets served, the degree of technological sophistication required, and the complex economic systems involved far exceed the intellectual grasp of any one manager.
The shoe usually pinches first in financial planning. As treasurers struggle to estimate capital needs and trade off alternative financing plans, they and their staffs extrapolate past trends and try to foresee the future impact of political, economic, and social forces. Thus begins a second phase, forecast-based planning. Most long-range or strategic planning today is a Phase II system.
At first, this planning differs from annual budgeting only in the length of its time frame. Very soon, however, the real world frustrates planners by perversely varying from their forecasts.
In response, planners typically reach for more-advanced forecasting tools, including trend analysis and regression models and, eventually, computer simulation models. They achieve some improvement, but not enough. Sooner or later plans based on predictive models fail to signal major environmental shifts that not only appear obvious after the fact but also have a great and usually negative impact on corporate fortunes.
Nevertheless, Phase II improves the effectiveness of strategic decision-making. It forces management to confront the long-term implications of decisions and to give thought to the potential business impact of discernible current trends, well before the effects are visible in current income statements. The issues that forecast-based plans address—e.g., the impact of inflation on future capital needs or the inroads foreign manufacturers may make in domestic markets—often lead to timely business decisions that strengthen the company’s long-term competitive position.
One of the most fruitful by-products of Phase II is effective resource allocation. Under the pressure of long-term resource constraints, planners learn how to set up a circulatory flow of capital and other resources among business units. A principal tool is portfolio analysis, a device for graphically arranging a diversified company’s businesses along two dimensions: competitive strength and market attractiveness.
As practiced by Phase II companies, however, portfolio analysis tends to be static and focused on current capabilities, rather than on the search for options. Moreover, it is deterministic—i.e., the position of a business on the matrix is used to determine the appropriate strategy, according to a generalized formula. And Phase II companies typically regard portfolio positioning as the end product of strategic planning, rather than as a starting point.
Phase II systems also do a good job of analyzing long-term trends and setting objectives (for example, productivity improvement or better capital utilization). But instead of bringing key business issues to the surface, they often bury them under masses of data. Moreover, Phase II systems can motivate managers in the wrong direction; both the incentive compensation program and informal rewards and values are usually focused on short- or medium-term operating performance at the expense of long-term goals. In sum, Phase II planning all too easily becomes a mechanical routine, as managers simply copy last year’s plan, make some performance shortfall adjustments, and extend trend lines another 12 months into the future.”
If you would like to continue reading this article, please visit: www.hbr.org
Research Paper
“Corporate Innovation and Competitive Environment
International Entrepreneurship and Management Journal 1,
September 2005
Abstract
Empirical studies have shown that the characteristics of the competitive environment influence the corporate innovation activities of U.S. firms. This study attempts to internationalize these studies in two ways. First, it examines the environment-corporate innovation relationship in Norwegian manufacturing firms. Second, it examines how the firms’ corporate innovation activities are influenced by their international activities. Results indicate that environment and internationalization are positively related to corporate innovation, but models developed using U.S. firms may not be generalizable to firms from other countries.
Authors have long argued for the importance of understanding entrepreneurship from the perspective of a firm’s behavior (Covin and Slevin, 1991; Guth and Ginsberg, 1990; Slevin and Covin, 1994; Wiklund, 1999; Zahra and Covin, 1995; Zahra, Jennings and Kuratko, 1999). Corporate innovation (CI) is an important dimension when this perspective is used. CI consists of product, process and organizational forms of innovation (Butler, 1988; Knight, 1967; Zahra, 1991) that stem from incubative, acquisitive and imitative sources (Burgelman and Sayles, 1986; Link, 1988; Pisano, 1990). CI is increasingly becoming the key to success in today’s globally competitive markets (Zahra and Garvis, 2000). Emerging global markets and rapid technological development make strong demands on the ability of companies to develop and utilize its resources and capabilities. By being engaged in CI, the company can meet these pressures and compete vigorously, renew its operations, create new revenue streams and improve shareholders’ value.
The relationship between a firm’s external environment and CI has long been a subject of interest in the management literature, and several studies have shown that the characteristics of the external environment influence the type and source of firms’ CI activities (Covin and Slevin, 1989; Guth and Ginsberg, 1990; Lumpkin and Dess, 2001; Tsai and MacMillan, 1991; Zahra, 1991, 1993a, 1996). A general finding in these studies is that conditions in the firms’ competitive environment, such as dynamism, hostility and heterogeneity, are antecedents of CI activities. For example, firms operating in turbulent and fast changing industries are usually characterized by rapid and frequent new product creation and high levels of R&D spending and patenting (Covin and Slevin, 1989; Guth and Ginsberg, 1990; Lumpkin and Dess, 2001). Moreover, in a series of studies Zahra (1991, 1993a, 1996) has showed that firms competing in dynamic and growing environments put a greater emphasis on product and process technology introductions compared to firms competing in stable, non-rivalrous environments. Hence, it appears as if conditions in the firms’ competitive environment play a profound role in influencing CI activities.
However, despite the important contributions of the above mentioned studies, these and other similar studies share two important limitations. First, while some studies have considered the CI activities of non-U.S. firms (e.g., Hisrich, 1988; Manu, 1992) most studies of CI have focused exclusively on U.S. firms (Giamartino and McDougall, 1993). Few, if any, have examined the environment-CI relationship in non-U.S. firms (Zahra et al., 1999). CI and environment-CI relationships, however, can be influenced by cultural factors or differences in the market structures of different countries (Morris, Davis and Allen 1994; Porter, 1990; Shane, 1994). Countries vary along several dimensions which may influence CI, such as political systems, innovation climate and culture (Boyacigiller and Adler, 1991; Hofstede, 1983; Mueller and Thomas, 2000). Despite these differences management education and literature in many countries are based on studies using U.S. samples. Managers operating in other countries need to understand whether findings from U.S. studies are generalizable to other countries and cultures (Zahra et al., 1999). Thus, there is a need to determine if the relationships between the environment and CI identified in previous studies hold in non-U.S. settings. This study attempts to address this shortcoming on past studies by examining the environment-CI relationship using a Norwegian sample.
Second, while some studies have analyzed the relationship between the environment and the firm’s international activities (e.g., Hakansson and Johansson, 2001), few studies have analyzed how a firm’s international activities are associated with firms’ CI activities. This shortcoming is surprising given the evidence that internationalization and innovation are becoming increasingly intertwined (Hakansson and Johansson, 2001) and as innovation has become a major source of international competitive advantage (Hitt, Hoskisson and Ireland, 1994; Zahra and Garvis, 2000). These competitive advantages can include comparative advantages by obtaining access to lower cost production factors in other countries, as well as the firm’s ability to obtain economies of scale in production, marketing or purchasing through high level of export. From a resource-based view, firms engaged in international activities possess a different stock of organizational resources, which may increase their ability to innovate (Kotabe, 1990).
Based on the discussion above, we will argue that there are shortcomings in our knowledge of how characteristics of the external environment influence the CI activities of firms outside U.S., as well as how a firm’s international activities are associated with firms’ CI activities. This study, therefore, addresses the following two questions:
(1) Can previous theory and measures of the environment-CI relationship be generalized to a non-U.S. setting? (2) Are a firm’s international activities related to the firm’s CI? The perspective taken in this study is illustrated in Figure 1.
The remainder of this paper is divided into four sections. First, the study’s theory and hypotheses are introduced. The categories of CI and the environment are presented, followed by a discussion of how the environment and international corporate activities are hypothesized to be associated with CI. Second, an explanation of the study’s methodology is provided. Third, the results are discussed and compared to studies using U.S. samples. Finally, the paper concludes with a discussion of the study’s implications, limitations, and future research questions.”
If you would like to continue reading this paper, please visit: www.link.springer.com
Course Manuals 1-12
Course Manual 1: Competitive Environment Analysis
A competitive analysis is a strategy that includes investigating a brand’s primary competitors to gain knowledge of their sales and marketing plans and product offerings. It aids a business in creating efficient strategies, enhancing the current ones, outperforming rivals, and expanding its market share.
In this course manual, we’ll explain the value of competition analysis and explain how to conduct one.
The importance of competitive analysis
To stand out in the market and surpass rivals, businesses employ a variety of strategies and techniques. However, they frequently overlook a thorough competitive study. It is not sufficient to quickly familiarize yourself with the websites and social media accounts of your main competitors. You risk losing out on important information about the marketing and sales plans of your competitors. This is crucial if you want your firm to succeed.
A thorough research of your competitors is very important for your company. It aids in being familiar with the work of your rivals, their product features, strategy, and business practices. You can find the weaknesses in your competitors’ work and capitalize on them by conducting an analysis. You have a fantastic chance to outperform them and increase your market share at this time. However, you may also use their skills to identify your own deficiencies and make adjustments. Once you have all the necessary information, you may continue to be current and relevant. The market and customers’ high criteria will always be met by your product.
A competitive study also enables you to create your unique value proposition and the elements that make your product stand out in a market that is becoming more and more competitive, in addition to the advantages already discussed. Knowing your competitive edge aids in the planning of your upcoming marketing initiatives and strategies. You’ll also be aware of the strategies that will keep you in front of the competition and remain interesting to customers. You can learn about the shortcomings of competitors’ products via client testimonials obtained through competitive analysis.
We’ll go over the procedures needed to do a competitive analysis now that you are aware of the justifications for doing one.
How is a competitive analysis conducted?
You must follow many requirements in order to conduct a competitive analysis. You should comprehend the analysis well because you must perform it frequently.
1. Determine who your rivals are. You need to identify your genuine competition before you start the process. To do this, you must identify every rival and categorize them into two groups: direct and indirect. The work of direct competitors must be evaluated while conducting a competitive analysis. These businesses are based in the same region as you are and provide a product that can be used in place of yours. However, you must continue to keep in mind your indirect rivals (they provide a different product but it can solve the same problem). Their standing in the market is subject to change at any time.
2. Describe the goods they provide. Every company’s primary competitive advantage is its unique product or service. Examining competitors’ whole product lines and the caliber of their goods is essential for this reason. Pay attention to specifics like price, discounts, special offers, loyalty programs, etc. that could help you better your strategies. Additionally, you should investigate their market share, buyer persona, pricing policies for both online and in-person purchases, competitive advantages, and methods of product distribution.
3. Examine the sales tactics and results of competitors. You may need to invest a lot of time and energy in a sales study, but it will be worthwhile. You’ll gain insightful information on your future plan once you’ve completed it. To do this, you must examine your competitors’ sales procedures, the media they employ to market their goods, the discounts they provide, their yearly revenue, and the total volume of sales they generate. Find out if partner reselling schemes are scaled and implemented by your competitors. Consider the reasons why customers choose not to buy the product.
4. Examine the benefits and prices offered by rivals. You must ascertain the price your rivals charge for comparable products in order to set a pricing that is reasonable for both you and your clients. You can assess whether your product is superior or inferior once you are familiar with the offerings and prices of your competitors. For instance, if you and your rivals both sell the identical products but you are aware that yours has more distinctive qualities than theirs, you can charge more for it. Be prepared to justify why your product is deserving when you do that though. If your product doesn’t have any more beneficial features and its quality isn’t better than that of rivals, you should price less. You can provide first-rate customer service and a seamless user experience if you sell subscription-based services. You should also look into some other advantages that your competitors have over you in the eyes of the public. You can lose customers due to the free trial versions, referral, and loyalty programs offered by competitors.
5. Research how rival companies sell their goods. Visit the websites of your competitors to learn more about their marketing strategies. You can use it to fill in the gaps in your company and get critical answers. From the website, you may find out if they have blogs, podcasts, features articles, webinars, ebooks, case studies, and media kits. In addition, you’ll learn about their press releases, content they produce, online and offline promotions, and FAQ area.
6. Pay attention to the content strategy of competitors. To determine the kind of content that is published and how frequently, you must examine the websites’ content (once a day, week, or month). After that, study their articles to assess their value to readers, relevancy, and quality. Review the graphics, readability, brand tone, language, and accuracy of the text. You’ll be able to clearly see the advantages they provide and the reasons why clients respect them once you’ve examined their content. Make use of this knowledge to your advantage.
7. Identify the level of customer involvement with the content of competitors. Checking client feedback on their postings will help you accomplish this. Check out the number of shares, comments, and likes. Additionally, scan the comments to determine whether they are overwhelmingly good or negative. You should also determine the subjects that appeal to the target audiences the most. Take note of these subjects as you write engaging and educational blog posts. Don’t forget to look at the tags, share buttons, and social media followers on the content of the rivals. Finding out how rivals advertise their material is the next step. Analyze the internal linking and keyword density.
8. Examine the social media strategy and profiles of rival brands. Monitoring social media profiles to understand how your rivals advertise their items is now essential. Learn about the CTAs, social network links, sharing buttons, and other elements that aid in boosting interaction. See the platforms your rivals are using for promotion and identify those you are not. Next, perform an analysis: decide which platforms you don’t use and gauge user involvement. You must look at the fan base size, content engagement, and virality to determine the measure. Consider whether it would be wise to register an account for your brand after you have analyzed them.
9. Carry out a SWOT evaluation. Along with your competition analysis, it will be helpful to conduct a SWOT analysis. You will learn about the advantages, disadvantages, opportunities, and threats faced by your rivals. After that, you may evaluate how they stack up against yours and decide what extra has to be done to dominate your sector.
You can use competition analysis as a useful technique to determine your competitive advantage and assess the sales and marketing strategies of your rivals. Its outcomes will clear a way for your company to operate more successfully and for your strategy to be improved.
Is industry competition focused on product differentiation, price, technology, or a mix of all three?
Product Differentiation: What Is It?
The essential feature or features that set a company’s goods or services apart from those of its rivals are called its products. Product differentiation that works results in brand loyalty and higher revenue.
A product differentiation strategy entails finding and showcasing a product or business’s distinctive attributes as well as the key distinctions between it and its rivals. Creating a compelling value proposition and product differentiation work hand in hand in order to make a product or service appealing to a target market or audience.
If done well, product differentiation can give the seller of the product a competitive edge and ultimately increase brand recognition. The quickest high-speed Internet service or the most fuel-efficient electric car on the market are two examples of distinct products.
The Process of Product Differentiation
The main goal of product differentiation is to persuade customers to pick one brand or product over another in a crowded market of rivals. It identifies the characteristics that distinguish one product from another that are similar and makes use of those distinctions to influence consumer decision.
A specialized market can be the focus of differentiation marketing. For instance, a small business can find it difficult to compete with a much larger rival in the same sector. The smaller business may therefore emphasize great service or a money-back promise.
Promoting Product Differentiation
The packaging, advertising, and frequently even the product’s name all make reference to a product’s distinctive features. The advertisement for Fancy Feast cat food supports the idea that it is a premium cat meal that cats adore. The brand of cat food called FreshPet makes a point of using natural ingredients. Hill’s Science Diet makes it clear that the cat food was created by experts in animal nutrition.
A strategy for differentiating a product can just entail altering the packaging or it might entail incorporating new functional features. Sometimes product changes are not necessary for differentiated marketing; instead, new advertising campaigns or other promotions are used.
Measuring Product Differentiation
As was previously said, there may be physical or quantifiable distinctions between the products, such as the lowest-cost gym in a given area. The distinctions between the goods could, however, be more ethereal. For instance, a car manufacturer might assert that its vehicles are the most opulent on the market.
In order to stress that their apparel is on-trend, retailers and designers frequently invest a sizable amount of money in advertising by placing their products on young, trendy models. Actually, no business can define or assess the level of style that their product gives.
Since the goal of product differentiation is to change how consumers perceive the advantages of one product over another, it is frequently subjective. Although the advertising tagline “Gets out the toughest stains” suggests that one brand of detergent is more successful than others, the real difference between the product and its rivals may be negligible or nonexistent.
Non-functional elements, like the packaging or bottle design, can distinguish two items with similar functional characteristics, like in the case of bottled water.
Product Differentiation Types
A product differentiation approach should ideally show that the product can accomplish all of the goals of the rival options while also offering a unique extra benefit. Here are a few of the most widely used methods for differentiating a good or service.
Price
There are two ways that price can be utilized to distinguish a product. Companies might provide the lowest price relative to rivals to draw in budget-conscious customers; Costco is an example of this. To imply quality and that a product is a luxury or high-end item, such as a Bugatti sports car, businesses can also demand premium pricing.
Efficiency and Dependability
It is possible to distinguish products based on their dependability and durability. For instance, some batteries are thought to last longer than other batteries, and customers will choose them based on this fact.
Location and Service
Local businesses can set themselves apart from their larger, national rivals by highlighting their support for the neighborhood. For instance, a neighborhood restaurant might use local labor and buy its food and ingredients from suppliers and farmers in the area.
Benefits of Product Differentiation
A product that stands out from the competition can boost brand loyalty and even compete at higher price points. Customers will think a product is worth the greater price if they believe it to be superior in some way to its rivals.
When a product, like bottled water, isn’t regarded to be very different from a competitor’s, differentiation marketing might help businesses stand out.
Focusing on a cheaper price point or the fact that it is a locally owned firm could be the strategy. Nonfunctional elements might be highlighted when the functional aspects of the two goods are the same. The tactic might be a visually appealing redesign or styling adjustment.
A effective campaign for product differentiation increases consumer interest and persuades them that they need one product over another.
Examples of Product Differentiation
Companies that launch new products frequently point to their cost advantages. If Company X manufactures a coffee machine that is nearly identical to that of Company Y, Company X might sell a less expensive version of the product. The savings on paper filters are emphasized in the packaging and advertising if it has a reusable filter.
For instance, among the several coffee maker brands available on the market today, product differentiation is clearly visible. Coffee makers made by KitchenAid are heavy and substantial, and they cost more than average. The simplicity of the coffee pods helps Keurig stand out from the competition. As usual, Amazon Basics offers unbeatably low prices.
What is competition-based pricing?
• A pricing method known as “competition-based pricing” alters prices in response to changes in rivals’ prices.
• The product price is only tied to competitor prices and unrelated to the customer’s desire to pay or the worth of the product.
• A strategy centered on competition is primarily concerned with increasing volume and may not always be the most profitable one.
In e-commerce, competitive dynamic pricing is a well-liked tactic where algorithms examine other companies selling comparable goods and then modify product prices in real-time. For instance, a huge online retailer like Amazon will alter the prices of its products several times each day based on those of competitors.
In an internet setting where there is significant price transparency and product comparison, this may make sense. Overshooting on price may result in abandoned shopping carts in an age where consumers can quickly cross-check price tags with a click or swipe. However, a competitive pricing strategy is more likely to contribute to profitability by increasing overall volumes and may also rely on customers adding less similar, higher margin items to their basket rather than being profitable in and of itself.
When is it best to employ pricing depending on competition?
• Low-cost and commoditized products generally use competition-based pricing.
• When the product’s manufacturer or brand is unimportant to consumers, competitive pricing is effective.
• This approach works best with products that are exact replacements.
When is a pricing strategy based on competition inappropriate?
• Can you make your product stand out from the competition? Do you possess greater speed, effectiveness, sustainability, dependability, etc.?
• Can you argue for a higher price by emphasizing the advantages clients gain from purchasing and using your product?
• Would the absence of your specific product or service result in higher expenses for the customer?
• Customers, are you willing to pay for the value you provide?
• Customers’shopping around’ and comparing pricing for your goods, but are they really doing so? Or are there only a few of them here? The handful who do speak to sales teams frequently, while those who don’t are never heard from.
These are only a few of the inquiries you might make to decide if a competition-based strategy is the best course of action. You would probably do far better to investigate a value-based strategy if the answer to one or more of these questions is “yes.”
Information Technology Modifies Your Competitive Strategy
Computer-based technology offers new competitive potential as it transitions from a purely supporting position in the back office. A business can utilize this technology, for instance, to create an entry barrier, add switching costs, or perhaps even fundamentally alter the basis of competition.
When determining how IS fits into their organizations, executives must conduct a competitive analysis because, while in some circumstances it is appropriate for IS to play a supporting role and add only modestly to the value of a company’s products, in other circumstances it is essential to a company’s ability to remain competitive.
The CEO can decide on both the appropriate level of spending and the appropriate management structure for IS with the aid of an understanding of where a company stands on this spectrum.
Examples:
• A large distributor installs an online network for its important clients so they may immediately submit orders into its computer in order to handle customer care issues. The major goals of the computer are to lower the cost of order entry and provide consumers more control over the timing and method of order submission. The solution results in a greater comparative advantage, enhancing customer value and significantly increasing customer sales. A key competitor is forced to undergo a corporate reorganization and a significant systems development effort to minimize the damage as a result of the fast increase in the company’s market share. However, these corrective steps have only partially succeeded.
• A regional airline testifies before the US Congress that a national carrier’s reservation system has caused it significant harm. It asserts that the larger airline can identify all mutually competitive routes on which the regional is performing well and take competitive pricing and service action by having access to the reservation levels on every aircraft operated by the smaller airline. The regional airline claims to be at a significant competitive disadvantage because it lacks access to the data of the larger carrier.
• Major suppliers have been asked by a significant aerospace company to purchase CAD (computer-aided design) equipment in order to connect directly to its CAD installation. It asserts that doing this has significantly decreased the overall cost and duration of design revisions, part acquisition, and inventory, increasing its competitiveness.
These are common examples. Computer systems have been able to quickly transition from applications for back-office support to those delivering considerable competitive advantage thanks to the sharp decline in the cost of information systems (IS) technology (i.e., computers, remote devices, and telecommunications1). Systems that connect the client and the provider stand out in particular. Although these connections present a chance for a competitive advantage, they also pose a threat of strategic weakness. Operating processes have significantly improved in the case of the aerospace industry, but at the expense of much greater dependence because it is now much more difficult for the manufacturer to switch suppliers.
In many instances, new technology has provided a corporation with a unique, one-time opportunity to reallocate its resources and reconsider its strategy. The company now has the chance to create cutting-edge new tools that could result in long-term increases in market share thanks to technology.
Of course, these prospects differ greatly from one company to another, just as the level and the laws of competition differ greatly between industries. Similar to this, a company’s location, size, and core product technology also influence prospective applications of IS technology. Even the smallest businesses have been impacted by computer advancements. (Recently, for instance, a $6 million electrical component firm profitably purchased CAD technology.) Additionally, a business may legitimately try to be either a leader or an attentive follower under various circumstances. But because the stakes can be so high, this must be a deliberate choice.
Companies That Destroyed Their Largest Competitors: Google Vs Yahoo!
It is difficult to imagine a time when Google wasn’t the clear leader in the search industry, let alone when it held a very modest portion of the market. Search engines like Lycos, Excite, AskJeeves, and others fought for market share in the early days of the Internet. But by the turn of the century, Yahoo! had taken the lead after surviving the dot-com bubble that had destroyed the smaller businesses. After then, Yahoo! bought the majority of these for little to nothing. Six times more than its nearest competitor, the website received 56% of its traffic from search engines in 2000.
In June of that year, Google had around 1% of the market. Yahoo! started utilizing Google’s search algorithm in 2001. And as Google started vying for market share, Yahoo! quickly lost momentum. By 2002, Google’s effective search engine had become incredibly popular. Compared to Yahoo36.3% !’s of searches, it referred 31.8% of all searches. In the following eight years, Google rose quickly to the top and essentially took over the market. Google reportedly held more than 65% of the market in July of this year, while Yahoo!, its closest rival, had just 16.1%, according to Comscore.
The well-known and well-established brand objective of Google is to organize the world’s information and make it universally usable. The mission was developed by the company’s co-founders, Larry Page and Sergey Brin, early on, and the organization has remained dedicated to it ever since. The claim is prominently featured on Google’s “About” page and frequently used in internal communications. Many people have used it as a strong descriptor for the business, and staff have referred to it as the inspiration behind almost everything they do.
Exercise 3.1: Paper Plane
Course Manual 2: Identify Potential Competitive Offerings
How to analyze your Niche Market?
You need to be able to connect with your consumers and explain how you can help them if you want to grow your business and transform both your life and the lives of others through the goods or services you offer.
Being an entrepreneur makes it very impossible to connect with people and meet their needs if you are unable to interact with them. Let’s imagine that you are attempting to communicate with a person who does not speak your language. If you begin marketing your goods and services to the incorrect customer or market, the same scenario can play out. As a result, understanding about growth is everything.
A niche market refers to the industry in which your product or service fits best, as well as the demographics of your target market. But more than that, by identifying your niche market, you will also be able to determine the product attributes intended to meet certain market demands, as well as the price range and level of manufacturing. You will be informed of the precise market area you can control.
The market niche for each product can be used to define it. The highly specialized niche market competes against multiple super firms and strives to survive. Even the well-established ones produce goods for many markets. For instance, a software company might have accounting or tax products geared for the individual taxpayer or family market while also having distinct products with one of these tasks for small or large businesses.
Define the final product quality (low or high) based on the specific needs that the product is intended to serve and, in some circumstances, factors of brand awareness in order to expand markets even before you launch (e.g. prestige, practicability, money saving, expensiveness, environmental conscience, or social status).
With that said, you will realize that your competition has already been working with your niche market and that they are a good source of information and statistics. Additionally, social media channels today have a ton of tools that provide business account holders with the best way to analyze their “buyer persona” and provide a fully detailed demographic picture of them.
Top Hacks to identify your Niche Market
Make a list of your top ten rivals and make sure you have access to all of their social media accounts. Use Google, Facebook groups, forums, Quora, blogs, or even marketing firms or research and business intelligence software for more in-depth searches.
Use a tool to see their metrics and obtain more data about their sites. Using the websites of your competitors, you may learn more about them, including their worldwide rank, classification by internet category, monthly visitors, traffic sources, top organic keywords, top sponsored keywords, social media sources, audience interests, comparable websites, and related mobile apps.
Audit them. Audits in general, content, social media, and email marketing. Take your time and dissect each of these formats to understand their strategies and the ways that they engage and foster relationships with their audience. This can be done with your rival in general or just with the specific product that interests you. You’ll have more clarity and insight when you’re more concentrated.
Problem Solved: Keep in mind that a business is ultimately a solution to a problem that someone is experiencing. Whether you are providing a service or a product, someone is in need of it. Determine the issue you are resolving for each rival as well as for yourself, and describe how you will present the solution to the person who needs it.
Social Media conversation: After starting to pay attention to the conversations on social media about your sector and your product, you will be able to identify:
Demographics: Search for people based on characteristics like age, gender, marital status, level of education, place of employment, and more.
Location: reach out to people in the locations where you wish to conduct business. Even a radius can be built around a store to encourage more walk-ins.
Interests: Find people based on their interests, such as hobbies, preferred forms of entertainment, and more.
Behaviors: Reach people based on their purchase behaviors, device usage and other activities.
Example of a niche market: Georgetown Cupcake – A bakery that only bakes cupcakes
After leaving their corporate jobs, sisters Katherine Kallinis Berman and Sophie Kallinis LaMontagne decided to pursue their passion for baking and opened up Georgetown Cupcake. Unlike other bakeries that create cakes and other sweets, their sole product is cupcakes and they were able to perfect their recipes by focusing on one product type.
Trending Niche Products that are hacking the world
Trends, trends and more trends.
Finally, now that you are aware of it, you will want to keep an eye out for the products that are most popular in your niche market and business. And once more, for that, just a little study will provide you with a solid and trustworthy basis to help your organization grow and advance.
The creation of a community around a common interest in an unusual product is one of the largest hacks. It’s best if you, as the seller, are enthusiastic about the particular product or are an authority on it. It would be simpler for you to gain a following if you did this.
Consumer preferences and behaviors frequently have a significant impact on market developments. You can identify the actions that could have a direct impact on your company’s performance by performing the following forms of industry trend analysis:
• Keep track of industry influencers and publications
• Know the up-to-date industry research and trends reports.
• Make the most of digital tools and analytics about your market behavior.
• Monitoring the prices and tariffs.
• Listen to your customers.
Don’t forget that even if you do this starting your business, as the demand of products are changing daily and monthly depending on your target market, you will keep going back to this process from time to time.
Identify Your Product Offering
The purpose of information products is frequently to increase sales. The goal of others is to draw potential consumers into your sales funnel. They want to support the expansion and success of your internet business. The format and shape of your product offering will be influenced by where you place your product on the value chain.
It’s crucial to produce a product to use as an alluring free opt-in, sometimes referred to as a lead magnet, incentive, or freebie. They aid in building a rapport with and the trust of your clients. Building an internet information business requires using free opt-in incentives and freebies. You have the chance to demonstrate your expertise through them. additionally create successful, long-lasting client relationships.
Define Your Goal for Your Product Offering
The objective for your product offering must be decided upon before you begin your study and analysis. Are you creating a free product to promote one that already exists? Are you creating the product as a thing to be bought? Both will need investigation, although the amount of research needed will vary.
A paid information product has a different objective than an opt-in incentive or freebie. By luring new clients, the opt-in incentive aids in the expansion of your company. A “taster” of your paid items is what the opt-in is meant to be. They are typically smaller than your whole product when compared in size.
You are still producing a high-quality product whether you are making an information product to sell or give away as a free opt-in incentive. It is “customer-centric,” thoroughly researched, and promotes your online company. The chance to increase authority and confidence in the eyes of your clients is available with both paid and free items.
Types of marketing offerings
Your company may advertise several kinds of marketing products, such as:
Convenience offerings: Offerings for convenience are inexpensive goods that consumers routinely buy, like standard groceries and toiletries. Customers typically don’t take their time to compare prices or quality.
Shopping offerings: Shopping offerings are more expensive goods that buyers compare before making a decision, like a car or a large piece of furniture. Customers may spend days or even weeks looking for the finest product to suit their needs and preferences.
Specialty offerings: Specialty products are less widespread, more expensive items that consumers may identify by brand, like designer apparel or accessories. By buying the same kind of products from their chosen brand, customers demonstrate their brand loyalty.
Unsought offerings: Unsought offers are goods or services that customers infrequently acquire, such as roofing work or a new HVAC system. Customers typically lack product knowledge and are forced to compare options.
How to design a powerful marketing offer
The actions you can take to create marketing offerings are as follows:
1. Get to know your customers.
Determine which features and goods are most crucial to your target market. For instance, your clients may feel that having easy ways to shop is more important than having the best deals. You may create pertinent items and services by learning what your clients value and need. Think of incorporating the next research categories:
• Customer surveys
• Comment cards
• Focus groups
• Demographic data
• Market trends
2. Align your offerings with consumer needs
Knowing your target market can help you make decisions about how to design your product, including what features and support to provide. You can promote your products in a way that appeals to your target market by using market data. For instance, you might conduct an advertisement campaign promoting getting enough sleep if your market research showed that your target audience is made up of parents of infants.
It’s crucial to distinguish between the characteristics and benefits of your items when marketing them to customers. Features are fundamental components of a product’s function or design. Benefits are the ways in which a feature might enhance the experiences of your customers or solve an issue. For instance, a mobile app might have a function that links your phone to your television so you can use it as a remote control. Customers gain by having more convenience when watching television, and the app can address the issue of misplaced remotes.
3. Set your product’s price
Based on your market analysis, set your product’s price. You might think about the income and spending patterns of your customers. In order to maintain competition, you should also take into account the pricing of comparable goods and services offered by other businesses. While some companies strive to draw clients with low costs, others concentrate on the features and benefits of their products. Your approach could change based on your target market and business objectives.
Several pricing tactics are as follows:
• Cost-plus pricing: Cost-plus pricing entails calculating the overall cost to your business to produce the good and then adding a portion to that sum.
• Competition-oriented pricing: In this pricing approach, you base your rates on the pricing of your rivals.
• Dynamic pricing: This is a flexible pricing approach that alters in response to client demand and market trends.
• High-low pricing: High-low pricing refers to the practice of charging higher prices while launching new products and dropping them as demand or seasonality fades.
4. Add value
By providing value, you can raise interest in your offerings by:
• Convenience: Implement usability testing and design, delivery services, or curbside collection to make your goods or services simpler to reach.
• Customer service: Focus on providing customers with positive experiences through strong customer service skills.
• Quality: Boost product quality to surpass consumers’ expectations and win their steadfast support.
• Support: Provide free installation, recurring maintenance, or free repair estimates for the duration of the product’s life as examples of support services for your products.
• Adding value to your offerings may change your pricing strategy. If customers feel they are getting greater value for their money, they could be willing to spend more for your goods or services.
Tips for marketing offerings
Here are some ideas you can use to enhance the services you provide to clients or customers:
• Provide product or service bundling. Think about letting buyers choose from a range of your goods and services to put together a product package. As a result, they can tailor their buy to better suit their needs.
• Adjust your offerings as needed. Keep track of how customers are responding to your offerings. You could need to modify your product offers by getting rid of some products, enhancing current products, or developing new ones.
• Use offerings to gain more customers. You can utilize marketing offers as a perk for customers who carry out a specific action, such subscribing to your newsletter, stopping by your physical location, going to your website, or recommending your company to others.
Famous Brand Rivalries: Lamborghini and Ferrari
In the mid-1900s, Ferruccio Lamborghini produced just tractors. But after brutally dismissing his criticism of the flaws in Ferrari cars and disparaging him as a “truck mechanic,” Enzo Ferrari started building high-end automobiles.
A Ferrari or a Lamborghini is likely to draw notice when it is driving down the road. The competition between the brands is just as well-known as the cars themselves. In the 1960s, a unique conflict between two Italians got under way.
Ferruccio Lamborghini was born into a family of grape farmers, but because he did not share their enthusiasm, he decided to start his own firm, Lamborghini Trattori, making tractors. He became rich and prosperous as a result. At the time, Lamborghini purchased a Ferrari, which was regarded as the pinnacle of luxury vehicles.
According to Lamborghini, the Ferrari was too difficult to drive and required too many clutch repairs. Enzo Ferrari was approached with the complaint, but Ferrari was unappreciative. Ferrari thought that a tractor producer wouldn’t have any knowledge of automobiles. This was seen as an insult by Lamborghini, who used it as motivation to launch a strategy to start producing high-end vehicles.
After working incredibly hard for four months, Lamborghini unveiled his debut automobile at a motor exhibition in October 1963. The man’s automobile soon gave Ferrari’s a tough fight, and it still does today.
Exercise 3.2: The Agency
Course Manual 3: Intellectual Property Reviews
Intellectual Property Types
Some of the most prevalent intangibles that make up intellectual property are listed below.
Patents
A government organization, such as the U.S. Patent and Trademark Office, will frequently give an investor a patent, which is a type of property right. The invention, which could be a design, a method, an advancement, or anything tangible like a machine, is given to the inventor exclusive rights through the patent. Many software and technology companies have patents on their innovations. For instance, Steve Jobs and three other Apple Inc. employees filed the patent for the personal computer in 1980.
Copyrights
Copyrights give authors and other original content creators the sole authority to use, copy, or replicate their works. Both musicians and book authors have copyright protection for their creations. A copyright also stipulates that the original authors may provide permission to use the work to anybody through a licensing agreement.
Trademarks
A trademark is a recognisable word, phrase, or design that designates a product and legally distinguishes it from competing goods. When a corporation is granted exclusive use of a trademark, no other party may use or copy the trademark. A trademark and a company’s brand are frequently linked. The Coca-Cola Company, for instance, owns the “Coca-Cola” brand name and logo (KO).
Franchises
A franchise is a license that a business, person, or entity—referred to as the franchisee—purchases to utilize the franchisor’s name, trademark, intellectual knowledge, and business practices.
The franchisee, who runs the shop or franchise, is often a small company owner or entrepreneur. The franchisee has the right to use the company’s name to sell goods or offer services thanks to the license. In exchange, the franchisee pays the franchisor a start-up fee and annual license fees. Several businesses, such as United Parcel Service (UPS) and McDonald’s Corporation, operate under the franchise system (MCD).
Trade Secrets
A corporation’s procedure or practice that benefits the company or the person holding the trade secret financially is referred to as a trade secret because it is not generally known. Trade secrets are often the outcome of a company’s research and development and must be carefully protected by the business (which is why some employers require the signing of non-disclosure agreements, or NDAs).
Designs, patterns, recipes, formulas, and proprietary procedures are a few examples of trade secrets. Trade secrets are used to develop a business strategy that gives the organization an edge over competitors and differentiates its customer offers.
Digital Assets
Additionally becoming recognized as IP are digital assets. These would include online digital content and proprietary software code or algorithms.
Intellectual Property Infringement
Intellectual property rights (IPRs), which are attached to intellectual property, are specific rights that cannot be violated by people who do not have permission to use them. Owners have the power to prevent others from copying, exploiting, and reproducing their work thanks to IPRs.
A legally protected patent is violated when it is used without authorization by another person or business. Patents submitted before June 8, 1995 have a 17-year lifespan, while those submitted after this date have a 20-year lifespan. The specifics of the patent are released to the public after its expiration date.
When an unauthorized person duplicates an original work, such as a piece of music, a novel, or a work of art, they are infringing on the author’s copyright. For the conduct to be considered an infringement, the copied material need not be an exact duplicate of the original.
Similarly, trademark infringement happens when an unlicensed party makes use of a mark that is similar to or identical to a licensed trademark. For instance, a competition might employ a mark that is similar to that of its rival to disrupt operations and draw in their clientele. Additionally, corporations in adjacent industries may employ the same or similar marks in an effort to profit from other businesses’ strong brand reputations.
Non-disclosure agreements are frequently used to protect trade secrets (NDA). A party to an agreement has violated it and infringed on a trade secret if they reveal all or part of a trade secret to uninterested parties. When an NDA is absent, trade secret infringement may still be present.
Guidelines to Prevent IP Infringement
Infringement frequently occurs unintentionally. Make sure your company isn’t using any content that is protected by a copyright or trademark, and make sure your brand or logo isn’t too similar to another company’s that it may reasonably lead someone to believe it is the other brand. Do a patent search as well to make sure that any ideas you have are original to you and, if not, that you can legally license them. To ensure that you are not using someone else’s protected intellectual property, there are IP lawyers who specialize in this procedure.
Make sure the contract specifically indicates that any creative works produced would become the company’s property and not the person you hired if you engage someone to undertake creative work for you or your business.
Special Considerations
Since there aren’t any established accounting procedures for valuing each asset, many types of intellectual property cannot be represented as assets on the balance sheet. However, because stock market participants are aware of the existence of the intellectual property, the value of the property typically reflects itself in the price of the stock.
Due to their expiration date, some intangible assets, such as patents, are listed as real estate. Through the process of amortization, a numerical value for these assets is recognized. An accounting technique called amortization reduces the value of an intangible asset over a certain period of time. By deducting a specific amount annually for tax purposes as the useful life of the intangible asset shortens, this approach aids the corporation in lowering its income.
A patent, for instance, might only have 20 years before it becomes part of the public domain. A business would estimate the patent’s total worth. By dividing the entire value by 20, the patent would be expensed or amortized by the same amount each year for 20 years. The amount of an amortized asset would lower the company’s net income or profit each year for taxation reasons. However, as it never expires, intellectual property that is thought to have a perpetual life, such as a trademark, is not amortized.
Real-World Example
A company called Waymo sued Uber in 2017 in a widely reported intellectual property action over the alleged theft and use of technology related to Waymo’s self-driving car program. Even though the technology was not yet fully developed, the plans were important intellectual property for Waymo. In an effort to prevent Uber from using the information to improve their own self-driving car development, they were able to take legal action after alleging that Uber had gotten their intellectual property.
The Four Major Categories of Intellectual Property
Trade secrets, copyrights, trademarks, and patents are the four primary categories of intellectual property.
Intellectual Property: Who Owns It?
A work’s creator is typically considered to be its owner. However, the ownership of intellectual property can be established in various ways for various types of property and in various situations. For instance, the proprietor of any intellectual property developed for a client is the client. Additionally, ownership rights might be given to other people.
What Purposes Does Intellectual Property Serve?
In addition to being utilized for branding and marketing, intellectual property can also be used to safeguard assets that give a competitive edge.
Four suggestions to safeguard intellectual property
By safeguarding your intellectual property, you may provide your company a competitive edge and ensure that you can defend the originality of your concepts, goods, and services. Registering intellectual property with the government and enforcing ownership rights are the greatest ways to protect it.
You can defend particular kinds of intellectual property by doing things like:
• Documenting your discoveries
• Using digital rights management
• Opting for strong nondisclosure agreements
• Creating strong access credentials
Continue reading for more information on how to prevent intellectual property from being stolen or used for unauthorized purposes.
1. Keep Track of Your Discoveries
Leaks are a common occurrence in the information age. Even though you can’t always avoid them, you can always keep a record of your discoveries and breakthroughs as they happen.
Your records can date your operations and demonstrate your validity (and ownership rights over your intellectual property) in the event that another business attempts to repurpose or reproduce your ideas as a result of obtaining illegal information through a leak.
2. Make use of DRM (Digital Rights Management) systems
If your work is available to people and published online, some of those individuals might try to copy it. Coding that does any, all, or a combination of the above acts as digital rights management (DRM) to safeguard your online assets:
• limits the frequency or window of time a user is able to access your work
• limits the number of devices that can access your work
• restricts people’ ability to modify, save, or copy your work
• restricts the sharing, printing, and screenshotting of your work
• Put a watermark on your work to prove ownership.
A form of encryption known as DRM places restrictions on what a user can do with your protected work. For content that is restricted to certain internet platforms, such as:
• Data studies and surveys
• Market reports
• E-books
• Software
DRM makes it far more difficult, if not impossible, for someone to use or reproduce your internet IP without authorization.
3. Decide on robust nondisclosure agreements.
Any interested person is forbidden from disclosing information that is covered by the provisions of the NDA.
Create an NDA to bolster your protections against IPR violations such trade secret theft, when an employee might divulge private IP information to other parties.
4. Make reliable access credentials
Protecting a secret demands being proactive, unless you are the only person who is aware of it. Courts won’t be persuaded that a trade secret was essential enough to guard if it isn’t protected with sufficient security. Limit access to any valuable information by using strong credentials, especially when it comes to intellectual property.
This could imply:
• Separating teams so access to files isn’t shared
• Training employees on your company’s security best practices
• Frequently updating passwords
Leaks are still possible with any security measures. It may be time to see an intellectual property specialist to understand your alternatives for IPR enforcement if your intellectual property has been compromised.
Famous Intellectual Property Disputes: Isaac Newton v. Gottfried Wilhelm Leibniz
Many believed that the study of calculus was created by the German mathematician and philosopher Gottfried Wilhelm Leibniz by the early 18th century. After all, it was Leibniz who initially published papers on the subject in 1684 and 1686. However, a controversy started when Englishman Isaac Newton wrote a book titled Opticks in 1704 in which he claimed to be the inventor of calculus. It was one of the greatest mathematical breakthroughs, and each of the thinkers’ home nations wanted a piece of the action.
According to Newton, the “science of fluxions” was an original idea. In 1665 and 1666, he reportedly wrote on this area of mathematics, although only a select handful of his peers were aware of his work. As the intellectual conflict between the two men intensified, Newton charged Leibniz with copying one of the early manuscripts that were circulated. But before anything could be decided, Leibniz passed away in 1716. In contrast, historians now agree that Newton and Leibniz separately developed the concept and were co-inventors.
How to Use Intellectual Property to Launch Your Product in a New Market
Multinational corporations (MNCs) have concentrated on extending their presence in new markets around the world as a result of the rapid globalization. Due to the distinctive sociocultural subtleties present in each of these countries, MNCs frequently attempt to alter their product offers in response to customer demand.
However, expanding a consumer product into a new market entails some risks in terms of intellectual property (IP). Here are some actions to take for businesses planning to introduce their consumer products in new areas in order to avoid any hiccups or major complications:
1. Recognize consumer interest
Understanding the demand for your consumer goods on the market is essential before entering a new market. It can be helpful to assess your competitors’ level of interest in the same area by learning about their IP filings in your target market.
For instance, to determine the level of interest in a specific subject, you can research the patent, design, and trademark trends in your target market over the past ten years.
2. List the current IPs
You can locate the many active patents that are present in your target market by conducting a Freedom to Operate (FTO) search. After that, you can assess whether you’re violating any of the listed patents by comparing them to your items.
3. Check the severity of the violation
The needed due diligence also includes knowing the extent to which your consumer goods may infringe upon the active patents in the new market. An FTO search, often referred to as an infringement study and a clearance search, is useful for determining whether a specific product violates any currently active patents. You might ask outside IP service providers with appropriate experience in your new target market for assistance in conducting such an analysis.
4 if required, get licenses
You can determine whether you require a patent license by conducting a thorough infringement study. It is advised to obtain a license if you find that your product might violate someone else’s patent(s) in order to avoid becoming involved in IP litigation.
A merger and acquisition (M&A) agreement can also be negotiated with a smaller company if the results of your infringement investigation reveal that it already holds a patent that your consumer product may infringe upon. A similar agreement will give your business a competitive edge when it comes to comprehending local patterns in consumer behavior in the new market.
5. Think about changing your product(s)
Consumer requirements and expectations, which are primarily influenced by regional cultural differences and customs, are taken into account when securing patents. As a result, you can add new features to your consumer goods to meet the demands of the new target market while securing IP licenses.
Additionally, it’s common for new market entrants to discover the value of safeguarding their IP only after their product has been copied or when they are accused of violating the rights of others. Additionally, a lot of people who immediately understand the importance make a mistake and find themselves in trouble.
The following are some of the most frequent errors businesses make while expanding their brand into new markets:
1. Believing that IP protection is universal: Many companies think that their trademarks and patents that are registered in one nation are safeguarded internationally. The nature of IP protection is territorial, thus you must register your rights across all markets. To protect their invention across numerous nations, inventors can also choose to file an international patent application.
2. believing that IP laws and practices are uniformly applied worldwide: Each nation has its own set of laws for the protection of intellectual property. So businesses are recommended to research the legal framework of their intended market.
3. Ignoring crucial deadlines: Inventors must submit patent applications in other nations within a year of the date of their initial application. The priority period is when this happens. Failure to meet these dates could prevent you from obtaining patent rights.
4. Sharing information without confidentiality or non-disclosure agreements in place: Inventors risk losing their IP rights if they share information about their ground-breaking product or technology with prospective business partners, export agents, or distributors without first filing a patent application or having appropriate confidentiality agreements in place.
5. Using unsuitable trademarks: Businesses must determine whether their current brand carries undesirable or unfavorable implications in the local language or culture. Before releasing their product, they must confirm with the nation’s trademark authority whether their mark is unlikely to be registered.
Your consumer product can enter a new market risk-free from an IP standpoint. However, since carrying out these tasks independently can be a little challenging, it’s crucial to seek assistance from outside IP experts. These professionals have vast experience that can help you avoid the mistakes that businesses frequently make and make sure you successfully launch your consumer goods in a new market.
Famous Intellectual Property Disputes: S. Victor Whitmill v. Warner Bros. Entertainment Inc.
In the film The Hangover Part II, Ed Helms’ character, Stu Price, a strict dentist, wakes up in Bangkok after a night of intoxication to discover a tribal tattoo wrapped around his left eye, his skin still uncomfortably pink. Price has a tattoo that is an exact replica of Mike Tyson’s and relates to the boxer’s appearance in the original 2009 version of The Hangover.
Just weeks before the film’s May 26 release, Tyson’s tattoo artist S. Victor Whitmill sued Warner Bros. Entertainment on April 28. He asserted that the use of his design without his permission in the film and in commercials constituted copyright infringement because he had acquired a copyright for the eight-year-old “artwork on 3-D” on April 19. Naturally, Warner Bros. considered it to be a satire that qualified as “fair use.”
A movie release injunction was refused by Chief Judge Catherine D. Perry of the United States District Court for the Eastern District of Missouri on May 24, 2011, but she stated that Whitmill still had a case. Warner Bros. stated in early June that it would be willing to “digitally change the film to substitute a different tattoo on Ed Helms’s face” when the movie is released on home video in order to avoid a protracted legal battle. But on June 17, Warner Bros. and Whitmill came to a secret deal, preventing that outcome.
Exercise 3.3: Get them to Draw it
Course Manual 4: Technology Stack Assessment
Your tech stack will evolve as your business adapts and expands because you want to increase productivity and cut costs.
A mistake that could ultimately cost you millions of dollars is choosing the incorrect tools or continuing to utilize ineffective ones. When you don’t have any kind of tech stack, you lose much more. For instance, if your sales staff lacks the necessary resources, your reps won’t be able to close as many transactions.
It is impossible to undervalue how technology stacks affect business. But how can you choose which applications are most essential to the expansion of your business when there are so many options? We’ll go over how to audit your tech stack and how to design a solid one in this course manual, along with examples.
Five Steps to Assessing Your Marketing Technology Stack
Marketers frequently use the words “overwhelmed,” “anxious,” and “paralyzed” to convey how they feel about marketing technology and its explosive expansion over the previous five years. At the same time, they express their enthusiasm for the prospects these technologies present for integration, cross-channel marketing, demand generation, and revenue marketing across their marketing ecosystem by using adjectives like excited, empowered, and passionate.
Scott Brinker’s 2018 Marketing Technology Landscape Supergraphic estimates that there are close to 7,000 marketing technology solutions, an increase of almost 40% from just the previous year. In 2014, there were little over 1,000 technologies, for contrast. Even the best marketing technologists find it challenging to stay informed and knowledgeable about the most recent solutions due to this kind of rapid growth.
Finding the best technologies for our company, managing our collective technological stack, and making the most of these platforms are just a few of the numerous problems we face as modern marketers. To make sure we’re maximizing utilization and filling capability gaps, our marketing technology stack needs to be reviewed on a regular basis.
Every marketing team has a marketing technology stack, whether it has a few solutions or hundreds, even though we may not refer to it as such. As we develop in our marketing maturity, there are dozens of other technologies that we need to monitor and evaluate. The basic platforms often include marketing automation, CRM, and website solutions.
Maybe you’re just starting out and are looking to create your first marketing technology stack. In contrast, you might need to consolidate and maximize capabilities if you have dozens or even hundreds of technologies spread across numerous business units and/or geographies. Regardless of where you are in your journey, using this fundamental method as a starting point and evaluation of your marketing technology stack may be helpful.
Step 1: Plan
You specify and record your overall marketing strategy and objectives throughout the planning phase. Your company’s corporate objectives should be in line with your marketing technologies. Setting your requirements in terms of skills and marketing objectives is crucial before you can appraise the technology you need. It’s a great place to start if you already have a marketing strategy in place. If not, creating goals and strategies could call for further work, such as collaborating with your different marketing stakeholders. In any scenario, you must conclude with a precise outline of your marketing objectives, tactics, and plans.
You’ll also need to specify the skills of your staff, just as you would when establishing your marketing environment and infrastructure. What are the key skills needed to accomplish the goals and objectives you have set? On your list of necessary skills, you may include, for instance, marketing strategy, lead management, lead scoring, content management, nurturing, and data analysis. Depending on the size of your business and the duties assigned to your marketing and sales staff, your list may be short or long.
By the end of this phase, you ought to have a thorough list of skills, or, if you’re feeling particularly creative, a visual map, outlining your business and marketing objectives as well as the procedures and skills needed to achieve them.
Step 2: Audit
It’s time to evaluate your marketing technologies now that you have a structured perspective of your objectives and capabilities. Make a list of all the technology that your marketing teams, and possibly sales teams, typically use. Solutions for CRM, marketing automation, conversion, web analytics, sales enablement, paid media, social media, etc. may fall under this category. You haven’t yet considered the advantages of any particular platform, and you shouldn’t worry about issues like duplication, underutilization, or anything else. Simply compile a list of every technology so you may evaluate it later.
Reach out to important stakeholders from different departments, business units, regions, etc. to perform a full audit. A quick survey or worksheet will usually reveal all of the technologies in use, though you might wish to schedule brief interviews with people to examine their technology. To aid people in remembering the numerous technologies they utilize to complete their activities, you can consider providing examples, capability categories, or other technology descriptors.
You have to have a good inventory of all the technologies used by various departments in your firm at the conclusion of your audit.
Step 3: Discover
Knowing every technology your teams utilize is a wonderful place to start, but in order to complete your assessment, you must have a complete awareness of the context. Interview your key stakeholders and the users of the technologies to learn this degree of information. Include your discovery questions during any interviews you want to conduct as part of the audit phase.As part of your interviews, ask questions that will help you understand the need and scope of the technologies. These are a few questions you can seek to answer:
• Who is using the technology?
• How are they using it?
• What are some of the challenges they encounter with the technology?
• Are there areas of improvement they see?
• What value is the technology bringing to them and the team?
• How does the technology interact with other technologies, if it does?
• How is the technology configured?
At the end of the Discover phase, you will have a thorough analysis of the marketing technologies in use along with their context — usage, configuration, integration, data, value, users, etc.
Step 4: Assess
Once you’ve reached this stage of the process, you will have identified (and perhaps created a technology and/or capabilities map of) your goals against capabilities and supporting technologies. You will also have supporting documentation to describe the details of each solution, including how it is used and who is using it. Armed with this information, you can begin your assessment and in-depth review of your overall marketing technology stack.
This is when you’ll begin to make cross-platform connections, dive deeper into what these technologies can do for your business, and detail how each solution can integrate with others. You’ll see patterns and areas for improvement in multiple areas. To start, keep your eye out for the following:
• Gaps – Where in your map are there gaps in technologies? In other words, where have you listed goals and capabilities, but do not have technologies that can support these needs?
• Redundancy – Where do you have capability overlap? Are there multiple technologies performing the same function and outcome? Are there certain business units or regions using different technologies that do the same thing (i.e., event management, lead scoring, etc.)?
• Inconsistency – Are there varying ways that users are utilizing your technologies? Is a governance system required or something to be considered? Are some teams utilizing more of a specific technology solution than others?
• Underutilization – Do you have robust technologies in your stack, but users are only utilizing a small fraction of what they can actually do? Are there capabilities within certain technologies that can increase productivity, quicken lead to revenue, and/or eliminate the need for additional technologies or processes requiring resources and money.
Do not speed through the assessment process. Allow yourself time to go over your notes, carry on your talks with users, and allow your thoughts to consider areas that could use improvement. Continue to include key stakeholders in your analysis and take into account their views. This will not only assist you in creating a complete assessment, but it will also boost support for your proposed course of action.
Step 5: Action
It’s time to construct a visual representation of your marketing technology stack, including a rollup to goals and capabilities, once you’ve reached the action stage. Draw attention to any sections in your diagram that require work, such as those mentioned in your evaluation. A clear visual will go a long way in helping you explain your results and win buy-in and permission for change. Additional paperwork outlining your advice is also necessary.
Although they are outside the purview of this essay, change management, organizational preparation, and internal onboarding are all crucial to implementing your ideas.
Why It is Important to Keep up with Changing Technology Trends
Change is inevitable and on the horizon. The eminent Charles Darwin held the view that only those who are most adaptable to change may endure through changing circumstances. Constantly growing and easily getting better, technology and communication. As a result, organizations with the highest risk of going out of business are those who fail to adapt to modern business practices and technological advancements. Learn some of the most advantageous justifications for maintaining technological developments in order to succeed in business.
1. Remain Relevant
First, to remain current, always keep up with technological advancements. The best and newest technology seems to be developed quickly these days. Keep up with your customers as a result. Customers, both existing and potential, view your company as an authority in the field in which they are interested. You will lose connection with your audience if you don’t use the newest technologies and don’t comprehend trends. Even small businesses can succeed by utilizing current social media platforms, responding to customer evaluations, and learning about emerging digital avenues for customer engagement. In order to keep your company from losing relevance with clients, put your attention on understanding current technology developments.
2. Stay Competitive
Expect rival brands to use cutting-edge technology to stay on top. To remain competitive in the market, your company must adopt current technological advances. Are you promoting your company wisely? Your firm must utilize the most recent social media, advertising, SEO, and targeting technologies in order to retain existing clients and attract new ones. The ultimate objective is to build a relationship with your clients so that they choose to do business with you rather than a rival.
3. Retain Customers
Utilizing cutting-edge technologies to enhance the client experience will keep customers coming back. Make sure your company is successful in offering a friendly and effective customer experience. Make life simple for them. Everyone dislikes 10-step checkout procedures. The customer should have a simple and speedy experience while interacting with your business, whether it be making an online purchase or using your website. Customers who encounter difficulties could never want to engage with your company again and abandon the first purchase.
4. Greater Opportunities
Finally, staying current with technology advancements will help you avoid missing out on chances. Businesses who are obstinate and stick to what they are best at risk missing out on all the opportunities to better understand and engage with their clientele. In order to place orders, post job applications, and more, several firms have had success using Facebook Messenger as a commercial tool.
Similar to how it has progressed, modern technology will continue to make communication across all platforms and mediums simpler. Additionally, by continually enhancing their overall experience, this will demonstrate to clients that they are important. Utilizing cutting-edge technology will benefit your customers as well as your company’s labor costs. The right technology can increase production while decreasing processing fees and overhead costs.
Finally, make a plan in advance to keep one step ahead of the competition. To succeed, be current and give thought to the experience of your customers. A lack of technology advancement and progressive change might cause your organization to lag behind and ultimately fail.
Reasons Why The Old Technology In Your Business Is Costing More Than You Think
If your business continues to rely on antiquated and out-of-date technology, it might be time to upgrade because doing so comes with a number of unanticipated expenses. Even though maintaining outdated hardware and software may appear frugal, you could be setting yourself up for MASSIVE costs in the future.
It is fairly clear why many small firms hesitate to spend money on new hardware and software: when they do the math, they find that the cost keeps rising, seemingly exponentially. Although the initial price of new hardware, software, or technologies may be considerable (or higher than you would want), you must compare what business can afford against the expense of maintaining out-of-date equipment.
Let’s start by examining some of the “hidden” costs associated with utilizing antiquated or outdated technologies.
Lost Productivity: As technology ages, it becomes less effective. Both hardware and software are affected by this, although for different reasons. Hardware, even when well-maintained, has a propensity to lag. It is impossible to avoid tool wear and tear; it only occurs with use. But the productivity issues that come with old technology only get worse when you add out-of-date software to the equation. Over time, you will start to lose the support of developers, and this has a variety of problems. Here, three instances are provided.
Integrity Loss – Older apps no longer have secure connections to your other company apps. When an illustration, your CRM software and billing software once seamlessly integrated; but, as developers focused on creating newer versions of their software, they stopped updating older ones. The result will be more errors and hiccups, and you run the danger of losing data.
Loss of Compatibility: Older programs frequently don’t work properly with newer ones. What should you do if your suppliers or customers are utilizing the most recent version while you are still using the outdated program? Everyone involved may become quite frustrated as a result, and you risk losing clients. According to a Microsoft study, 91% of customers said they would stop doing business with a company if it continued to employ antiquated technology.
Loss of Time and Money – As a result of deteriorating compatibility and integration, aged technology makes it more difficult for your staff to do its duties. According to a recent Currys PC World (UK) study, workers lose an average of 46 minutes each day due to outdated technology. This amounts to roughly 24 days year and an average loss of $3,500 per worker, but the exact number can vary greatly by industry. You may be sure that the time and financial costs affect every department and employee in the company.
When your company uses outdated technology, productivity suffers, but security also becomes a serious concern.
As technology ages and developers stop supporting it, you will therefore receive fewer security upgrades. At some point, there won’t be any more security patches, leaving you totally exposed. Additionally, hackers and online criminals will keep trying to break into older programs even if creators cease marketing them. They are aware that smaller businesses frequently update their systems more slowly, giving hackers an advantage.
Your business may be responsible for the high costs of this kind of data breach if a hacker is able to access your network due to the use of outdated and unsupported software. The issue is exacerbated worse if you have little to no IT security in place and weren’t backing up your documents. It’s like handing over control of your business to crooks! It is impossible to stress how important IT protection is, and the risks are increased if you use outdated software and older computers.
What Can Be Done to Avoid This, then? As we previously mentioned, many small businesses think it is prohibitively expensive to maintain their technology up to date. They don’t want to cope with the up-front costs associated with purchasing new technology and software. Despite the fact that it can be pricey, depending on your needs, there are strategies to reduce those expenditures.
Solutions such as Software-as-a-Service (SaaS) and Hardware-as-a-Service (HaaS) are one approach. These enable small firms to stay up to date without having to spend a significant sum of money (or whatever the digital currency equivalent is). HaaS and SaaS are a natural fit for managed service providers (MSPs), who are dedicated to helping small businesses with all of their IT requirements, such as keeping their equipment updated and their network secure from outside intruders.
Throwing the outdated technology in the trash and switching to the new can be readily justified when you consider the lost productivity (and the discomfort that comes with it) as well as the costs of data breaches, malware infections, or cyber assaults.
Companies That Destroyed Their Largest Competitors: Apple vs. Nokia
Nokia commanded more than 50% of the global smartphone market in the fourth quarter of 2007, followed by Research In Motion’s BlackBerry with 10.9% and Apple with just 5.2%. Apple, who has consistently dominated the market for digital music players for years, was ready to accomplish the same for smartphones in less than four years.
Even as recently as the fourth quarter of 2010, the Nokia 28% market share was somewhat larger than the 16.1% share held by the Apple iPhone. However, Steve Jobs’ company has soon taken the lead thanks to staggering sales figures. IDC estimates that the company had a 19.1% market share and a 141% annual growth rate as of the second quarter of 2011. With a growth rate of -30.7%, Nokia, which has moved up to third place after Samsung, had a 15.7% share.
Steve Jobs’ vision was ahead of his time. He said, “What we want to do is make a leapfrog product that is way smarter than any mobile device has ever been, and super-easy to use. This is what iPhone is. OK? So, we’re going to reinvent the phone.”
One company got it right and revolutionized the marketplace, while the other business ending up getting bought out and sold for a fraction of its market value.
Exercise 3.4: Dog, Rice, Chicken
Course Manual 5: Porters Five Forces Analysis
What Are Porter’s Five Forces?
An industry’s vulnerabilities and strengths can be ascertained using Porter’s Five Forces, a model that identifies and examines five competitive forces that affect every industry. The structure of an industry is typically identified using the Five Forces analysis to develop company strategy.
Any sector of the economy can benefit from using Porter’s model to better analyze industry rivalry and increase long-term profitability. After Michael E. Porter, a professor at Harvard Business School, the Five Forces concept was created.
Porter’s 5 forces are:
1. Competition in the industry
2. Potential of new entrants into the industry
3. Power of suppliers
4. Power of customers
5. Threat of substitute products
Understanding Porter’s Five Forces
A business analysis framework called Porter’s Five Forces can help to understand why different industries are able to maintain varying levels of profitability. The model was made available in 1979’s Competitive Strategy: Techniques for Analyzing Industries and Competitors by Michael E. Porter.
The Five Forces model is frequently used to evaluate a company’s corporate strategy as well as its industry structure. With some qualifications, Porter identified five immovable forces that affect every market and business in the globe. The attractiveness, profitability, and level of rivalry in a market or industry are typically assessed using the Five Forces model.
1. Competition in the Industry
The number of competitors and their capacity to undercut a firm are the first of the Five Forces. The power of a corporation decreases as the number of competitors and the number of comparable goods and services they provide increases.
If a competitor can provide a better deal or lower rates, suppliers and customers will look to them. On the other hand, when there is little competition, a corporation has more negotiating power and can raise prices to boost sales and profits.
2. Potential of New Entrants Into an Industry
The force of new entrants into a market has an impact on a company’s power as well. An established company’s position may be considerably undermined the quicker and cheaper it is for a rival to enter its market and become a viable rival.
It is appropriate for existing enterprises inside an industry with significant entry barriers since the company would be able to charge higher rates and negotiate better conditions.
3. Power of Suppliers
The Porter model’s second element examines how quickly suppliers can raise input costs. It is influenced by the number of suppliers of an item or service, the degree to which these inputs are special, and the cost to a corporation of switching providers. A company would be more dependent on a supplier in an industry with fewer providers.
As a result, the supplier is in a stronger position and has the ability to increase input costs and demand additional trade benefits. On the other hand, a business can maintain its input costs low and increase its profits when there are several suppliers or low switching costs between competing suppliers.
4. Power of Customers
One of the Five Forces is the power or capacity of the customer to influence price reductions. It is influenced by the quantity and value of a company’s purchasers or customers, as well as by how expensive it would be for a company to find new markets or consumers for its goods.
Each consumer has greater leverage to bargain for lower rates and better deals because the client base is smaller and more strong. It will be simpler for a business with lots of small, independent clients to raise pricing and boost profitability.
Businesses can increase their profitability by using the Five Forces model, but they must constantly check for changes in the Five Forces and modify their business plans accordingly.
5. Threat of Substitutes
The fifth and final force focuses on alternatives. Threats come from substitute items or services that can be employed in place of a company’s goods or offerings. Companies with the ability to raise prices and secure advantageous terms will be those that make items or provide services for which there are no direct alternatives. Customers will have the choice to choose not to purchase a company’s product when close substitutes are readily available, which might diminish a company’s position in the market.
An organization can modify its business plan to more effectively utilise its resources and produce higher earnings for its investors by comprehending Porter’s Five Forces and how they apply to an industry.
Example of Porter’s Five Forces
There are numerous instances where Porter’s Five Forces can be used to analyze different sectors. Finding opportunities and risks that could affect a firm is the ultimate objective. Trefis, a stock analysis company, examined Under Armour as an illustration to see how it fits into the athletic apparel and footwear market.
• Competitive rivalry: Nike, Adidas, and up-and-coming athletes present fierce competition for Under Armour. With significantly more financial resources at their disposal, Nike and Adidas are making a drive for market share in the burgeoning performance gear market. Because Under Armour lacks any fabric or manufacturing method patents, its product line may one day be imitated.
• Bargaining power of suppliers: A diverse supplier base limits supplier bargaining power. Numerous companies based all around the world manufacture Under Armour’s goods. As a result, Under Armour has an edge because suppliers’ leverage is reduced.
• Bargaining power of customers: Both end-user and wholesale clients are among Under Armour’s clientele. Wholesale clients, like Dick’s Sporting Goods, have some negotiating power since they can replace Under Armour products with those of the company’s rivals to increase margins. Customers who are end users have less negotiating leverage because Under Armour is a well-known brand.
• Threat of new entrants: The high capital expenditures associated with product branding, advertising, and demand generation prevent newer firms from entering the sports apparel sector. However, currently operating businesses in the sportswear sector may eventually enter the market for performance gear.
• Threat of substitute products: It is anticipated that demand for athletic clothes, footwear, and accessories will keep rising. As a result, Under Armour is not currently threatened by this force.
What Are Porter’s Five Forces Used for?
Managers and analysts can better understand the competitive environment a company operates in and how it is positioned within it by using Porter’s Five Forces Model.
Strategies for success
After you’ve finished your analysis, you should put your strategy into action to increase your competitive edge. Porter identified three general tactics that can be used in any sector to achieve this (and by companies of any size.)
Cost leadership
Your objective is to either expand market share by lowering the sales price while maintaining profits or to improve profits by decreasing costs while maintaining industry-standard prices.
Differentiation
Than adopt this strategy, your business’s products must be much superior to those of the rivals, increasing both their competitiveness and consumer value. Effective sales and marketing, as well as in-depth research and development, are necessary.
Focus
For successful implementation, the business must pick niche markets where to offer its products. It necessitates a deep comprehension of the market, its vendors, customers, and rivals. Porter’s 1985 book Competitive Advantage has more details on the generic techniques.
Porter’s Five Forces alternatives
Despite being a useful and tried-and-true model, Porter’s Five Forces has come under fire for not adequately explaining strategic alliances. Adam Brandenburger and Barry Nalebuff, professors at the Yale School of Management, developed the concept of complementors as a sixth factor in the 1990s.
According to Brandenburger and Nalebuff’s paradigm, complementors market goods and services that work best when combined with those from rival companies. Apple, a maker of computers, and Intel, a chip manufacturer, might be viewed as complementors.
Your grasp of your company and its possibilities will likely be rounded up by using further modeling tools. The BCG matrix assists organizations in determining which products are most likely to profit from greater investment, and value chain analyses aid businesses in understanding where their strongest competitive advantage rests.
Is Porter’s Five Forces Model Still Relevant?
Yes, despite being developed more than 40 years ago, the Five Forces Model is still a helpful tool for figuring out how a company is positioned in the marketplace.
What Are Some Drawbacks of Porter’s Five Forces?
The Five Forces model has some limitations, including being backward-looking, which limits the relevance of its conclusions to the short term and is exacerbated by the effects of globalization.
Another major flaw is the propensity to utilize the five forces to evaluate a specific firm rather than the entire industry, which is what the framework was designed for.
The way the system is set up forces every company to belong to only one industry group, even though some companies operate in more than one. The requirement to evaluate all five forces equally when certain industries aren’t as significantly impacted by all five is another problem.
What’s the Difference Between Porter’s Five Forces and SWOT Analysis?
Tools for analyzing and making strategic decisions include Porter’s Five Forces and SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis. While businesses, analysts, and investors frequently utilize a SWOT analysis to take a closer look inside a firm to assess its internal potential, they typically employ Porter’s 5 Forces to study the competitive landscape within an industry.
The Bottom Line
When examining a corporation’s competitive environment, the most crucial factors to be taken into account are those included in Porter’s Five Forces framework. High threat levels often indicate the possibility of declining revenues in the future, and vice versa. For instance, if entry barriers are absent, a young business in a rapidly expanding field may find itself shut out very quickly. Similar to how a corporation providing products with many alternatives will not be able to use pricing power to increase margins and may even lose market share to rivals.
Porter’s approach was so widely used because it compels businesses to consider their whole sector when developing long-term strategies, rather than just their immediate business. Porter’s still plays a significant part in that, but it shouldn’t be the only instrument used to develop a corporate plan.
WalMart and Porter’s Five Forces
Is the retail sector appealing to investors? Addressing Porter’s Five Forces Model is advised in order to study the industry that surrounds WalMart.
1. Bargaining Power of Buyers
The bargaining power of the purchasers is the first force in Porter’s Five Forces Model. Because Wal-Mart has already incorporated these concerns into its business model, customers do not need to haggle with the retailer in order to obtain lower pricing, better quality, or additional services. To guarantee that its consumers receive the best possible price, Wal-Mart offers numerous different pricing strategies, such as “Every Day Low Price,” “Rollback,” and “Special Buy.” Low switching costs in the retail sector contribute to a lack of consumer loyalty. Not the case with Wal-Mart, as its pricing advantage appears to be the most significant aspect for shoppers.
2. Bargaining Power of Suppliers
The bargaining power of suppliers is the second force in Porter’s Five Forces Model. Threatening to raise prices or lower the quality of purchased items is one way suppliers might exercise their power. Because Wal-Mart carefully selects its suppliers and has a solid track record with them in order to uphold their price philosophy, this will not happen to them or their customers. Wal-Mart actually purchases from more than 68,000 American suppliers. Wal-2005 Mart’s Annual Report
3. Threat of New Entrants
Because they can employ economies of scale to spread the cost of production over a larger number of manufactured units, Wal-Mart does not have to be concerned about the prospect of new competitors. When a result, as volume rises, so does the cost of the product per unit. In order to reduce costs, Wal-Mart has the capacity to create more. Wal-Mart distinguishes its products through great brand recognition and patronage. One key component of their strategy is the availability of distribution channels that offer secure product distribution. Wal-Mart is able to maintain its customer-focused strategy thanks in large part to technology. Because Wal-Mart has distinct resources and competencies that are difficult to replicate, there are substantial entry barriers for businesses desiring to enter the market.
4. Threat of Substitutes
Threats from replacement goods and services make up Porter’s fourth force in his five-force model. Many of Wal-rivals Mart’s have tried, but failed, to copy the retailer’s distinctive and effective business model. The value chain of Wal-Mart is what makes their exceptional customer service special. To make shopping at Wal-Mart a memorable experience, every effort is made. To encourage consumer acceptance and goodwill in this environment, Wal-Mart keeps a “satisfaction guaranteed” policy in place.
5. Intensity of Rivalry
The level of competition among industry competitors is the fifth force in Porter’s Five Force Model. Kmart, Sears, and Target are actually Wal-biggest Mart’s rivals in the retail sector.
Several factors prevented Kmart and Sears from competing with Wal-Mart: First, Sears charges more than Wal-Mart because its infrastructure has higher overhead expenses. Another problem is the fact that Kmart has lost its attractiveness to customers as a result of failing to give them adequate service. Kmart started receiving complaints about subpar customer service while Wal-Mart focused on consumer satisfaction. Kmart was unable to keep its name-brand merchandise at consistently low pricing as a result.
In addition Wal-Mart’s sales are approximately four times Kmart’s sales. WalMart’s discount stores are larger than Kmart’s and produce sales of twice the amount of Kmart’s.
Exercise 3.5: Human Knot
Course Manual 6: Identify Competitor’s Team Members
The War for Talent: What It Is and How Your Organization Can Win
In today’s economy, skill is highly sought after. Talent was one of three areas that required the most urgent intervention in the 2021 “Creating People Advantage Report” by the Boston Consulting Group and the World Federation of People Management Associations. Although the “war for talent” may appear to be a novel idea, its roots can be found in a McKinsey & Company research from 1997. This course manual will examine the nature of the war for talent and how your company might win in 2023 and beyond.
The War for Talent Explained
The term “the war for talent” was first used by McKinsey & Company’s Steven Hankin, and it was then elaborated upon by McKinsey consultants Ed Michaels, Helen Handfield-Jones, and Beth Axelrod in a book of the same name. The authors noted an impending talent gap that would have a big effect on business performance. Companies were recommended to concentrate on their plans for attracting, keeping, and developing outstanding individuals in the original breakthrough study.
However, most believed that talent issues were a thing of the past when the economy slowed down during the following few years. The climate of today makes it quite evident that this is not the case. The ongoing talent war is the outcome of a number of intricate circumstances that have been made worse by the pandemic. These consist of:
• A skill gap caused by rapid changes in the job market
• Changing demographics
• Competition from the gig economy
• Disruptive changes in the way companies do business
• The changing needs and expectations of workers
Challenges Associated with the War for Talent
Whatever the cause, a lack of qualified workers can result in decreased production, decreased employee satisfaction, and more staff turnover.
Given these difficulties, it is not surprise that employee retention and attrition are top priorities for 2022 for many firms, such as those in the UK. Cathy Geerts, chief HR officer at European HR and payroll services supplier SD Worx, noted that “enterprise leaders recognize they’ll have to interact more directly and intimately with people to establish organizational resilience and to deliver actual value.”
She continued, saying that “HR needs to pull out all the stops to stay up” with workers who are searching for employers who can accommodate their requirements and who want a better work-life balance.
How to Win The War: Key Areas of Focus
Companies have had to be inventive when hiring new personnel and come up with novel strategies to keep their current workforce. Traditional employees, temporary employees, contractors, and gig workers all make up the modern workforce. Human resources specialists must be able to manage them all while predicting the competencies the business will require in the future.
Organizations frequently try to hire new employees when they are faced with a skills gap. However, experts advise businesses to put more emphasis on the staff members they already have. This suggests that a greater emphasis should be placed on internal skill development for employees.
In fact, according to Jeff Tarr, chief executive officer of Skillsoft, businesses must compete with their staff members’ “visions of their future selves.”
Companies may prosper in the talent war by spending money on enhancing the talent they currently have. We succeed by fostering a culture of learning where each employee has the chance to gain new knowledge and talents and is provided with the resources to do so.
In this technologically advanced, rapidly changing world, upskilling and reskilling are essential. It is much less expensive to invest in your present staff than it is to find, hire, and train new hires. Training your staff not only helps them execute their jobs more effectively and productively, but it also shows them how much you appreciate them. This raises spirits and may even affect the financial results of your business.
Businesses also stand to benefit significantly if they focus on:
Giving Employees More Flexibility
The standard 40-hour workday from Monday through Friday is no longer the only choice. Both the daily drive to and from work are not. Part-time work, flexible scheduling, remote work, and other unique options are sought after by employees. Giving employees the expected flexibility improves the organization’s appeal as a place to work.
Creating Personalized Experiences
Companies must go past one-size-fits-all procedures and personalize the workplace environment for each employee if they want to prevail in the competition for talent. This can be done by providing for different career pathways or adjusting daily encounters to suit various demands.
Building Employee Engagement
The term “engagement” describes the mental and emotional ties that employees have to their jobs, their coworkers, and the company. Engaged employees go above and beyond the call of duty and inspire others to follow suit. Customer experience, revenue, employee attrition, and other crucial success indicators are all impacted by engagement.
Emphasizing Work-Life Balance and Employee Wellbeing
These are not considered to be rare events or luxury items by today’s workforce. They anticipate living a life outside of work, and they anticipate that their employers will promote their physical and emotional wellbeing.
Attracting and Retaining Older Workers
Many older adults either need to or desire to keep working. A misguided belief that they are set in their ways causes many of them to be passed over for training and development opportunities. They are frequently pressed into retirement before they are ready, and they are frequently among the first to be laid off. The workforce is aging quickly at the same time, and businesses are forced to accept this fact. Make sure you satisfy the requirements and expectations of your 50+ employees if you want to make the most of the talent you already have. Otherwise, you risk losing them to businesses that recognize their worth.
The Powerful Benefits of Internal Training — 5 Reasons You Need to Do It
“The only thing worse than training your employees and have them leave is not training them and having them stay.” — Henry Ford
There is no denying the importance of training. Not even a question, really. What kind of training should I offer? is the genuine query you should be asking.
There are lots of different methods of training, such as:
• Lecture-style training
• Coaching and mentoring
• Instructor-led training
• Simulation training
• Hands-on training
• Case studies (by that, we mean bookwork)
• Hands-on learning
The list could go on and on, with each technique working and changing based on the workplace. However, training is often divided into internal training and external training, the two main types of classical training methods.
The advantages of internal training
1. Fully Customizable
You can control how things goes down thanks to internal training. For the sake of your business and your staff, you have the power to modify training as necessary. When you customize it, you can:
• Focus on the skills you see the need for refining.
• Update the program whenever you need to — whether because of industry changes or a shift in goals.
• Choose your delivery method.
• Make adjustments based on employee feedback.
2. Reflects the Culture of the Company
Your company’s culture sets the tone and fosters an atmosphere that both employees and customers want to be a part of. Any organization’s training procedures play a significant role in its culture. Internal training gives you the chance to instruct staff members in accordance with the principles and behaviors that reflect the culture you want to thrive.
3. Offers Real-Life Examples
I don’t know about you, but we love doing things ourselves, and internal training is all about doing things yourself. The following are some real-world examples that management might utilize while teaching employees about your firm procedures:
• Realistic
• Applicable
• Given in terms/jargon, the employee understands
One of its strongest qualities is probably internal training. It enables staff members to immediately put what they learn into practice.
4. Strengthens Teams
Internal team training often entails one person mentoring another. Not only is this advantageous for the employee providing the coaching (because teaching others is undoubtedly one of the best ways to learn), but it also fosters teamwork.
Together, workers learn how to handle obstacles to communication (including miscommunication), disagreement, opportunities for problem-solving, and even emergency situations. All the while working and learning via experience. It fosters trust and encourages them to rely on one another.
5. Effective Method of Upskilling
Whatever business you work in, rules, specs, and necessary abilities are undoubtedly continually changing. Did you know that a vital talent has a five-year average lifespan? You did read that correctly. By offering internal training to your staff as you upskill them, you can stay on top of the ebb and flow. This facilitates:
• Increase talent retention: Employees are more likely to stay with a company for the long term if they feel valued and appreciated in their current positions.
• Prepare employees for promotion or internal transfers: As Mr. Ford noted, the only thing worse than not training a worker and having them stay on the job is not teaching them at all. Give talent the chance to advance if you want to keep them on your team. Train them well so they will want to stick around.
• Strengthen existing skill sets: By providing internal training, you’re allowing your staff to operate in a setting where learning is a regular part of the job. Employees constantly form and add to their knowledge as learning transforms into a building block set.
• Keep you on the cutting edge: As already noted, industries change frequently. As you communicate with your team about regulatory changes, information updates, and technological advancements, providing on-the-job training keeps you up to date.
You must ultimately choose what is best for your organization.
Why is talent important?
Superior talent is up to eight times more productive.
It’s remarkable how much elite talent can boost an organization’s productivity. High performers are 400 percent more productive than mediocre performers, according to a recent survey of more than 600,000 researchers, artists, politicians, and athletes. Business studies demonstrate not only comparable outcomes, but also that the disparity widens as a job’s complexity increases. High performers are astonishingly 800% more productive in extremely complicated occupations, such as the information- and interaction-intensive work of managers, software developers, and the like (Exhibit 1).
Exhibit 1
Let’s say your business strategy calls for three years to finish a number of cross-functional projects. How quickly might the intended impact be achieved if 20% of the average talent working on the project was replaced with excellent skill? It would take less than two years if these individuals were 400 percent more productive, and it would take less than one if they were 800 percent more prolific. Even if it started a year or two later, a competitor may outperform you in the market if it employed 20% more excellent talent in comparable initiatives.
When you compare the production of the top and bottom 1%, the results are even more astounding. The top 1% produce three times as much for unskilled and semiskilled positions as the bottom 99% do, and twelve times as much for jobs of moderate complexity (such as technicians and supervisors). 12 people in the bottom one percent are equal to one person in the top one percent. The difference for high-complexity jobs is too great to quantify.
Go after the top of the crop, as the late Apple CEO Steve Jobs advised, to best express the value of talent. A small group of A+ players can outperform a large group of B and C players. ” Management guru Jim Collins concurred: “… the single biggest constraint on the success of my organization is the ability to get and to hang on to enough of the right people.”
Most companies don’t get it right
Since business leaders know that talent is valuable and scarce, you might assume that they would know how to find it. Not so (Exhibit 3). A whopping 82 percent of companies don’t believe they recruit highly talented people. For companies that do, only 7 percent think they can keep it. More alarmingly, only 23 percent of managers and senior executives active on talent-related topics believe their current acquisition and retention strategies will work.
Exhibit 3
These executives aren’t being modest; most businesses just lack these skills. In a 2015 survey, according to Gallup, more than 50% of participants were “not engaged,” while an additional 17.2% were “actively disengaged.” According to related studies, 43 percent of workers were more likely to consider a new job than they had been a year prior, and 73% of employees are “thinking about another job.”
This state of affairs is made more troubling by the fact that the Baby Boomers’ decades of expertise and experience are now permanently exiting the workforce. Many of the most senior engineers at the natural resources behemoth BP, for instance, are referred to as “machine whisperers” because they can maintain critical, pricey, and fickle equipment online. The outcomes could be disastrous if top talent isn’t brought in to replace these individuals.
What are the big ideas?
Focus on the 5 percent who deliver 95 percent of the value
Initiations to enhance a company’s talent management practices move through cycles. The vast majority of leaders claim that their organizations struggle to find enough highly talented employees and don’t have confidence in the effectiveness of their present business strategy, despite the fact that they only see marginal improvements.
What do these authorities overlook? Take American football, for example. People would properly respond that the quarterback, who is crucial to the great majority of plays, is the highest-paid player on a team. Since they immediately assist the quarterback in moving the ball forward, most people would likely argue that the running back or wide receiver earned the second-highest salary. These folks are mistaken. The quarterback is shielded from dangers he cannot see by the left tackle, who goes largely unnoticed.
Some employees, not all of them evident, disproportionately create or safeguard value. For instance, a navy should certainly make sure that the greatest and brightest individuals are in charge of its fleets of nuclear submarines. The IT-outage engineer, who guards against disasters for the crew, the environment, and humanity, must also be recruited with excellent talent. Companies should concentrate their efforts on the few crucial areas where the greatest individuals can make the biggest influence in a world with limited resources. Instead of beginning with processes (which produce generic solutions that don’t significantly improve results) or individual people (who may be able to assist you in certain circumstances but don’t develop institutional muscle), start with roles.
It’s difficult to choose the appropriate conflicts; you need to grasp the real economics of value generation in particular jobs. This can be one of your hidden weapons in the war for talent because of this very reason.
Make your offer magnetic—and deliver
Leaders are familiar with the phrase “employee value proposition,” or EVP: what workers receive in exchange for their contributions. “Gives” come in a variety of forms, including time, effort, experience, and ideas. “Gets” include material benefits, employment experiences, leadership support for staff, and the quality of the work (Exhibit 4). You will recruit and keep the top talent if your EVP is actually stronger than that of the opposition. But few businesses have EVPs that actually aid them in winning this battle for the following three reasons:
Exhibit 4
Not distinctive. A typical human resources department spends months identifying what people desire—a fantastic position in a fantastic organization with fantastic executives and fantastic benefits. HR then asserts that the value proposition should include all of this, resulting in an EVP that is similar to those of other companies that have undergone the same procedure. It is preferable for businesses to excel in one area while remaining mindful of the others. Work for Google if you want to tackle complicated problems, Virgin if you are inspired by Richard Branson’s leadership, or Amgen if you want to “defeat death.”
Not targeted. A winning EVP for the 5% of roles that matter the most is more important than having a good overall EVP. For instance, if data scientists are crucial, you’ll want an EVP that empowers them to innovate, provides a clear, quick career path, and enables them to make a significant impact.
Unreal. An alluring EVP created by HR and promoted by PR was utilized to recruit the finest candidates. However, in the long run, this was always a losing strategy since outstanding individuals would swiftly lose faith in reality if it fell short of their expectations. Today, talent won’t even consider purchasing such promises. Compared to CEOs or HR directors, employees are a more reliable source of information about working conditions. The same Internet and social media platforms that assist customers in researching product claims can assist with EVPs. Peer ratings and assessments of the genuine working conditions at various companies are available on websites like Glassdoor and Job Advisor. Your EVP must be unique, focused, and genuine; it cannot be spin.
Technology will be the game changer
Moneyball by Michael Lewis contrasts rigorous statistical analysis with the conventional wisdom of baseball players, managers, coaches, scouts, and front offices when deciding which players to sign. Analysis triumphs, forever altering the game. The same can apply to hiring excellent talent.
The National Bureau of Economic Research investigated this and compared hiring practices for more than 300,000 employees in high-turnover positions at 15 different organizations. People chosen by computers remained far longer and performed equally well or better, decisively defeating human experience, instinct, and judgment. There were other similar findings as well. Professors at the University of Minnesota concluded that hiring algorithms perform at least 25% better than people after analyzing 17 experiments. “The effect holds in any situation with a large number of candidates, regardless of whether the job is on the front line, in middle management, or (yes) in the C-suite.”
Some organizations are dumping outdated concepts, which many business leaders find difficult to accept. For instance, the waste management company Richfield Management used an algorithm to examine candidates for signs of potential workers’ compensation fraud. Since then, claims have decreased by 68%. Attrition decreased by 20% after Xerox switched to an online test from Evolve to replace their recruitment-screening procedure.
Oracle, SAP’s SuccessFactors, and Workday’s HR software systems already collect information from sites like LinkedIn to give employers an early heads-up when top employees may be considering leaving. At McKinsey, we identified the three factors responsible for 60% of the attrition among our managers using machine learning algorithms. Surprisingly, none of the three are connected to wages, travel, or hours worked.
Although the subject of people analytics is still young, it is developing quickly. Only 8% of businesses claimed to be completely capable of adopting predictive modeling in 2016, an increase from 4% in 2015. Leaders that don’t put clear strategies into action to use technology in the competition for talent will lag behind. But machines by themselves won’t succeed. IBM’s Deep Blue computer defeated Gary Kasparov in 1997. However, the top chess players in the world right now are human teams competing against computers, not computers alone. The same will be true in business.
Companies That Destroyed Their Largest Competitors:
Facebook vs. Myspace
When Facebook membership was still limited to college students in July 2005, Rupert Murdoch’s News Corporation paid $580 million to acquire the up-and-coming Myspace. In May 2007, Facebook had just under 30 million unique monthly viewers, compared to about 70 million for Myspace, according to Comscore.
Myspace had remained at 70 million unique viewers until Facebook met and surpassed it in May 2009. Facebook had approximately 160 million users as of May this year. Meanwhile, the number of users on Myspace has fallen below 40 million and is continuing to decline. Murdoch sold the failing business in June for $35 million, 93% less than he had paid for it initially.
Marketing professionals created and oversaw the operation of Myspace, and they had a totally different perspective on social media than the folks in charge of Facebook. Then, Myspace made the error of ignoring Facebook because it believed it was just another copycat.
Myspace tried to imitate Facebook’s approach and design, but by the time it became evident that Facebook was here to stay, it had already fallen behind. Later, it made an attempt to reposition itself as a music platform, but this was too late.
A startup that wants to succeed needs to put its clients first and stop worrying so much about the competition. Even so, it’s crucial to understand the environment in which your product operates. Myspace was unsuccessful in these two areas.
Exercise 3.6: Photo Finish
Course Manual 7: Identify Competitor’s Investors
5 Effective Strategies For Attracting Investors
As previously mentioned, a firm approaches a precipice where internal growth is limited without the help of outside investment at a specific point in its lifecycle. Companies that reach this turning point must then recruit and win over investors to support future growth.
But how can a business go about luring investors in the correct way when there is so much at stake? Today, we’ll go over five practical methods you may use to enlist great allies in your cause.
Strategy #1 — Investors Want a Roadmap
Companies and people make investments in order to make a ton of money. Companies need to be persuaded that the initiative has the ability to generate at least 10 times their initial investment before they will take on such risk. What would be the point then?
It is simpler to persuade investors to put their money where their mouth is the more business results you have. Your financial statements should all be accurate, and your investment deck should be ready to go.
Big ideas can be successful, but investor interest is frequently more strongly influenced by the company’s financial performance. They seek assurance that their investment would not only be fully repaid but also increased. They must be able to see how your business model scales and what those possible figures might be.
You must demonstrate that the model is effective before making a convincing case for how you will use their money to expand the firm if you want to persuade them to put their money at risk. Discussion points for a pitch meeting include:
• Your historical company numbers
• P&L
• Balance sheet
• Cash flow
• The total money required
• How that money will be utilized
• Competitor and market analysis
• Your unique value proposition
Strategy #2 — Target the Right Investors
A partner is worth far more than an unlimited budget.
The ideal investor will contribute tangible value to the company as it expands in addition to capital. You want a partner who can improve the product, draw on their network of commercial contacts, and engage with you at all stages of the company’s development.
Also keep in mind that not every investor will be the same.
While some provide more investment for later-stage expansion, others provide smaller, earlier capital injections (a Series A, for instance). Your company’s maturity level, together with the amount of equity and control you are willing to give up in exchange, will have a significant impact on the type of investor you should be aiming for.
In light of this, typical choices include:
• Banks
• Venture capitalists
• Private equity firms
• Friends and family
• Angel investors
• P2P lenders
Strategy #3 — Leverage Networks and Referrals
A typical strategy for smaller businesses is for their entrepreneurs to network and soft-sell their start-up in a more natural way rather than focusing on the hard pitch. Diana Goodwin, the founder of AquaMobile Swim School, claims:
Getting out and networking in your area’s startup and investment scene might be a terrific method to meet investors if you’ve been creating a successful firm. The majority of my investor encounters came about as a result of me attending an event and introducing my company.
One of the easiest ways to tell other investors and experts about your company and the opportunities it can present is through networking. If your industry hosts significant conferences or events, this is an exceptional opportunity to network with other participants, gain knowledge of the sector, and pitch your idea to influential investors.
If your soft-sell proposal is effective, it might get you invited to a big investment conference. So, be honest while describing your intentions and objectives. Also, don’t worry about coming across as arrogant. Just be mindful and perceptive. The people you are conversing with will keep the conversation going if they are interested.
Strategy #4 — Offer Stocks with Dividends
Providing a stock offering that isn’t restricted to merely business shares, which only gives value if the company eventually sells, is one investment alternative that can persuade a reticent partner. Another option is to offer investors a stock that pays dividends, luring them in with quick cash flow returns.
Offering quick payouts as opposed to a long-term ROI may make investing in you much more appealing. However, in order for this to be successful, you must have a well defined compensation strategy and schedule.
Strategy #5 — Speak to a Larger Purpose
Investors, without a doubt, desire a return on their investment. They only make high-risk investments for this reason.
Having said that, their overall goal is far more than just the chance to increase their income. At this point, a lot of people want a product or service that they also believe in—and the value it offers the rest of the world.
So, in addition to demonstrating the economic viability of the business, it is also essential to emphasize your company’s:
• Vision
• Mission statement
• Potential positive impact on the world
As Inc.com notes: “Blake Mycoskie of Toms Shoes attributes his ability to raise a seed round and build a $400-million company to his commitment to provide a free pair of shoes to the underprivileged for every pair sold. He didn’t have any big technical shoe innovations.”
One of the first businesses to adopt a one-for-one, altruistic business strategy was Toms. This aided the business’ word-of-mouth and social media marketing operations to generate buzz. Investors felt a sense of accomplishment and satisfaction knowing they would be able to make money and support a worthwhile cause.
What Are the Advantages and Disadvantages of a Company Going Public?
Private companies list on the stock market to raise money to support their expansion, pay off debt, or finance other business operations. An initial public offering (IPO), often known as the transition from private to public ownership, has benefits and drawbacks and may not be the best course of action for all businesses.
The most obvious advantage is, as was previously stated, the cash gain in the form of capital raising. Research and development (R&D), capital expenditures, and debt repayment can all be funded by capital.
Because IPOs frequently generate publicity by bringing their items to the attention of a new group of potential buyers, this is another benefit. This may consequently result in the organization gaining more market share.
Individuals who founded the company may also use an IPO as a departure plan. A lot of venture capitalists have used IPOs to profit from successful businesses that they assisted in founding.
After an IPO, a firm can conduct a secondary public offering by selling fresh shares to investors in order to raise additional funds.
Public companies frequently encounter a number of disadvantages that may cause them to reconsider going public, even with the advantages of an IPO. The requirement for more disclosure to investors is one of the most significant developments.
Additionally, the Securities Exchange Act of 1934 regulates public firms with relation to periodic financial reporting, which could be challenging for newly listed public companies. They must also abide by additional requirements that the Securities and Exchange Commission oversees (SEC).
More importantly, it can be highly expensive to comply with regulatory obligations, especially for smaller businesses. Since the Sarbanes-Oxley Act was passed, these costs have only risen. The creation of financial reporting papers, audit fees, investor relations departments, and accounting oversight committees are a few examples of the extra expenses.
Special Considerations
Public corporations are also subject to increased market pressure, which could lead them to prioritize short-term outcomes above long-term expansion. The management of the corporation is likewise subjected to more scrutiny as investors continue to demand higher earnings. This can prompt management to employ dubious methods in an effort to increase profits.
Companies must weigh all of the pros and cons that could result from going public before determining whether to do so. This often takes place at the underwriting stage, when the firm collaborates with an investment bank to weigh the benefits and drawbacks of a public offering and decide whether it is in the company’s best interest at that moment.
Real-World Illustration
Snap Inc. (SNAP), which is most known for its flagship product Snapchat, is one well-known firm that suffered after its IPO. In March 2017, the corporation raised $3.4 billion.
The stock had a brief rise over its $17 IPO price, but it had trouble holding onto those gains. Snap revealed depressing user growth numbers in its first quarterly report as a publicly traded firm. Investors filed a lawsuit in May 2017 claiming the business had made “materially false and misleading” representations about user growth. Snap made a settlement in January 2020 for $187.5 million.
Why Would a Company Not Want to Go Public?
A corporation may decide against going public for a variety of reasons. These factors include the time-consuming and expensive process of an IPO, the founders’ complete ceding of power, and the requirement for more exacting reporting in order to abide by SEC regulations.
When a Company Goes Public, Who Gets the Money?
When a business goes public, it immediately receives all of the funds acquired through the initial public offering (IPO). The corporation does not receive any of that cash when the shares trade on a stock exchange following the IPO. By purchasing and selling shares on the exchange, investors exchange that amount of money.
Is It Better for a Company to Be Public or Private?
Depending on the particular business and the objectives of its founders, it will either be better for a company to be public or private. The founders can manage the business anyway they see fit as long as they keep it private and are exempt from the numerous regulatory restrictions that come with being a public company. A corporation can raise a considerable amount of money and expand its business by going public. The choice that is best for the company’s founders and their original vision is ultimately the greatest one.
The Bottom Line
By going public, a private firm might raise finance to support its expansion or for other business requirements. It is a typical action for many businesses that emerge from the start-up stage.
Although purchasing a company does increase money, there are also considerable disadvantages. These include the drawn-out process of an IPO, making sure the business complies with stringent regulatory requirements, relinquishing complete ownership and ultimate control, and facing scrutiny from the general public and investors.
Before opting to go public, it’s crucial to consider the advantages and disadvantages and have a clear idea of what the company’s founders want it to be.
What Are the Other Sources of Funding Available for Companies?
In order to grow their businesses into new markets or areas, corporations frequently need to acquire outside finance or cash. They can use it to ward off rivals or invest in research and development (R&D). And while businesses do strive to finance these investments with revenues from current operations, it is frequently preferable to turn to outside lenders or investors.
Even though there are millions of businesses worldwide, spread across many different industries, there are only a few sources of funding that are open to all businesses. Retained earnings, debt capital, and equity capital are a few of the greatest places to look for finance. In this course manual, we will look at each of these capital sources and what they signify for businesses.
1. Retained Earnings
Companies typically exist to generate a profit by offering goods or services at a price higher than what it costs to manufacture them. This is the most fundamental source of funding for any business and, ideally, the main way that the organization generates revenue. Retained earnings are the net income that is still available after costs and commitments have been met (RE).
Because the corporation retains retained earnings rather than paying dividends to shareholders, retained earnings are significant.
Retained earnings rise when businesses make more money, enabling them to draw from a larger pool of capital. Retained earnings decline when dividend payments to shareholders increase.
These resources can be employed to finance initiatives and expand the company. For firms, retained earnings have a number of benefits. This is why:
• When retained earnings are used, businesses have no debt to anyone.
• They are a low-cost source of funding. The opportunity cost is what is referred to as the cost of capital when employing retained earnings. By withholding dividends, firms force shareholders to forfeit this. Additionally, since they are not required to pay interest to bondholders, firms save money when using retained earnings instead of issuing bonds.
• Corporate management has the option to determine whether to distribute all or a portion of the company’s profits to shareholders. The management group can then select how to use any money that will be put back into the business.
• There is no ownership dilution.
However, there are drawbacks to using retained revenues to support initiatives and promote business expansion. For illustration:
• Even when retained earnings are reinvested back into the business, shareholders’ value could decrease. This is due to the possibility that they won’t produce larger profits.
• Another claim is that because retained earnings do not genuinely belong to the corporation, employing them is not a cost-effective strategy. They actually belong to the shareholders.
Pros
Don’t owe anyone anything, employ cheap financing, have the freedom to use retained earnings whatever management sees fit, and don’t dilute ownership.
Cons
• A decrease in shareholder value
• Earnings are really the shareholders’ property.
2. Debt Capital
Like individuals, businesses can borrow money, and they frequently do. Borrowing money to finance initiatives and promote growth is a widespread practice. Debt capital is useful in a variety of situations. for ad hoc requirements. Additionally, high-growth firms require a lot of capital quickly. Private borrowing can take the form of conventional loans from banks or other lenders, whereas public borrowing takes the form of debt issues.
Traditional loans and debt issues are two ways that debt capital is obtained. The term “corporate bonds” refers to debt issues. They enable a large number of investors to become the company’s debtors or lenders. Companies can approach banks, other financial institutions, and other lenders, just like consumers might, to get the capital they require. They benefit from this because:
• Tax deductions on interest payments to banks and other lenders are possible when taking out a loan.
• In comparison to other sources of funding, interest costs are typically less expensive.
• It could raise corporate credit scores, which is advantageous for new businesses in particular.
• Because the money is borrowed, it is not necessary to distribute gains to investors.
But using debt financing has drawbacks. For illustration:
• The principal and interest must be paid to the lenders or bondholders, which is the major factor to take into account when borrowing money. This could be a concern if profits are low.
• A default or bankruptcy may occur if interest or principle payments are not made.
Pros
Tax deductions are available for interest paid on financing, it is less expensive than other sources of funding, it helps build credit, and it is not essential to share profits.
Cons
• Businesses must pay back their lenders.
• Bankruptcy or default may arise from failure to repay.
A slowing economy may make it more difficult for smaller or struggling enterprises to obtain debt financing.
3. Equity Capital
Selling ownership stakes in the form of shares to buyers who become shareholders is one way for a business to raise money. Equity financing is what it is called. Private businesses can raise money by selling stock holdings to family members and close friends or by going public through an IPO (IPO). If public firms require more funding, they may do secondary offerings.
The benefit of this method is:
• Nothing needs to be paid back. This is due to the fact that this form of financing relies on investors rather than creditors, which enables businesses with bad credit histories to raise money.
Equity capital has several drawbacks, including:
• Dilution. The voting rights of equity shareholders also mean that if a firm sells more shares, some of its control is lost or diluted. This comprises startups and small enterprises who work with venture capitalists to raise money for their operations.
• Costs. Given that investors could anticipate a portion of the profits, equity capital is frequently among the most expensive types of funding.
• Tax advantages similar to those provided by debt financing do not exist.
• Headaches on the inside. Obtaining outside funding may heighten anxiety since investors might not concur with management’s predictions about the company’s future.
Pros
• No restitution
• No need for a clean credit history
Cons
• Dilution in ownership
• Investors expect share of profits
• No tax benefits
• Possibility of tension between investors and management
How Can Businesses Raise Money From Internal Sources?
Retained earnings are one of the primary methods that businesses can raise capital on the internal market. This is the simplest and most straightforward approach. Any net income that is left over after all commitments and expenses have been satisfied is referred to as “retained earnings,” which is a broad term.
What Are the Three Major Sources of Financing?
Retained earnings, debt financing, and equity financing are the three main sources of funding for businesses. Any net income that is still available after a business settles its debts and expenses is referred to as retained earnings. Debt capital is money that a business obtains through obtaining loans or corporate bond offerings from lenders. Equity capital is money that a publicly traded corporation generates or raises by selling new shares to shareholders. Selling common or preferred stock could be used to achieve this.
Is Debt Financing or Equity Financing Better?
Both debt finance and stock ownership include some risk. Businesses that use debt financing are obligated to repay their creditors. Non-repayment may result in bankruptcy or default. This may affect corporate credit scores. Even while firms are not obligated to pay off any obligations with equity financing, there are no tax benefits associated with it. There is also a chance of dilution of ownership because it involves adding new shareholders to the mix. Investors both young and old should expect to share in business gains.
The Bottom Line
In a perfect world, a business would be able to raise all the funds required for expansion by merely making a profit on the sales of its products and services. However, as the adage goes, “you have to spend money to make money,” and nearly every business eventually needs to raise money to develop goods and grow into new areas.
Examine the balance of the main funding sources while judging businesses. For instance, a business may run into problems if it has too much debt. On the other side, if a business doesn’t use the money it can borrow, it can miss out on growth opportunities. The weighted average cost of capital (WACC), which identifies the cost of all a company’s funding sources together, is frequently calculated by financial analysts and investors.
Apple’s Near Death Experience
Although it’s nearly difficult to envision a world without Apple now, the computing behemoth was on life support when Steve Jobs rejoined the organization in June 1997 after a 12-year absence.
Three months later, Apple’s fiscal year came to a conclusion, and it had lost more than $1B on a wide range of goods, including duds like the Newton MessagePad, a handheld gadget resembling a Palm Pilot. Even worse, according to Walter Isaacson’s biography of Jobs, the business was 90 days away from going bankrupt.
With the support of a $150 million investment from Microsoft, Apple’s comeback got off to a good start. This contribution was made as part of a larger peace agreement that helped Microsoft fight off antitrust accusations by keeping its greatest rival afloat.
After that, Jobs set to work reducing Apple’s product line so the company could concentrate on peddling a select few game-changing gadgets. In addition to terminating nearly 70% of Apple’s products, including the Newton MessagePad, he fired 3,000 workers. “Deciding what not to do is as important as deciding what to do,” Jobs told Isaacson.
Additionally, Jobs encouraged the business to use more avant-garde design. He once famously exclaimed, “The products suck!,” during a meeting with Apple’s top executives in 1997. There’s no longer any sex in them!
The iMac, Apple’s first big hit of the second Jobs period, was released the following year as a result of the company’s renewed focus. The user-friendly desktop computer sold roughly 800,000 units in its first five months thanks to its sleek, translucent design and simple internet setup. 1998 marked Apple’s first profitable year since 1995 thanks to the product’s performance.
Jony Ive, the creator of the iMac, built on his success by creating the iPod in 2001 and the iPhone in 2007. Today, Apple is a $300 billion business with a well-known brand associated with appealing product design. But without a $150 million investment from Microsoft and a kick in the pants from its founder, it all might not have occurred.
Exercise 3.7: Object memory
Course Manual 8: Identify Competitor’s Customers
How to find your competitors’ customers
Knowing your competitors’ clients is essential if you want to understand them.
After all, the clients of your competitors reveal a lot about their aspirations, performance, constraints, and objectives. You can learn how your competitors bring in new business by identifying their clients, which can help you attract more of your own. Of all, this research is only about stealing the best clients for the majority of businesses.
Finding gaps in your competitors’ product offering may also be aided by learning who their customers are. For instance, if you learn that a significant rival has a sizable customer base in a particular market, you may deduce that these clients are searching for a feature or service that your rival doesn’t yet provide. By addressing the issue, you can win over some of those clients’ interest (and business).
Building a detailed map of your rivals and their clients is the basis for market intelligence. It depicts your operating environment and provides a wealth of hints regarding effective maneuvers. Even if it isn’t utilized to guide sales, marketing, or product initiatives, this form of market knowledge is crucial for many businesses since it gives you confidence that your own methods make you stand out versus competitors.
Let’s assume that you are already persuaded of the need of identifying the clients of your rivals. How can we identify the businesses that are selecting our rivals, then?
How to conduct competitor customer research
Even if you may hire a seasoned company to gather competitive intelligence, anyone can develop a picture of their market using the resources and approaches available.
Customer websites
You can discover a lot of the information you need online.
The majority of businesses want to brag about their clients. They cover their websites in customer testimonials, case studies, and logos.
From their point of view, it is an excellent approach to demonstrate their competence and knowledge and provides strong social proof, one of the most effective persuasion tools.
However, it also offers a clear glimpse into their clientele. Additionally, the names they choose to use could provide clues about their goals and the kinds of customers they hope to draw in.
Resume databases
You can use resume databases like Indeed to discover people who claim to have used the goods of your competitors. The gap in your ability to pinpoint the employer who uses the product is filled by their work history.
Social media
Who is a follower of your rivals? Who is making mention of them? or disseminating details about them?
Social media can disclose a variety of relationships between your rivals and their clients. Insightful debates may also be found on blogs and forums. On a forum, for instance, developers might ask for help using a specific platform, while project managers might talk about using a new tool to organize their work.
The Risk (and Opportunity) in “Stealing Customers”
We discussed the advantages of filling a market gap with a product that the industry is missing in while also being one that consumers would adore in the prior session. Is the fact that clients from your competitors are transferring to you therefore a good thing? Should you be happy that you’re stealing consumers from your rivals, or should you take this as a major warning sign?
The general agreement was that it should begin as the latter but, if done properly, could become the former.
It’s likely that a prospect will blame you if they don’t accomplish their desired outcome while using your product if they didn’t with the previous product and blamed the product (and the company that made it).
If the rival did nothing to prepare them for success—to fill in the gaps—and you don’t either (or won’t even try to win them over with your product knowing they won’t succeed), you’ll suffer the same fate as the competitor who is losing that customer.
However, given that they are approaching you already with one foot out the door, they might not even stick around as long with you as they did with the other guys.
They will move on to the next rival as soon as they feel like they are going through the same thing again. until they find a company that helps them both bridge the Success Gaps that exist and holds them accountable for the things they need to do to be successful through a better product, training, outside experts, webinars, courses, consultants, office hours, communities, videos, ebooks, etc.
You must comprehend this context, inquire about their objectives and prior experiences, manage their expectations both before and after the sale, show them the path of Success Milestones to achieving their Desired Outcome (again, even before the sale), and explain the roles that your product, partners, and other employees from your company (prof services, implementation, etc.) will play in assisting them in achieving their Desired Outcome.
When a customer switches because a competitor’s product couldn’t help them accomplish their goals, you need to understand that this presents both an excellent opportunity and a possible issue.
You’ll be setting them up for success and a long lifetime as a customer if you handle it correctly and take the necessary steps to get them on track to achieving their Desired Outcome, or at least get them to realize they need to do certain things (or pay you to do those things for them) to reach their goals.
The good news is that even if they don’t take the steps required to accomplish their desired outcome, since you regulated expectations from the start, they will be less likely to hold you responsible for their failure because they were aware of what they needed to do.
They might not even stay long enough to pay back what it cost to acquire them and, for good measure, tell everyone how bad you are on the way out if you do everything incorrectly and merely ignore the warning signs.
Are customers changing rapidly in terms of preferences?
With so many options at their disposal, consumers today have considerably more power to influence firms’ goods than they did in the days of Henry Ford, who said that “any customer can have a car painted any color he wants, so long as it is black”. Businesses need to understand their clients in-depth and provide superior customer service if they want to remain competitive.
Keeping up with consumer needs is more difficult than ever as demographics and consumer preferences are changing quickly. Globally, the client base is changing as a result of rising salaries, middle class swells, aging populations, and the next generation of Millennials. Technology has also increased customer demand for carefully crafted experiences. Customers have been accustomed to receiving personalized, immediate service at reasonable pricing because to services like internet streaming, Uber, Amazon Prime, and others.
A major problem is meeting these changing client demands. In reality, it was ranked as the second-largest obstacle in the Business Reality Check, which was created by The Economist Intelligence Unit and commissioned by American Express. It was chosen by 34% of senior executives polled. Dealing with shifting consumer needs appears to be the top challenge for firms, according to market data that looked at indications from Bloomberg, Edelman, and the OECD, among other sources.
Declining trust in business
According to market data and business perspectives, maintaining competitive prices and gaining the trust of customers are the two major obstacles to meeting changing consumer needs. In order to succeed in this cutthroat global marketplace, 55% of senior executives are focusing on the latter: consumer trust.
Building two-way relationships
It is noteworthy that different business sizes employ different tactics for adapting to shifting consumer demands. Small and medium businesses concentrate more on offering competitive prices for their products, whereas large companies (with more resources) focus more on innovation.
Nearly half (48%) of executives believe that increasing customer engagement is a vital strategy for keeping up with changing consumer needs across all industries. Integrating clients more deeply into the business is one way for companies to interact with their patrons. A significant possibility for organizations is open innovation, which involves involving customers and incorporating their feedback into product creation. This allows for the customization of products while also fostering two-way communication and trust.
Customer experience as a competitive advantage
Providing excellent customer service is crucial for any organization. The more satisfied consumers you have, the more repeat business you’ll get, the more raving reviews you’ll get, and the less friction there will be with returns and complaints.
The benefits of delivering a great CX include:
• Increased customer loyalty
• Increased customer satisfaction
• Better word-of-mouth marketing, positive reviews, and recommendations
No single universal checklist can be followed to ensure a positive customer experience because both your company and your clients are special.
In essence, you may provide excellent customer service if you:
• Make listening to customers a top priority across the business
• Use customer feedback to develop an in-depth understanding of your customers
• Implement a system to help you collect feedback, analyze it, and act on it regularly
• Reduce friction and solve your customers’ specific problems and unique challenges
Asking your consumers questions, paying attention to their answers, and acting on their input will result in a positive customer experience.
Factors that lead to negative customer experiences
Bad customer experience comes in a variety of forms and manifestations, but Hotjar, for instance, identified some often cited problems in their customer experience statistics.
Source: Hotjar.com
Bad customer experience is primarily caused by:
• Long wait times
• Employees who do not understand customer needs
• Unresolved issues/questions
• Too much automation/not enough of a human touch
• Service that is not personalized
• Rude/angry employees
If you need any more ideas, just think about the last time you were frustrated as a customer—it’s quite likely that one (or more) of the above was the cause.
Ultimately, though, what counts as poor customer experiences in your business will be unique—and you’ll only learn about it by opening the door to customer feedback, then working to minimize the impact of factors that cause a bad experience for your them.
Final thoughts
CX is much more than excellent service and competitive prices. It’s the foundation for building and sustaining a successful brand. But leveraging CX as a competitive advantage depends on great data, a customer-centric culture, and technology that empowers the entire team to deliver a quality experience.
Companies with great customer experience: JetBlue
Airlines are infamous for providing typically subpar services. However, this is a motivating tale of a genuine people person. Along with the other crew members, he can be seen giving out water and doughnuts to customers in queue at the check-in desk. After that, they held trivia contests on board and awarded the winners complimentary tickets to any of their 60 BlueCities.
It appears that the JetBlue team goes above and beyond to delight their customers. Like when they exerted every effort to return a straightforward pair of sunglasses to a customer who had left them on the aircraft. Positive customer reactions are sparked by core principles like empathy and cooperation. The thirsty people waiting in line may have only wanted something as basic as a drink of water. Those pleasantly delighted customers were left with a lasting impression by the JetBlue staff’s kindness.
Exercise 3.8: Telephone Pictionary – Creative thinking
Course Manual 9: Monopolistic Competition
What Is Monopolistic Competition?
When a large number of businesses provide rival goods or services that are comparable but imperfect alternatives, monopolistic competition exists.
A monopolistic competitive industry has minimal entry requirements, and decisions made by any one firm do not immediately affect those of its rivals. The price and marketing choices made by the rival companies serve as their points of differentiation.
Understanding Monopolistic Competition
Between a monopoly and perfect competition, monopolistic competition exists, combines aspects of both, and comprises businesses with comparable but distinct product offerings.
Industries with monopolistic competition include those in restaurants, hair salons, household goods, and clothes. Numerous rival businesses compete to sell, advertise, and price goods like dish soap and hamburgers.
Pricing is frequently a major tactic for these rival businesses because demand is highly elastic for their products and services. In order to increase sales, one business may decide to cut prices while forgoing a bigger profit margin. A different product might charge more and employ packaging or marketing that implies higher quality or complexity.
Businesses frequently employ distinctive branding and marketing techniques to distinguish their products. Because all of the products have the same function, the typical consumer frequently is unable to distinguish between them or evaluate what a reasonable price might be.
Characteristics of Monopolistic Competition
Low Barriers to Entry
In monopolistic competition, numerous businesses can enter the market and fight with one another for market share. This prevents one company from controlling the entire industry. Companies don’t have to think about how their choices will affect rivals, allowing them to operate without worrying about intensifying rivalry.
Product Differentiation
Similar items from competing companies are differentiated by their unique marketing approaches, brand names, and levels of quality.
Pricing
In monopolistic competition, businesses set pricing for both goods and services. Monopolistic competition allows businesses to change prices without starting a price war, which is common in oligopolies.
Demand Elasticity
In monopolistic competition, demand is very elastic and responsive to price fluctuations. For products like laundry detergent, consumers will switch brands based purely on price increases.
Advantages and Disadvantages of Monopolistic Competition
Monopolistic competition has advantages and disadvantages for businesses and customers.
What distinguishes monopolistic competition from perfect competition?
In an ideal market, all vendors provide the same product. If one rival raises its price, it will lose all of its market share to the other firms, in accordance with market supply and demand factors, where prices are not set by businesses and sellers accept the pricing created by market activity.
In monopolistic competition, pricing is not decided by supply and demand forces. The prices for the vastly diverse but similarly priced products are established by the companies. Product differentiation is the primary feature of monopolistic competition, where items are pushed based on quality or brand. Due to the tremendous elasticity of demand, any change in price may cause buyers to favor one competitor over another.
How Does Monopolistic Competition Function in the Short Term and Long Term?
Businesses aim to produce a given quantity where marginal income and marginal cost are equal in order to maximize profit or minimize losses. When existing businesses are profitable, new enterprises will enter the market. The demand curve and the marginal revenue curve alter, and new businesses stop entering the market, until all enterprises eventually make zero profit. If the existing businesses are losing money, some of them will exit the market. The businesses stop leaving the market after all start making a loss. The market cannot be said to be in equilibrium until there are no further market entrants or exits, or when all firms suffer long-term losses.
What Industry Is an Example of Monopolistic Competition?
Burger King and McDonald’s are two instances of restaurants with monopolistic competition. Both are fast food chains that offer comparable products and services to the same clientele. These two companies aggressively compete with one another and make an effort to differentiate themselves by providing varied food and drink bundles, charging different prices, and developing their brands.
What Is the Difference Between Monopolistic Competition and a Monopoly?
A monopoly is when one company has total control over a market and may establish its own prices for its products without fear of competition. Monopolies limit consumer options and control production quality and quantity. Monopolistic competitive companies are compelled to compete with one another, which restricts their ability to raise prices significantly without reducing demand and provides buyers with a wide range of product options. Monopolistic competition occurs more frequently than monopolies, which are discouraged in nations with open markets.
Supply-Demand Curve Graph in Monopolistic Competition
In general, the demand for a specific product declines when additional businesses enter the market and take share from it.
Demand is quite elastic under monopolistic competition. If demand is very elastic, consumers are very responsive to price changes and will switch to a different brand even if the product’s function is only marginally altered.
Pricing and competitiveness are correlated in such a way that raising prices causes a drop in an industry’s overall profitability (and vice versa).
The erosion of the total economic profit and margin over time is what gives the curve its downward slope structure.
The industry-wide short-term economic profits that first attracted more enterprises to the market tend to peak early.
But with time, profitability levels progressively begin to fall, and eventually fewer enterprises enter the market since the potential is no longer as alluring as it once was.
Operating in a market with monopolistic competition, in the opinion of the concerned businesses, is unsustainable over the long term. Eventually, there is usually no longer any financial incentive to bring in new competitors in such marketplaces.
The Bottom Line
When numerous businesses provide competing goods or services that are comparable but not exact alternatives, monopolistic competition develops. Clothing and hair salons are two examples of sectors with monopolistic competition. Competitive businesses frequently use branding or discount pricing methods in their pricing and marketing initiatives in order to gain market share.
Definition of Monopolistic Competition Examples
When there is monopolistic competition, multiple businesses compete with one another while also selling goods that are somehow different from those of the rivals. All instances cannot be given because monopolistic competition can be observed in a variety of industries.
As a result, a few examples of monopolistic competition are provided below, illustrating various scenarios.
Examples of Monopolistic Competition
Below are the Examples of Monopolistic Competition:
Example 1 – Fast Food Company
The most frequent sort of monopolistic competition is found at fast food outlets like McDonald’s and Burger King, which offer hamburgers. The two businesses listed above sell products of a type that is very similar to one another, yet they are not interchangeable. It is now entirely up to the individual consumer to decide which product and which firm they prefer. These businesses also market additional items outside hamburgers, such as French fries, soft drinks, etc. Although all of the aforementioned products are of a similar kind, there is no similarity between the two because each one has a slightly distinct shape and flavor. The monopolistic structure looks like this.
Example 2 – Hairdresser
One of the most well-known types of examples of monopolistic competition is the service offered by hairdressers in the market. There are undoubtedly many distinct types of hairdressers, and since each one of them has a little unique set of skills, they all offer slightly different services to customers. Additionally, they offer the services from various locations on various properties. These characteristics set the product apart in consumers’ perceptions. Since the hairdresser industry is not a large chain, it protects them against a more oligopolistic market structure.
The cost of the hairstylist’s services will vary according to their originality and scope. If a particular hairdresser has a reputation for offering the greatest services in a given market, it may raise its service fees because it is confident that customers will be willing to pay a little more for their superior offerings. The ability to charge higher prices comes from distinctiveness. As a result, the reputation of the businesses for the quality of their offerings is based on their service. One of the key characteristics of the monopolistic structure is that opening a new hair salon has relatively low entry and exit barriers.
Example 3 – Bakery Shop
Any municipality will undoubtedly have a large number of bakeries, and each one will offer a slightly different product to customers. However, if there is just one bakery in a given portion of the town, it may charge a little more for its goods. Due to their capacity, businesses engaged in monopolistic competition might increase the pricing of their products by capturing a larger part of the market.
Aside from the aforementioned, if a specific bakery is renowned for making the best pasties and pies in the city, it may raise its rates since it is confident that customers will be willing to pay a little bit more for their superior goods. This is how brand recognition and customer loyalty are established. One of the key characteristics of the monopolistic structure is that opening a new bakery store has relatively low entry and exit barriers.
Example 4 – Running Shoes Market
If one is looking for running shoes, there are many different brands to choose from, such as Adidas, ASICS, Nike, etc. On the one hand, it appears that there is intense rivalry in the running shoe market due to the large number of companies and the low entrance and exit barriers. The distinctiveness that each brand of shoe offers, however, allows them the power to charge a price that is different from the other competitors, giving the market for running shoes the appearance of being under a monopolistic structure. Businesses may add more features to their products and charge customers extra for such features. The consumer would only purchase the new feature if he felt it was worth the price.
Example 5 – Restaurants
Every town has a large number of eateries, and they all compete for customers based on the standard of the cuisine they serve and the cost of the goods they sell. Everywhere, it is evident that some restaurants charge $50 for a certain product while another restaurant costs $80 for the same same. Numerous elements, like the caliber of the food, the restaurant’s location, the additional services they provide to customers, etc., affect the pricing of the restaurant’s goods. This is how the various restaurants differentiate their products from one another, which is an essential component of any business. Despite having a nature that is comparable, these goods are not a replacement for one another. Another crucial aspect of the monopolistic structure is the minimal barriers to opening new restaurants and closing existing ones.
Conclusion – Monopolistic Competition Examples
Therefore, a monopoly is an industry or area that combines aspects of monopolistic and competitive marketplaces. Players have the freedom to enter and quit the market and to offer a variety of products that are similar to one another but do not replace one another. As a result, companies are able to independently maintain the prices of the goods and services they are providing. Since there is freedom of entry in an industry or region with monopolistic competition and high profits, this will encourage more businesses to enter the market, which will eventually result in average earnings. Thus, some examples of monopolistic structures in various industries can be seen in the aforementioned examples. There are numerous such examples that demonstrate the existence of monopolistic competition in a variety of marketplaces or industries.
Companies That Destroyed Their Largest Competitors: Amazon Vs Barnes & Noble
For many years, Barnes & Noble was the biggest bookshop in the nation. Amazon.com, an online retailer, has positioned itself as a competitor by moving book sales online and away from the costly operation of running storefronts and stocking hundreds of thousands of volumes in physical inventory. For Amazon, convenience and ease of use were crucial.
Later, when competing against B&N’s Nook and other e-readers, Amazon’s Kindle emerged victorious. While some bookshops, like Borders, have closed their doors, Barnes & Noble has just lost money. The net income of Barnes & Noble decreased from $147 million in 2006 to a $74 million loss in 2010. In contrast, Amazon’s net profits increased from $190 million to $1.2 billion. Some claim that the physical book’s era may be coming to an end.
Exercise 3.9: Desert Survival
Course Manual 10: Monopoly
What Is a Monopoly?
A monopoly is a market arrangement where one producer or seller holds a disproportionate amount of power within a certain market. Monopolies are forbidden in free-market economies as they limit customer alternatives and impede competition.
Antitrust laws are in existence in the US to prevent monopolies, guaranteeing that one company cannot dominate a market and take advantage of its dominance to take advantage of its customers.
Understanding a Monopoly
A company that enjoys monopoly status lacks replacements for its goods and faces little internal rivalry. Monopolies have the power to set prices and erect obstacles to entry for rival businesses.
Companies can become monopolies by vertically integrating their operations to control the entire supply chain from manufacturing to sales, or by acquiring rival businesses to become the only producer.
Monopolies frequently benefit from economies of scale, the capacity to produce large volumes at reduced unit prices.
Types of Monopolies
The Pure Monopoly
A single vendor in a market or industry with substantial entry barriers, such as high beginning costs, and no competitors is considered to have a pure monopoly.
The first business to have a complete monopoly on personal computer operating systems was Microsoft Corporation. Its desktop Windows software continued to have a 75% market share as of 2022.
Monopolistic Competition
Monopolistic competition is described as the presence of multiple vendors with comparable replacements in a given industry segment. Entry barriers are low, and competing businesses distinguish themselves through pricing and marketing initiatives.
Their products fall short of ideal alternatives like Visa and MasterCard. Retail establishments, dining establishments, and hair salons are other instances of monopolistic competition.
The Natural Monopoly
In reliance on distinctive raw materials, technology, or specialty, a natural monopoly develops. Companies with patents or high R&D expenditures, such as pharmaceutical firms, are seen as natural monopolies.
Public Monopolies
Public monopolies offer necessary services and products, such as those in the utility sector, where an area often receives its energy or water from just one company. Government communities permit and strictly regulate the monopoly, and they also have authority over rates and rate hikes.
Pros and Cons of a Monopoly
Monopolies can set prices and maintain consistent, predictable pricing for consumers in the absence of competition. Monopolies benefit from economies of scale and are frequently able to produce large volumes for less money per unit. A business can safely invest in innovation while operating as a monopoly without worrying about rivalry.
On the other hand, a business that controls a market or an industry might use its position to set prices, produce low-quality goods, and create artificial scarcities. Because there are few or no alternatives in the market, consumers must believe that a monopoly operates morally.
Regulation of a Monopoly
Antitrust legislation and rules are in place to prevent monopolistic practices, safeguard consumers, and maintain an open market.
The Sherman Antitrust Act, a forerunner to the monopoly, was created by the U.S. Congress in 1890 to restrict “trusts,” or groups of businesses that conspired to fix prices. Monopolies like the American Tobacco Company and the Standard Oil Company were destroyed by this act.
The Federal Trade Commission Act established the Federal Trade Commission (FTC), which along with the Antitrust Division of the U.S. Department of Justice sets standards for business practices and enforces the two antitrust acts. The Clayton Antitrust Act of 1914 established rules for mergers, corporate directors, and listed practices that would violate the Sherman Antitrust Act.
The AT&T monopoly breakup was the most significant in American history. AT&T was defeated by antitrust laws after dominating the country’s telephone service for decades as a monopoly sponsored by the government. The biggest impediment to competition was AT&T’s 1982 forced sale of 22 local exchange service businesses, which it owned and controlled. AT&T possessed telephone connections that almost connected every American house and company at the time.
What Businesses Have Experienced Monopoly Antitrust Violations?
Microsoft was charged with maintaining a monopoly and preventing competition in the personal computer operating systems market by utilizing its significant market share in 1994. Using the Antitrust Act, Microsoft was charged with “using exclusionary and anticompetitive contracts to market its personal computer operating system software. By these contracts, Microsoft has unlawfully maintained its monopoly of personal computer operating systems and has an unreasonably restrained trade.”
Microsoft was ordered to be split into two technological businesses by a federal district judge in 1998, but the ruling was later overturned on appeal by a higher court. Microsoft was free to continue using its operating system, methodologies for creating applications, and marketing strategies.
What Is Price Fixing?
An agreement to raise, cut, maintain, or stabilize prices or price levels is known as price fixing. Antitrust rules mandate that each business set its own prices and other competitive parameters, without consulting a rival. Customers decide which goods and services to purchase and anticipate that the cost will be established by supply and demand, not by a deal among rivals.
How Do Antitrust Laws Protect Consumers?
Both state and federal governments have the authority to bring antitrust cases. Consumers can get in touch with the Antitrust Division or Federal Trade Commission at the federal level if they believe a business is breaking antitrust rules. The state’s attorney general has the authority to look into a local business doing business within the state.
The Bottom Line
A monopoly is described as a single producer or seller who forbids rivals from offering the same product. A monopoly has the power to set prices and makes it difficult for rivals to enter the market. Antitrust laws exist to prevent monopolies, preventing one company from dominating a market and abusing that dominance to take advantage of its clients.
Monopoly Examples
The monopoly examples that follow illustrate numerous monopolistic business models. Both theoretical and real-world examples are provided. Some businesses have monopolies in the industries they operate in. Since there are several monopoly examples, not all variations and types are covered here, but the general idea of each type is the same, i.e., the company is the only seller of a good with no rivals or alternatives.
Top 8 Real-Life Monopoly Examples
Here are some actual monopolies from everyday life.
Monopoly Example #1 – Railways
Like the railroads, the government offers public services. Since no new partners or privately held enterprises are permitted to operate railways, they have a monopoly. The cost of the tickets, however, is affordable enough for the majority of people to use public transportation.
Monopoly Example #2 – Luxottica
The owner of all the main sunglasses brands is Luxottica. The business has acquired practically all of the main eyewear manufacturers. They still have different names, though. Although they are all made by the same business, it gives the impression to the buyer that they have a selection of sunglasses to pick from. More than 80% of the eyeglasses sold worldwide is produced by Luxottica.
Monopoly Example #3 – Microsoft
Microsoft is a company that makes computers and software. It dominates the tech market and effectively monopolizes it with a share of more than 75%.
Monopoly Example #4 – AB InBev
The corporation AB InBev, which was created when Anheuser-Busch and InBev merged, distributes over 200 different brands, including Budweiser, Corona, Beck’s, etc. These beers all come from the same manufacturer, despite having various names and compositions that result in various tastes. So, in a way, consumers of many Beers are paying a single business.
Monopoly Example #5 – Google
Every time we don’t know the answer to something, we usually turn to Google for assistance. The largest web search engine holds a market share of more than 70% thanks to their proprietary algorithm. Additionally, the business has developed into a web of connected services, including search engines, Gmail, maps, etc. As a result, the business has advanced technologically and innovated more than its rivals Yahoo and Microsoft.
Monopoly Example #6 – Patents
With the exception of a brief window, patents grant a business a temporary legal monopoly. No other business is allowed to exploit the invention for its purposes while the patent is active. For instance, a casino in Malaysia’s Genting Highlands had the sole patent for a permitted casino and had years of legal monopoly in that country.
Monopoly Example #7 – AT&T
The antitrust rules were broken in 1982 when AT&T, a telecommunications company, was the only provider of telephone services nationwide. The corporation was compelled to divide into six companies known as “Baby Bells” because of its monopolistic practices for service as a necessary telecommunication.
Monopoly Example #8 – Facebook
The new market in the twenty-first century is social media. Services are provided without charge to users, but businesses make money via advertising. Facebook nearly controls this market thanks to its enormous market share. The business is in front of all of its rivals, including Twitter and Google+. Users have increased organically, and social media marketers and other businesses, such as WhatsApp and Oculus Rift, have been acquired. The corporation is so large that it was recently accused of influencing users’ opinions about how elections are contested and swaying them in favor of a particular candidate or political party.
Conclusion
Governments make sure that monopolies, which are widespread in the capitalist system, don’t exploit this and overcharge consumers for their goods and services. Moral rules are developed to validate the monopolistic rates charged by the businesses. Additionally, countries have created antitrust laws to defend consumers from monopolistic businesses’ aggressive practices.
The difference between Monopoly and Monopolistic Competition
The key differences are as follows:
• The primary distinction between a monopoly and monopolistic competition is the number of players in the marketplaces. A monopolistic competition is created by a single seller. Monopolistic competition also needs at least two but ideally not many sellers.
• There is competition in sales and prices because there are more participants in monopolistic competition. Monopoly has complete control over the general attributes of its goods.
• Due to the high acceptance and nature of the product, a monopoly in the market makes it exceedingly difficult for new entrants and the exit of the present player. Entry and exit are simple in monopolistic competition, which has little impact on the overall demand and supply structure of an economy.
• In monopoly marketplaces, the single-player is the only one to benefit financially from the sale of the good. In the other market, a few vendors sell their goods; as a result, market sales and earnings are split.
• In general, designer goods or a product with little presence on the mass market could result in a monopoly situation. Practically, monopolistic competition is more likely to occur. Although recently there has been a significant introduction to the real estate, education, and hospitality industries, the products often contain consumer-related items.
Monopolistic competition is a global phenomenon prevalent in almost all market sectors. It brings in the scope of elasticity in commodity prices, and consumers can create supply patterns as per their demands. Although the monopoly is extreme and hardly exists in today’s environment, it is not completely non-existent.
While monopoly is something, every company would desire, however, a thriving market should always have a healthy monopolistic competition.
Companies That Destroyed Their Largest Competitors: Hewlett-Packard vs. Dell
With a 13 percent market share, Dell used to rule the world of PC sales. With a share of 11.2 percent, Compaq came in second. The graph of the personal computer market has undergone a significant transformation in the last ten years. Hewlett-Packard paid $25 billion to acquire the risky Compaq in May 2002.
Up until 2005, Dell held the top spot with a 17.2% market share, but HP swiftly closed the gap with a 14.7 percent share. HP overtook Dell in the third quarter of 2008, or in less than three years, and currently dominates the market. In the second quarter of 2011, HP had a 17.5% market share, Dell had 12.5%, and Lenovo had 12%, slightly behind Dell.
HP is not a perfect company. But despite these challenges, the organization has survived for 80 years because its executives recognize that no matter what you do, the future will come. The business didn’t take any special precautions against Covid-19, a corporate takeover attempt, a supply chain failure, or a market collapse. Instead, it was resilient to a variety of potential futures due to its deeply embedded culture of preparedness (and the better awareness and behaviors that culture permitted). Rogue waves can’t be avoided, but how you respond to them will determine whether you survive or sink when the next one comes.
Exercise 3.10: The Human Icebreaker
Course Manual 11: Oligopoly
What Is an Oligopoly?
A market structure known as an oligopoly has a small number of enterprises, none of which can prevent the others from having a large impact. The market share of the major companies is calculated using the concentration ratio.
A market with a monopoly has just one producer, a duopoly has two businesses, and an oligopoly has three or more businesses. The maximum number of firms in an oligopoly is unknown, but it must be low enough such that each firm’s activities have a major impact on the others.
Understanding Oligopolies
A market structure known as an oligopoly is made up of a limited number of companies that collectively have significant influence over a particular sector or market. Despite the group’s considerable market dominance, none of the individual companies can undercut the others or take away customers. Due to the presence of some rivalry, prices in this sector are therefore modest.
When one business sets a price, others will adjust in a fashionable way to maintain sales. For instance, when an airline lowers ticket rates, other participants frequently do the same. Prices in an oligopoly are typically higher than they would be in ideal competition, while this is because there is still less competition than there would be in a free market with numerous participants.
Due to the lack of a dominant player in the market, businesses may be encouraged to cooperate rather than compete, which prevents new competitors from joining the market. They work as a single entity thanks to their cooperation. Oligopolies construct strong obstacles to entry, effectively keeping out fresh upstarts from becoming competitors, despite not being monopolies dominated by a single corporation.
An oligopoly can be identified using the concentration ratio, which analyzes the market share of the top companies in an industry. The maximum number of firms in an oligopoly is unknown, but it must be low enough such that each firm’s activities have a major impact on the others.
Without competition, businesses have the ability to set prices and limit supply, which can result in subpar goods and services and higher costs for consumers. Monopolies and oligopolies can function unhindered in the United States while restricting competition, so long as they do not break antitrust laws. These rules encompass unjustified trade restrictions, obviously detrimental behaviors including price-fixing, market-splitting, and bid-rigging, as well as mergers and acquisitions (M&A) that significantly reduce competition.
The kinked demand curve is distinctive of an oligopolistic market. It shows how, at higher and lower prices, the elasticity of demand changes. As a result, prices remain relatively rigid.
Conditions That Enable Oligopolies
High entry barriers for capital expenditures, legal privileges (such as a permit to use wireless airwaves or land for railroads), and a platform that increases in value with more users are all factors that allow oligopolies to persist (such as social media).
Some of these factors have altered as a result of the globalization of trade and technology. For instance, offshore production and the emergence of “mini-mills” have an impact on the steel sector. Google Docs, which Google funded with money from its web search company, competed with Microsoft in the office software application market.
Why Are Oligopolies Stable?
The reason that such a group is stable is an intriguing question. The businesses must recognize the advantages of cooperation over economic competition in order to decide to forego competitiveness and instead focus on the advantages of cooperation. The companies have occasionally come up with inventive strategies to prevent the appearance of price fixing, such utilizing moon phases. Setting prices rather than allowing the free market decide them is known as price-fixing. Another strategy is having companies follow a known pricing leader; when the leader raises prices, the others will do the same.
The Prisoner’s Dilemma
Each company in the oligopoly has an incentive to cheat, which is their biggest issue. If all companies agree to collectively restrict supply and maintain high prices, each company stands to gain significantly more business from the others by breaching the agreement and undercutting them. Such competition can be fought through prices or just by each company increasing the amount of product it sells.
These situations, which resemble a prisoner’s dilemma, have models that game theorists have created. The Nash equilibrium state for oligopolies is when costs and benefits are equal enough that no firm wants to leave the group. This can be accomplished through contractual or market terms, regulatory limitations, or tactical alliances amongst oligopoly participants that allow for the punishment of cheats.
Special Considerations
It’s noteworthy to note that determining the outcomes of numerous prisoner’s dilemmas and associated coordination games that repeatedly occur is a key component of both the challenge of preserving an oligopoly and the problem of coordinating activity among buyers and sellers generally on the market. Therefore, many of the institutional factors, such as secure contract enforcement, cultural norms of high trust and reciprocity, and laissez-faire economic policy, that facilitate the development of market economies by reducing prisoner’s dilemma issues among market participants, may also potentially help encourage and sustain oligopolies.
Governments occasionally combat oligopolies by passing laws that forbid collaboration and price-fixing. However, if a cartel operates outside the purview of governments or with their approval, they may be able to control prices. One illustration of this is OPEC, a cartel of oil-producing nations with no supreme leader. In contrast, oligopolies frequently seek out and advocate for advantageous government policies in mixed economies in order to run their businesses under the control or even the direct supervision of governmental organizations.
What Are Some Negative Effects of an Oligopoly?
An oligopoly occurs when a small number of businesses dominate a specific market. These businesses may control prices collectively by collusion, resulting in uncompetitive prices on the market. A market with an oligopoly restricts new competitors and discourages innovation, among other things. There are oligopolies in the oil sector, railroads, cellular carriers, and big tech.
What Is an Example of a Current Oligopoly?
The concentration ratio, which computes a company’s size in relation to its industry, is one indicator of whether an oligopoly is present. Mass media are examples of areas where a high concentration ratio is found. NBC Universal, Walt Disney, Time Warner, Viacom CBS, and News Corporation, for instance, control the majority of the market in the United States, despite the entry of streaming services like Netflix and Amazon Prime. Apple iOS and Google Android are the two major players in the huge tech industry that govern the smartphone operating systems.
Is the U.S. Airline Industry an Oligopoly?
It has been claimed that the airline business is an oligopoly, with just four companies controlling approximately two-thirds of all domestic flights in the United States as of 2021. These four businesses are American Airlines, Delta Airlines, United Airlines Holdings, and Southwest Airlines. A report created by the White House claims that “Reduced competition is a factor in rising prices for things like baggage and cancellation. These fees are frequently raised in lockstep, showing a lack of significant competitive pressure, and they are frequently unnoticed by customers at the point of sale.” It’s interesting to note that in 1978, The Airline Deregulation Act was passed, removing the Civil Aeronautics Board’s authority to govern the sector. Prior to this, the airline sector functioned much like a public utility, and 20 years prior to the introduction of deregulation, fare prices had been declining.
Oligopolies: Some More Current Examples
An oligopoly is when businesses in the same sector cooperate to boost their shared earnings rather than ruthlessly competing with one another. There are oligopolies all throughout the world, and certain industries even seem to be experiencing an increase in them. In contrast to a monopoly, when one company controls a particular industry, an oligopoly is made up of a small number of businesses that collectively have a substantial impact on a market or sector.
These businesses frequently collaborate or coordinate with one another for the advantage of the group as a whole, even if they are still legally regarded as rivals in their own industry. For customers, this anti-competitive activity may mean higher pricing.
Industries With Potential Oligopolies
Oligopolies have existed throughout history in a wide range of sectors, including the production of steel, oil, railroads, tires, grocery store chains, and wireless carriers. The pharmaceutical and aviation industries also have oligopoly structures.
The United States has some prominent oligopolies in the recording industry, cellular carriers, airlines, film and television production, and music. Since the 1980s, it has grown more typical for two or three companies to dominate an industry. Consolidation of the sector has been brought about by merger agreements between significant businesses.
These industries have one thing in common: they have high entrance barriers. For example, building or buying an airplane or creating and selling medications fall under this category. They also frequently benefit from intellectual property protections like patents and trademarks that effectively keep out competitors and benefit incumbents.
Current Examples of Oligopolies
Today, several well-known oligopolies exist. Some of these include well-known or household names in key industries or sectors.
Mass Media
National mass media and news outlets are a prime example of an oligopoly, with the bulk of U.S. media outlets owned by just four corporations:
• AT&T (T)
• Comcast (CMCSA)
• Walt Disney (DIS)
• Charter Communications (CHTR)
New players like Amazon and Netflix have joined the mix recently with the rise of streaming media, but smaller players remain shut out.
Big Tech
Operating systems for smartphones and computers provide excellent examples of oligopolies in big tech. Apple iOS and Google Android dominate smartphone operating systems, while computer operating systems are overshadowed by Apple and Microsoft Windows. Big tech also is concentrated on the Internet, with Google, Meta (formerly Facebook), and Amazon dominating.
Automakers
Automobile manufacturing is another example of an oligopoly, with the leading auto manufacturers in the United States being Ford (F), GM, and Stellantis (the new iteration of Chrysler through mergers). Worldwide there are perhaps a dozen key automakers including Toyota, Honda, Volkswagen Group, and Renault-Nissan-Mitsubishi.
Telecom
Once an actual monopolistic corporation, AT&T was famously split up due to antitrust ruling into several “Baby Bells.” These spinoffs now maintain an oligopoly in the landline and mobile phone provider space, including Verizon (VZ), T-Mobile (TMUS), and AT&T (T).
Entertainment
Hollywood has long been an oligopoly, with a select few movie studios, film distribution companies, and movie theater chains to choose from. The music entertainment industry, too, is dominated by only a handful of players, such as Universal Music Group, Sony, and Warner.
Airlines
The United States airline industry today is arguably an oligopoly. As of 2021, there are four major domestic airlines: American Airlines Inc. (AAL), Delta Air Lines Inc. (DAL), Southwest Airlines (LUV), and United Airlines Holdings Inc. (UAL), which fly just over 65% of all domestic passengers.
Other Industries
The examples above may be among the most obvious, but you are likely to find just a small number of large players across a wide swath of the economy. Food manufacturers, chemical companies, apparel, and supermarket chains are just a few more to look out for.
What Are the Characteristics of an Oligopolistic Industry?
In an industry with a few key firms who cannot effectively displace the others, oligopolies are more likely to form. These sectors typically have high entry barriers due to regulation and intellectual property protections, as well as their tendency to be capital-intensive.
Which Industries Are Oligopolistic?
There are oligopolies in a variety of sectors, including major tech, automakers, airlines, and the media and entertainment industries.
What Causes an Oligopoly?
If the correct circumstances exist, businesses in an oligopoly will come to understand that their best interests as an individual are served not by fierce competition but rather by coordinating and working with one another to a certain extent or in specific business areas.
Are Nike, Netflix, and Coca-Cola oligopolies?
In their respective industries, each of these businesses currently enjoys oligopoly membership.
The Bottom Line
To better manage an industry, oligopolies can develop organically or with the assistance of governmental agencies. Customers may suffer oligopolies’ higher pricing and worse products, but not to the same extent as they would under a monopoly because oligopolies still face competition. The bulk of American industries are oligopolies, which imposes high barriers to entry on potential competitors.
Why the Segway Failed to stay in the competition: Sometimes, being first isn’t all that great
These two-wheeled personal transporters seemed like something out of a sci-fi movie when they first appeared in 2001.
It goes without saying that when something this amazing is out, people are bound to be a little inquisitive and give it a try. The excitement surrounding Segway was comparable to the hullabaloo over Tesla’s most eye-catching product to date, the Cybertruck, in modern times.
Dean Kamen, the Segway’s creator, said:
“I believe the Segway HT will do for walking, what the calculator did for pad and pencil. Get there quicker. You’ll go further.”
But by 2007, Segway had only managed to sell 1% of what it had hoped to. Additionally, the business chose to give up in 2015 and was bought up by Ninebot, a Chinese rival.
So why did this supposedly life-changing device fail to catch on with consumers?
• There Were No Strong Safety Requirements for Segway Use – It Was Common for People to Ride a Segway Without a Helmet. Enforcing stringent laws on Segway use wasn’t really a top concern for the legislators because they were preoccupied with controlling severe offenses.
• Segway needed a better pricing strategy. In the beginning, a consumer would have to pay a staggering $5,000 to purchase a brand-new Segway. This may have been the equivalent of a typical consumer’s savings for half a year; a big price to pay for not walking, don’t you think?
• The Design Needed Some Serious Modifications – Sure, it sounds convenient to let a machine do the walking for you. However, the Segway was a temperamental device that wasn’t always reliable.
A new product may spark interest in the market, but it doesn’t guarantee it will go on sale.
Evidently, Segway was merely a test model for the sophisticated e-scooters we now see.
Exercise 3.11: Magazine story
Course Manual 12: Perfect Competition
What Is Perfect Competition?
A hypothetical market system is referred to as perfect competition. Perfect competition offers a valuable model for illustrating how supply and demand influence pricing and behavior in a market economy, despite perfect competition seldom occurring in actual markets.
There are numerous buyers and sellers in a market with perfect competition, and prices always reflect supply and demand. Companies only make as much money as is necessary to stay in operation. Other businesses would enter the market and reduce revenues if they were to make excessive profits.
How Perfect Competition Works
One standard or ideal kind to which actual market structures can be contrasted is perfect competition. Theoretically, monopolies, in which only one company provides a good or service and that company is free to set its own prices because consumers have no other options and it is impossible for potential competitors to enter the market, are the opposite of perfect competition.
There are no monopolies under a scenario of perfect competition. A few essential traits of this type of structure include:
• All firms sell an identical product (the product is a commodity or homogeneous).
• All firms are price takers (they cannot influence the market price of their products).
• Market share has no influence on prices.
• Buyers have complete or perfect information (in the past, present, and future) about the product being sold and the prices charged by each firm.
• Capital resources and labor are perfectly mobile.
• Firms can enter or exit the market without cost.
Contrast this with the more grounded imperfect competition that arises whenever a market, whether hypothetical or actual, deviates from the idealized principles of neoclassical pure or perfect competition.
Each genuine market can be categorized as imperfect since they all occur outside of the plane of the ideal competition model. The Cambridge school of post-classical economic thought is where the modern theory of imperfect versus perfect competition originated.
Characteristics of Perfect Competition
The following characteristics identify a market as being perfectly competitive:
A Large and Homogeneous Market
There are many buyers and sellers in a market that is very competitive. Instead of giant corporations that may regulate prices through changes in supply, the sellers are smaller businesses. There aren’t many distinctions in the capabilities, features, and prices of the things they sell. This makes sure that consumers cannot differentiate between products based on tangible qualities like size or color or intangible qualities like branding.
In this market, there are plenty of buyers and sellers, ensuring that supply and demand are stable. Customers can so readily switch out products made by one company for those made by another.
Perfect Information Availability
A crucial advantage is knowledge of an industry’s ecology and competitors. For some businesses, understanding supplier pricing and component sourcing, for instance, can make or break the market.
Information on patents and research projects at rival companies can help businesses develop competitive strategies and create a moat around their products in some knowledge- and research-intensive industries, such as technology and the pharmaceutical industry.
Absence of Controls
By enforcing rules and regulating prices, governments play a crucial role in the development of the market for goods. By establishing guidelines for the market’s operation, they can regulate the entry and exit of businesses. For instance, the creation, manufacture, and sale of medications are subject to a number of regulations that the pharmaceutical sector must follow.
As a result, these regulations necessitate significant capital expenditures in the form of persons (lawyers, quality assurance staff, etc.) and infrastructure (medicine manufacturing equipment). The total expenditures pile up and make it quite pricey for businesses to release a medicine on the market.
In contrast to its pharma equivalent, the technology sector operates with considerably less regulation. As a result, business owners in this sector can launch organizations with little to no cash, making it simple for anyone to launch a company in the sector.
In a market that is intensely competitive, such controls don’t exist. Since there are no limits on a company’s entry or exit from such a market, it can freely invest in labor and capital assets and alter output in response to market needs.
Cheap and Efficient Transportation
Another aspect of perfect competitiveness is affordable and effective transportation. Companies do not suffer considerable fees for products transportation in this kind of market. This lowers the cost of the item and shortens the time it takes to deliver the items.
Theory vs. Reality of Perfect Competition
The main reason why real-world competition deviates from this ideal is due of variation in manufacturing, marketing, and sales. For instance, the proprietor of a small organic goods store can differentiate their goods from those of rivals by heavily publicizing the grain fed to the cows that produced the dung that fertilized the non-GMO soybeans. Differentiation refers to this.
The first two requirements, homogeneous goods and price takers, are hardly ever true. However, the global tech and commerce transformation is increasing information and resource flexibility for the second pair of requirements (information and mobility). Although this theoretical model is far from reality, it is nonetheless useful since it may explain a variety of behaviors that occur in the real world.
Businesses aim to build brand value by marketing in line with their distinctiveness. They advertise in order to increase their purchasing power and market share.
Barriers to Entry Prohibit Perfect Competition
Many industries also have major entrance barriers, which restrict the ability of businesses to enter and depart such industries. Examples of these barriers include high beginning costs (as in the auto manufacturing industry) or rigorous government regulations (as in the utilities industry). And even while the digital age has boosted consumer knowledge, there are still few markets where consumers are constantly aware of all the options and pricing.
In the economy, ideal competition cannot emerge due to significant barriers. Considering that there are so many small producers in the agricultural sector and that they have so little control over the selling prices of their goods, this sector arguably exhibits the closest thing to perfect competition.
Although agricultural production has significant entry barriers, it is not particularly difficult to enter the market as a producer. Commercial buyers of agricultural commodities are typically highly well-informed.
Advantages and Disadvantages of Perfect Competition
A market economy’s idealized framework is one of perfect competition. Although it offers a useful model for how an economy functions, it frequently has considerable deviations from the real economy. The value of a perfect competition framework is only correct to the extent that it represents real-world circumstances, much like other models.
Low profit margins are a significant characteristic of perfect competition. All consumers have access to the same products, therefore they inevitably look for the best deals. Businesses cannot differentiate themselves by charging more for superior goods and services. Because its phones are more expensive than those of its rivals, a business like Apple (AAPL) would not be able to survive in a market with perfect competition.
The lack of innovation is another. Businesses are encouraged to innovate and produce better products by the possibility of gaining a larger market share and differentiating themselves from the competition. In perfect competition, however, no company has a dominant market share, therefore their operations have no long-term profitability.
The absence of economies of scale is another drawback. Companies will have less money to invest in increasing their production capacity if profit margins are limited to zero. Increased production capacity may result in lower consumer prices and higher profit margins for businesses. However, the existence of numerous small businesses that compete for the same market share prevents this from happening and makes sure that the average firm size remains modest.
Pros and Cons of Perfect Competition
Do Firms Profit in Perfect Competition?
Profits might be attainable for a short while in markets with perfect competition. The dynamics of the market, however, neutralize the impact of either positive or negative earnings and move them toward equilibrium. Since there is no information asymmetry in the market, competing companies will immediately increase production or cut expenses to bring themselves into parity with the profitable company.
In a market with perfect competition, a company’s average revenue and marginal revenue are equal to the selling price of its goods. The equilibrium of the perfectly competitive market, which had previously been disturbed, will afterwards be restored. All gains or losses in such markets eventually drift toward zero due to a change in supply and demand.
Perfect Competition vs. Monopoly
A monopoly, in which one business controls the supply of a specific good, is the reverse of perfect competition. When there is a monopoly, customers who feel the price is too high can only choose not to purchase the good.
This means that the monopolistic corporation can simply establish a price point that maximizes its profits rather than basing prices on supply and demand. Certain business models are regarded as natural monopolies because they enjoy a sizable first-mover advantage that deters rivals from joining the market. Other monopolies might be created by the government or by cartels like OPEC.
Examples of Perfect Competition
Perfect competition is a theoretical idea and doesn’t actually exist, as was previously stated. As a result, it is challenging to identify examples of ideal competition in daily life, however there are some variations.
Produce
Think about what happens at a farmer’s market, when there are many small sellers and purchasers. From one farmer’s market to another, products and pricing normally don’t change significantly. There is virtually little variation in how produce is packaged or marketed, and it does not matter how it is grown (unless it is considered organic). Therefore, the average pricing won’t change even if one of the farms supplying commodities for the market closes.
Supermarkets
In the instance of two competing supermarkets that stock their aisles from the same group of businesses, the scenario might also be very comparable. Once more, there are little differences between the products at the two stores, and their prices are essentially the same. The market for unbranded goods, which offers less expensive variations of popular brands, is another illustration of perfect competition.
Knockoffs
Product imitators typically have similar prices and little to distinguish them from one another. In the event that one of the businesses producing such a product falls out of business, another one steps in to take its place.
Technology
In some ways, the growth of new markets in the technology sector is similar to perfect competition. For instance, during the early stages of social media networks, there were a large number of websites offering comparable services. These websites include Asianave.com, Blackplanet.com, and Sixdegrees.com. The majority of the sites were free, and none of them had a significant market share. They were the market’s vendors, and the purchasers were the users of these websites, who were primarily young people.
Due to the low startup costs for businesses in this industry, both startups and established businesses can freely enter and depart these marketplaces. Many technologies, like PHP and Java, were open-source and accessible to everyone. Real estate and infrastructure-related capital expenditures were not required. Keep in mind that Mark Zuckerberg essentially started Facebook from his room in college.
The Bottom Line
Imagine a market with perfect competition, where every consumer has access to the same goods and information. All businesses must provide the lowest price feasible in this type of economy or else they run the danger of being undercut by rivals. Perfect competition is beneficial for illuminating how economic actors act in a free market, despite the fact that it is simply a theoretical model.
Companies That Destroyed Their Largest Competitors: GM vs. Toyota
General Motors, also known as GM, has faced two significant obstacles in its quest to overtake the top carmaker in the globe. Since the 1930s, GM has been the undisputed market leader in the United States. For nearly all of the second half of the 20th century, GM dominated the global market as well. The worldwide recession, however, caused it to start losing its hold on the top spot. By the end of 2008, Toyota overtook GM as the leading carmaker globally.
The market share of GM both internationally and domestically has been steadily declining.
The producer (GM) filed for Chapter 11 bankruptcy in June 2009 as a result of low sales and financial issues brought on by the recession. In just two years, it was back in first place. Due to the success of its recent IPO, GM soon turned a profit. In August 2009, GM once more overtook Toyota as the top carmaker in the world as a result of the devastating effects of the earthquake in Japan. Toyota, a Japanese competitor, only sold 3.7 million units in the first half of 2011, compared to 4.5 million sold by GM.
Exercise 3.12: Chairs
Project Studies
Project Study (Part 1) – Customer Service
The Head of this Department is to provide a detailed report relating to the Competitive Environment process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Competitive Environment Analysis
02. Identify Potential Competitive Offerings
03. Intellectual Property Reviews
04. Technology Stack Assessment
05. Porters Five Forces Analysis
06. Identify Competitor’s Team Members
07. Identify Competitor’s Investors
08. Identify Competitor’s Customers
09. Monopolistic competition
10. Monopoly
11. Oligopoly
12. Pure Competition
Please include the results of the initial evaluation and assessment.
Project Study (Part 2) – E-Business
The Head of this Department is to provide a detailed report relating to the Competitive Environment process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Competitive Environment Analysis
02. Identify Potential Competitive Offerings
03. Intellectual Property Reviews
04. Technology Stack Assessment
05. Porters Five Forces Analysis
06. Identify Competitor’s Team Members
07. Identify Competitor’s Investors
08. Identify Competitor’s Customers
09. Monopolistic competition
10. Monopoly
11. Oligopoly
12. Pure Competition
Please include the results of the initial evaluation and assessment.
Project Study (Part 3) – Finance
The Head of this Department is to provide a detailed report relating to the Competitive Environment process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Competitive Environment Analysis
02. Identify Potential Competitive Offerings
03. Intellectual Property Reviews
04. Technology Stack Assessment
05. Porters Five Forces Analysis
06. Identify Competitor’s Team Members
07. Identify Competitor’s Investors
08. Identify Competitor’s Customers
09. Monopolistic competition
10. Monopoly
11. Oligopoly
12. Pure Competition
Please include the results of the initial evaluation and assessment.
Project Study (Part 4) – Globalization
The Head of this Department is to provide a detailed report relating to the Competitive Environment process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Competitive Environment Analysis
02. Identify Potential Competitive Offerings
03. Intellectual Property Reviews
04. Technology Stack Assessment
05. Porters Five Forces Analysis
06. Identify Competitor’s Team Members
07. Identify Competitor’s Investors
08. Identify Competitor’s Customers
09. Monopolistic competition
10. Monopoly
11. Oligopoly
12. Pure Competition
Please include the results of the initial evaluation and assessment.
Project Study (Part 5) – Human Resources
The Head of this Department is to provide a detailed report relating to the Competitive Environment process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Competitive Environment Analysis
02. Identify Potential Competitive Offerings
03. Intellectual Property Reviews
04. Technology Stack Assessment
05. Porters Five Forces Analysis
06. Identify Competitor’s Team Members
07. Identify Competitor’s Investors
08. Identify Competitor’s Customers
09. Monopolistic competition
10. Monopoly
11. Oligopoly
12. Pure Competition
Please include the results of the initial evaluation and assessment.
Project Study (Part 6) – Information Technology
The Head of this Department is to provide a detailed report relating to the Competitive Environment process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Competitive Environment Analysis
02. Identify Potential Competitive Offerings
03. Intellectual Property Reviews
04. Technology Stack Assessment
05. Porters Five Forces Analysis
06. Identify Competitor’s Team Members
07. Identify Competitor’s Investors
08. Identify Competitor’s Customers
09. Monopolistic competition
10. Monopoly
11. Oligopoly
12. Pure Competition
Please include the results of the initial evaluation and assessment.
Project Study (Part 7) – Legal
The Head of this Department is to provide a detailed report relating to the Competitive Environment process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Competitive Environment Analysis
02. Identify Potential Competitive Offerings
03. Intellectual Property Reviews
04. Technology Stack Assessment
05. Porters Five Forces Analysis
06. Identify Competitor’s Team Members
07. Identify Competitor’s Investors
08. Identify Competitor’s Customers
09. Monopolistic competition
10. Monopoly
11. Oligopoly
12. Pure Competition
Please include the results of the initial evaluation and assessment.
Project Study (Part 8) – Management
The Head of this Department is to provide a detailed report relating to the Competitive Environment process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Competitive Environment Analysis
02. Identify Potential Competitive Offerings
03. Intellectual Property Reviews
04. Technology Stack Assessment
05. Porters Five Forces Analysis
06. Identify Competitor’s Team Members
07. Identify Competitor’s Investors
08. Identify Competitor’s Customers
09. Monopolistic competition
10. Monopoly
11. Oligopoly
12. Pure Competition
Please include the results of the initial evaluation and assessment.
Project Study (Part 9) – Marketing
The Head of this Department is to provide a detailed report relating to the Competitive Environment process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Competitive Environment Analysis
02. Identify Potential Competitive Offerings
03. Intellectual Property Reviews
04. Technology Stack Assessment
05. Porters Five Forces Analysis
06. Identify Competitor’s Team Members
07. Identify Competitor’s Investors
08. Identify Competitor’s Customers
09. Monopolistic competition
10. Monopoly
11. Oligopoly
12. Pure Competition
Please include the results of the initial evaluation and assessment.
Project Study (Part 10) – Production
The Head of this Department is to provide a detailed report relating to the Competitive Environment process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Competitive Environment Analysis
02. Identify Potential Competitive Offerings
03. Intellectual Property Reviews
04. Technology Stack Assessment
05. Porters Five Forces Analysis
06. Identify Competitor’s Team Members
07. Identify Competitor’s Investors
08. Identify Competitor’s Customers
09. Monopolistic competition
10. Monopoly
11. Oligopoly
12. Pure Competition
Please include the results of the initial evaluation and assessment.
Project Study (Part 11) – Logistics
The Head of this Department is to provide a detailed report relating to the Competitive Environment process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Competitive Environment Analysis
02. Identify Potential Competitive Offerings
03. Intellectual Property Reviews
04. Technology Stack Assessment
05. Porters Five Forces Analysis
06. Identify Competitor’s Team Members
07. Identify Competitor’s Investors
08. Identify Competitor’s Customers
09. Monopolistic competition
10. Monopoly
11. Oligopoly
12. Pure Competition
Please include the results of the initial evaluation and assessment.
Project Study (Part 12) – Education
The Head of this Department is to provide a detailed report relating to the Competitive Environment process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Competitive Environment Analysis
02. Identify Potential Competitive Offerings
03. Intellectual Property Reviews
04. Technology Stack Assessment
05. Porters Five Forces Analysis
06. Identify Competitor’s Team Members
07. Identify Competitor’s Investors
08. Identify Competitor’s Customers
09. Monopolistic competition
10. Monopoly
11. Oligopoly
12. Pure Competition
Please include the results of the initial evaluation and assessment.
Program Benefits
Marketing
- Sales models
- Business growth
- Business strategy
- Customer loyalty
- Enhanced performance
- Improved responsiveness
- Opportunity analysis
- Supplier evaluation
- Corporate goals
- Market analysis
Management
- Engaged workforce
- Increased trust
- Heightened teamwork
- Productive meetings
- Idea generation
- Increased revenue
- Role clarity
- Role distinctions
- Tasking formula
- Effective communication
Finance
- Cost-effective
- Return on investment
- Budget friendly
- Financially sustainable
- Profitability enhancement
- Self-financing
- Performance improvement
- Cost savings
- Controlled growth
- Calculated risk
Client Telephone Conference (CTC)
If you have any questions or if you would like to arrange a Client Telephone Conference (CTC) to discuss this particular Unique Consulting Service Proposition (UCSP) in more detail, please CLICK HERE.