Competitive Advantage

The competitive payoff is thought to be stronger when it lasts for giganticer stage of time. Those companies who argon able to principal(prenominal)tain a competitive benefit for m some(prenominal) another(prenominal) classs ar thought to give a sustainable competitive expediency. Understanding the Concept sustainable competitive vantages ar company assets, attributes, or abilities that argon difficult to duplicate or exceed and provide a superior or favorable long term position everywhere competitors. sustainable competitive advantages are required for a company to lucubrate in todays global environment.Value investors search for companies that are bargains. In order to avoid purchasing a value trap unriv altogethered Of the factors we search for is sustainable competitive advantages. With away one or much sustainable competitive advantages a company may not be able to rec everywhere from any(prenominal) ca utilize the stock to become a bargain. We tho lack to purchase the stocks of companies that are real value investments, not value traps. In other words, we want to deal stocks trading be miserable their intrinsic value and will age property f start for shareholders.If sustainable competitive advantage is dependent on maintaining a high advance margin than other companies in the comparable attention, how does a company set out to develop a dodging to both achieve and maintain competitive advantage? The two main components of profit are that nodes both value the goods and services and will pass on for them and that a company sas wellge make wareion speak to related to goods and services low, so that there is a higher profit margin. For example, if flings Cupcake obtain can make a chocolate cupcake for 25 centimes and divvy up it for $1. 0, the profit on each cupcake is 75 cents. Sallys customers will pay off $1. 00 per cupcake because the cupcakes are voluptuous and made with high reference ingredients. A few blocks a itinerary, Bobbys Cupcakes &038 More spends 40 cents making a chocolate cupcake, but can only sell the cupcake for 50 cents. Bobbys profit is only 10 cents per cupcake. Customers will not pay as much funds per cupcake, because Bobbys cupcakes are not as nice and are not made with ingredients that match the quality of Sallys cupcakes.Sally will be able to maintain a competitive advantage as long as she go bys cost displace than the amount customers will pay, allowing her to get on a higher profit than Bobby. If this continues year after year, plain as cost and cost change, Sally would be said to bring the sustainable competitive advantage. However, Sally cannot become too comfortable with her advantage, and instead must antique to acquire ways to maintain a competitive advantage. Bobby may become make to outperform Sally. If Bobby is able to increase his own profit substantially, he could potentially take away the sustainable competitive advantage.Your competitive advant age is what sets your avocation a jump from your competition. It highlights the benefits a customer receives when they do business with you. It could be your products, service, reputation, or even your location. For example, do you offer home delivery, a money defend guarantee, a 2-hour call-out service or childcare facilities? Types ND Examples of Sustainable Competitive Advantages Low Cost Provider/ Low pricing Economies of ordered series and efficient operations can help a company keep competition out by being the low cost provider.Being the low cost provider can be a substantial restraint to entry. In addition, low pricing done consistently can build commemorate loyalty be a huge competitive advantage (I. E. Wall-Mart). Market or Pricing Power A company that has the cogency to increase prices without losing market share is said to hit pricing power. Companies that stir pricing power are commonly taking advantage of high barriers to entry or have earned the dominant ses sion in their market. Powerful Brands It takes a large investment in time and money to build a brand. It takes very little to destroy it.A good brand is in expensive because it causes customers to prefer the brand over competitors. Being the market attraction and having a great corporate reputation can be part of a powerful brand and a competitive advantage. Strategic assets Patents, trademarks, sham rights, domain names, and long term contracts would be examples of strategic assets that provide sustainable competitive advantages. Companies with excellent research and development dexterity have tick off strategic assets. Barriers To Entry Cost advantages of an existing company over a vernal company is the most common barrier to entry.High investment be (I. E. New factories) and government regulations are common impediments to companies tying to enter untested markets. High barriers to entry sometimes Create monopolies or near monopolies (I. E. return companies). Adapting Pro duct Line A product that never changes is ripe for competition. A product annotation that can evolve allows for improved or complementary color follow up products that keeps customers coming back for the mod and improved rendering (I. . Apple phone) and possibly some accessories to go with it.Product Differed tuition A uncomparable product or service builds customer loyalty and is less probable to lose market share to a competitor than an advantage ground on cost. The quality, number of models, flexibility in ordering (I. E. Custom orders), and customer service are all aspects that can positively diametriciate a product or service. Strong Balance Sheet/ Cash Companies with low debt and/or lots of cash have the flexibility to make opportune investments and never have a problem with access to working capital, liquidity, or solvency.The balance sheet is the foundation of the company. Outstanding Management / People in that respect is always the intangible of outstanding manag ement. This is hard to quantify, but there are winners and losers. Winners seem to make the right closes at the right time. Winners somehow displace and get the most out of their employees, particularly when facing challenges. Management that has been palmy for a number fears is a competitive advantage. Value Investing and Sustainable Competitive Advantages Companies with one sustainable competitive advantage capability be winning.Finding companies with multiple sustainable competitive advantages will greatly improve the chances you have found a real value stock. Can you think of any sustainable competitive advantages I may have missed? Http//arborinvestmentplanner. Com/sustainable-competitive-advantages- definition-types-examples/ How to call your competitive advantage To recognise your competitive advantage, you ingest to understand your competitors and your customers. involve yourself Why do customers buy from Why do customers buy from our competitors and not us?Why do s ome potential customers not buy at all? What do we admit to do to be successful in the upcoming? Market research will help you to make these questions. Good market research will reveal how your business is unalike from your competitors, and what you have to offer that appeals to your customers. In-depth customer research will help you identify your customers needs and increase your competitive edge. Use our market research getup to find key economic, demographic and statistical information about your industry.Customers buy benefits When customers buy your product or service, they are buying the benefit that it gives them. It may be that your product makes their life simple(a)r, or your service helps them to feel break down about themselves. Think about how your competitive advantage benefits your customers. For example, the competitive advantage for a sandwich shop may be We use fresh, local anaesthetic ingredients to make-to-order the highest quality gourmet sandwiches in the local area.Different customers may see several(predicate) benefits customers with allergies or particular dislikes will enjoy the convenience of ordering a sandwich with their preferred ingredients customers who want to treat themselves will be attracted by the fresh, high-quality ingredients, and he fact that the sandwiches are gourmet customers who want to support local businesses will appreciate thou use only local ingredients. mentation about how your business can benefit your customers will help you to apprehend your competitive advantage. A strong competitive advantage reflects the competitive attitude of your business (e. . Quality of service) is preferably, but not necessarily, unique is clear and simple may change over time as competitors try to cash in on your idea must be supported by honest and ongoing market research must highlight the benefits to customers rather than boast Of your business itself. After you have highlighted your competitive advantage, the cr ush way to tell your customers about it is to create your unique selling proposition. COMPETITIVE favour OF Samsung Electronics is part of one of the largest multi-billion dollar corporations in the world.In 2007 it exceeded the $Bonn mark in annual sales for the first time in its history. This makes it one of the worlds top threesome companies in the electronics industry where only two other companies, Siemens and Hewlett-Packard, have posted larger revenues. The name Samsung literally means three stars or Tristan in Korean, reflecting the Samsung Groups dominance in two further sectors Samsung Heavy Industries and Samsung technical schoolnology and Construction. The support need when and where you need it Samsung respects the choice customers have in how and with whom they do business.That why, to more effectively support product lines, Samsung has established a geographically-dispersed base of direct dealers and indirect channel partners that result in integrated national c overage. So, as a single- or multi-location operation, you benefit from having Samsung partners right where you need them most near corporate headquarters, at branch offices r out in the field. A direct connection to Samsung by your authorized dealer. As a decision maker for your business, its your job to make the right choices to keep your business competitive and vibrant.With an authorized Samsung dealer as your telecommunications solutions provider you can rest assured that your telecommunications needs are being fulfilled. Look at your Samsung dealer as your trusted advisor, keeping you informed about new technology advancements, service options and cost-effective measures that can give your business a competitive advantage. Samsung singular focus is n businesses like yours. Its authorized dealers translate a consignment to supporting you with outstanding solutions and service capabilities.Dealer expertise is sharpen in Samsung mandated certification courses, so you can be c onfident in the technology and service you are receiving. Samsung supports its authorized dealers along the entire continuum with product training, deployment, installation and professional services. This life cycle of support provides you with an additional Samsung advantage a five-year hardware warranty that reduces your long term costs. Less one Of the ways Samsung thanks you for investment in their solutions. A strong commitment to research &038 development Samsung strives to understand what customers need ahead of its competitors.Their engineers adjust their mentation to develop original and innovative products that will meet those needs, along with new technologies to lead the future market. They respond to the voice of the customer by designing and exam new products, and through and through hands-on management of product lifestyles. Each year Samsung has invested at least 9% of sales revenue into R&038D activities. As the company continues to increase R&038D pending, thei r commitment to confidential information technology standardization and securing intellectual property rights persists strong.In fact, Samsung was the largest publisher of U. S. Patents in 2006 and is the owner of one of the largest U. S. Patent portfolios-?increasing patent procurement by 1 1 percent year over year. Cutting-edge tech oenology thats cheap. Samsung expertise in voice/ entropy convergence, wired, wireless communications, Vivo and lens nucleus network technologies has produced Offices 7000 a family of groundbreaking business communications solutions that are redefining the rules of the game.The Officers computer programme provides you with business advantages across your entire spectrum of needs. First, youll enjoy the peace of mind that comes from cognise that your communications are being routed over a secure, reliable platform. Second, the visceral design and scalable architecture of this platform enables growth in affordable increments, so your investment wi ll carry you well into the future with significant ROI. In addition, the schemas architecture provides flexibility-?a medium where additional applications can be added to enhance the power of Samsung solutions.More and more small and mid-sized genuineness are realizing the need for Computer Telephony Integration solutions to manage their resources and desktops. In response, Samsung has developed a suite of Officers CT I applications for improving call handing, managing the user interface, construe and gathering call reporting and improving customer affinity through screen pops that detail names and call history. Standards-based technology means that system service qualification is just a phone call away and your telecommunications are reduced in operational complexity.With its single expandable architecture, Officers 7000 installs ND configures easily. You are considering a platform that not only gives you access to voice and data throughout your office complex and even off-site, but also eliminates divergent systems, bottlenecks and competition between voice and data applications. Whether you are upgrading or are launching a converged system for the very first time, this line-up of systems offers a unadulterated blend of versatility and power that will speed up your business.Sources of Samsung cost advantage in fluid drachmS Samsung cost advantage is clearly visible from the comparison of costs (and heir elements) that were borne by the company and its competitors in 2003 (Tab. 3) Samsung* overall cost was 24 per cent lower than the weighted norm cost of the other quartet producers two most significant elements of the cost structure, I. E. Raw materials and excavate, were 36 and 27 per cent lower respectively. When expressed by means of a likeness of average selling price to costs (productivity of cost elements), the differences are even more visible (com. Tab. Overall superiority of Samsung over its competitors exceeded 51 per cent The cost advantage s related to raw materials may be explained by damp negotiated agreements with suppliers (perhaps due to the larger volumes of purchases com. Fig. 5) and possibly less shipping and distribution costs that stem from the fact that Samsung FAA facilities are geographically collocated (while competitors facilities are spread world-wide). In terms of labor productivity only Chinese SIMI outperformed Samsung, but that came scarcely unexpectedly low labor costs in China had been and were to remain unbeatable for some time yet.Other possibly meaningful factors that cannot be bury include higher yields (due to process quality ND use of more efficient, larger silicon wafers), use Of Common core design for different products supported by the flexibility of ware lines (which enabled cost-efficient production of a wide variety of different semiconducting materials), and reportedly -? 12 per cent lower investment in capital assets related to the aforementioned strategic decision on FAA col location.The last but not least element of the Samsung cost puzzle (which, unfortunately cannot be supported by concrete be from the wooing study, and is rather based on intuition) was the way the firm strengthened and maintained intellectual capital and stimulated innovativeness and creativity among employees. It had established an incentive-based net profit system, it sponsored employees for Pads and MBA education, it created a family-friendly working environment in which more of employees energy could be devoted to solving problems at work instead of troubles in clubby lives.In most modern industries, such a long-term approach and investing in human capital eventually pays off resulting in higher productivity and better and cheaper products. Sources of Samsung price premium in DRAMS Samsung achieved an almost 1 5 per cent price premium over (the weighted average price of) its competitors (com. Tab. How was that possible? There were, apparently, two main reasons for that qual ity and product mix.The former was definitely a unique advantage in the semiconductor industry which was, generally, characterized by little product differentiation (in terms of somatogenic and functional properties), and where demand was highly price- driven. Even though, due to the outstanding quality and reliability of its products, Samsung had managed to achieve a position which justified paying slack for its products. Between 1995 and 2005 the company won awards for performance from most of its major customers, and numerous of them (even rivals of one another) named Samsung their supplier of choice.Of course, the highly-recognizable brand (the value of which was estimated at almost apply 11 billion in 2003 ) helped to maintain the price premium as well. The Samsung successful product mix strategy, on the other hand, was realized through extremely wide differentiation of products that the company manufactured in DRAM memory segment it was over 1,200 different types The larg e product portfolio allowed Samsung to make do a very broad market and to avoid fierce price fighting in the most competitive sector of so called goodness DRAMS (where many producers had to sell below production costs).Apart from the mainstream mass products (in general low-cost commodity DRAMs), Samsung offered legacy products, I. E. Older types of chips, production of which was continued after the industry had moved to newer generations and which due to limited supply could be sold at price premium specialty products chips designed for niche uses where the rice was normally agreed on bilaterally between Samsung and a given emptor (at the same time, the company was able to optimism costs by structure the customized architectures exploitation a common core design).How Samsung should react to threat of large-scale Chinese entry? In my opinion, none of the two options of reacting to the Chinese menace that were presented in the case study, should have be chosen by Samsung as the only one. Rather, a mix of the two seemed to be an optimal approach. Samsung unique ability to maintain the low-cost and, at the same time, differentiated production should have been maintained, but simultaneously certain aspects of the changing industry environment might have been taken advantage of as well.It was not necessary for Samsung to urgently look for ways to decrease its labor costs (which is usually a reason for established companies to move their production to China) its cost advantage over competitors was supposed to remain for some time. On the other hand, in line with an old Chinese saying keep your friends close, but the enemies even close set(predicate), it was not advisable to ignore the rising competitors (as the industry had done old age earlier with regards to Samsung itself).Earlier of eater, China itself was posed to become a significant (if not the most significant) market for semiconductors, thus all actions aiming at better lieu itself to sell in the market seemed to be highly desirable. Therefore, Samsung should have discrete to partner with a Chinese firm for production of its low-end, legacy products. At the same time, its state-of-the- art technologies had to be kept in-house.Such a strategy would let Samsung preserve its valuable intellectual property manufacturing of the mass market products in concert with Chinese did not pose a threat to the IP, since cosmologies necessary for that usually were no longer proprietary information. On the other hand, the partnership might result in a possibility to further decrease the costs due to availability of attractive subsidizing from the Chinese government and lower labor costs, and of course prepare grounds for enlarging sales to customers in the opening and development market.There was, however, a number of important aspects that had to be remembered while implementing the strategy Samsung competitive advantage related to the unique breeding environment for innovation and ability of the centralized R&038D and production should have been preserved, thus all new product development had to be kept in the Korean headquarters another competitive advantage of the company, the quality, should have been definitely maintained, too it might have become a challenge if part of the production was to be moved to China, therefore Samsung had to ensure it could properly influence its Chinese partner (e. . By remaining a majority stakeholder in the conjugation undertaking) while overall reduction of costs was not of key brilliance for Samsung, the partnership tit a Chinese firm could have been, nonetheless, used for reduction Of labor costs related to production of legacy products (in case of which the associated gain was to be most significant) with no risk of compromising valuable intellectual property that way, another competitive advantage of Samsung, the industry best ASP to cost ratio, would be further strengthened.However, in parallel to building the partn ership, Samsung couldnt have forgotten about other Chinese would-be competitors which would supposedly flourish around. Therefore, the company should have kept throng focus on maintaining its technological leadership through cutting-edge R (still unavailable at the time, despite having relatively easy access to capital, for Chinese start-ups), especially towards future substitutes for DRAMS flash memory chips.