Coca-Cola Case Study

Video:

https://digital-films-com.vlib.excelsior.edu/p_ViewVideo.aspx?xtid=52670&loid=189836

Notes:

To gain a competitive advantage, the organization must establish an edge over its competitors. In today's aggressive business world, every advantage is needed to establish the organization in its industry. Gaining this competitive advantage takes both strategic planning and extensive research. Areas of focus include target markets, the competition, market barriers, and trend analysis. In this module, we will delve into how organizations gain competitive advantage in their market-space. We will also review; via Michael Porter's research (a leading authority on competitive strategy and the competitive and economic development of nations, states, and regions), two specific ways organizations can gain competitive advantage: lower cost or differentiation.

A competitive advantage is an advantage an organization gains over its competitors by offering customers greater value, either through lower prices, or by providing additional benefits and services that justify similar, or higher, prices. As organizations look at how to secure a competitive advantage, they first must answer the question, "Why should the customer purchase from this operation rather than the competition?" If an organization is less differentiated (its business product is very similar to other business products), this question can be difficult to answer. The goal in answering this question should be the understanding that organizations have customers for a reason. However, to be successful in business, including growth and expansion, organizations require a competitive edge that ultimately builds a core loyal customer base. If organizations stay the course (follow their competitive strategy) this loyal customer base will expand over time.

When developing an enduring competitive advantage, organizations should review:

Customer loyalty: why are customers committed to purchasing that organization's merchandise?

Location: where is the organization operating?

Distribution: how is the product getting to market?

Vendors: who is selling the product?

Product uniqueness: is this a private label or brand?

Customer service: does the organization have a solid reputation?

A Competitive Advantage Framework. Brand Benefit, Brand Personality, Product Description, Major Competitors, Target Customer, Visualization, Advertising Property, and Strategic Intent.

As detailed above, a competitive advantage exists when an organization delivers the same product or benefit as a competitor, but at a lower cost; this is a cost advantage. Additionally, an organization could deliver items that exceed the competitor's benefits or products; this is a differentiation advantage. These two advantages are known as positional advantages for the organization. By having a solid positional advantage, an organization has secured its position in their industry. Two additional areas in which an organization can gain a competitive advantage are resources and capabilities. Organizational resources can include items such as private brands, patented information, proprietary knowledge, and reputation. Organizational capabilities are things such as how the organization uses resources or how they get items into the markets. These two items together (resources and capabilities) form an organization's distinctive competencies, which are leveraged to create that cost, or differentiation, advantage. Ultimately, this is what creates organizational value.

Michael Porter (2008) defined the two types of competitive advantage an organization can achieve relative to its rivals: lower cost or differentiation. This advantage derives from attributes that allow an organization to outperform its competition, such as superior market position, skills, or resources. In Porter's (2008) view, management should be concerned with building and sustaining competitive advantage. This advantage can be gained through competitive strategies. Porter (2008) proposed that business-level strategies are the result of competitive forces in the company's environment. To find a competitive edge within the specific environment, a company can adopt one of the following three strategies:

Cost leadership: With a cost leadership strategy, the organization wants to reduce operating costs (like facilities) so they can be more efficient than the competition. This in turn allows the organization to provide a product not only at a lower cost, but also with comparable quality.

Differentiation: Here, the organization is focused on how to distinguish the firm's products or services from others in the same industry. This differentiation could be accomplished through distinctive product features, exceptional service, or new technology. If there is a loyal client base (such as Apple's iPhone users), this strategy can be extremely profitable, because loyal customers will pay high prices for the product.

Focus: In this strategy, the organization focuses on specific markets or groups. Focus can be further divided into cost focus and differentiation focus. Cost focus emphasizes cost-minimization within a focused market, while differentiation focus looks toward strategic differentiation within a focused market.

PORTER'S GENERIC STRATEGIES

Source: Porter, M. E. (1985). The competitive advantage: Creating and sustaining superior performance (Links to an external site.).New York, NY:Free Press. Retrieved from http://business-fundas.com/2011/generic-strategies-for-the-ultimate-competitive-advantage/

COMPETITIVE ADVANTAGE

C

O Lower Cost Differentiation

M Broad

P Target: 1. Cost Leadership 2. Differentiation

E

T

I

T

I

V Narrow

E Target: 3A. Cost Focus 3B. Differentiation Focus

E

D

G

E

A competitive advantage is an advantage that an organization has over its competitors which allows it the ability to generate greater sales or retain more customers than its competition. There can be many types of competitive advantages, including the firm's cost structure, product offerings, distribution network and customer support. In this module, we have detailed not only competitive advantage, but also how to use Porter's strategies to sustain a competitive advantage for the organization. In the following activities, you will have the chance to expand on competitive advantage (including strategies) and outline a specific case study.