04 June 2011

Creative Strategy To Achieve Competitive Advantage for the Business

In this competitive market, a number of companies are competing with each others. How does an enterprise try to generate more profit in the market? They may try to implement a creative strategy to allow them to do so.

There are three ways:
  1. Altering Firm's Existing Position - A firm can improve its attractiveness through its choice of competitive strategy. It can be done by reducing Customer Power (direct sales), Supplier Power (using standardized parts that can be sourced from many vendors), Substitutes (providing more features), Threat of Entry (Raise barrier to entry - increase fixed cost), Rivalry (avoid price wars and focus on differentiating products)
  2. Exploiting Changes in Industry - Examples: Forward or Backward Integration applied to Top Glove which acquired land to produce latex, External forces (such as improvement of substitute) and sudden and dramatic change like the impact e-mail had on document delivery services.
  3. Shape the Industry Structure - By enhancing industry value-added overall (eliminating inefficiencies in the supply chain or distribution network) or redistributing value-added in favor of industry participants (reducing customer power). Industry leaders are best positioned to reshape the industry because their ability to absorb the related costs and the fact that they generally benefit most from improved industry conditions.

p/s: Source from CFA materials

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