Competitive creation strategy advantages and disadvantages Кабиева Лаура

«ABYLAI KHAN KAZAKH UNIVERSITY OF INTERNATIONAL
RELATIONS AND WORLD LANGUAGES» JSC
FACULTY OF POSTGRADUATE EDUCATION
DEPARTMENT OF HOSPITALITY MANAGEMENT
On the topic «Competitive creation strategy: advantages and disadvantages»
PROJECT WORK
7М11113 – Specialty restaurant business and hotel business
Performed by: master's student of the 1st year Kabieva L. K.
Accepted: PhD, senior lecturer Abeldanova A. B.
Almaty 2023
CONTENT
INTRODUCTION………………………………………………………….. 3
1
THEORETICAL FOUNDATIONS OF THE FORMATION OF 5
THE COMPETITIVENESS OF THE ORGANIZATION .………..
1.1 Elements of forming an organization's competitiveness strategy ……... 5
1.2 Advantages and disadvantages of competitive creation strategy …….... 8
2
PRACTICAL EXAMPLES OF HOW A COMPETITIVE 10
CREATION STRATEGY CAN HAVE ADVANTAGES AND
DISADVANTAGES…………………………………………………...
2.1 Practical Implementation of Competitive Creation Strategy…………... 10
2.2 Examples of competitive Strategies……………………………………. 11
CONCLUSION……………………………………………………………... 14
LITERATURE……………………………………………………………...
15
2
INTRODUCTION
Competitive creation strategy is a business approach that focuses on creating
new markets or product categories, rather than competing within existing ones. This
strategy involves identifying untapped customer needs and wants, and creating a
unique value proposition that sets the company apart from its competitors. By
creating something new and innovative, companies can gain a first-mover
advantage, establish barriers to entry, and generate higher profit margins. However,
this strategy also carries significant risks and requires significant resources,
including time, money, and talent. In this project work, we will explore the
advantages and disadvantages of competitive creation strategy, and examine how
companies can successfully implement this approach in today's dynamic and highly
competitive marketplace.
Correctly, chosen types of competitive strategies contribute to stable business
development, allow you to create competitive advantages and increase the
company's revenue. This helps to survive in constantly changing market conditions
and stay afloat during crisis periods.
The concept of a competitive strategy includes a generalized model of actions
and the application of certain rules that a manager should adhere to in the process of
planning issues for further maintaining the company's competitive position in a
market economy. In other words, it is the creation by market participants of longterm priorities that are designed to interact with rivals. The combination of
competitive strategies helps to form a competitive policy for all market participants.
The organization's competitive strategies are formed not only at the stage of business
formation, but also during the company's work, for example, when economic
conditions change, during crisis periods. The strategy is developed by senior
management. With the right choice, you can get an answer to the questions: will the
business survive in times of serious crises, will it become successful and profitable.
For the first time, the term "competitive strategy" was introduced by Michael Porter.
Later, the original typologies of competitive strategies were proposed by J.
Lamburn, F. Kotler, A. Yudanov, Yu. By Rubin and other authors. Competition
strategies are strategies that guide market participants in the process of doing
business. They are used along with personnel, digital, investment, financial, sales,
production, accounting and other types of strategies.
In modern conditions, the competitiveness of an enterprise in the market is the
main criterion for the efficiency of production, evaluation of the effectiveness of the
management system.The competitiveness of an enterprise or firm is the ability to
successfully operate in a particular market in a given period of time by producing
and selling competitive goods and services. A few decades ago, the scientific theory
of competitiveness was practically absent. The turning point was made by the work
of the modern American economist Michael Porter and, above all, his concept of the
five forces of competition, which involves a comprehensive study of the
competitiveness of an enterprise in the industry [1].
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Quite often, the entire analysis of competitors for our enterprises and firms, at
best, boils down to the study of prices for products and services, because such an
approach requires a minimum of effort and money. But within the framework of
such tactics and strategy, there is no real increase in competitiveness.
What else, besides prices, do you need to know about your competitors? How
should we evaluate our comparative competitive advantages? How can we
determine what is really necessary to increase our competitiveness at a given time
and at a given enterprise?
These issues can be solved only by studying all the components of
competitiveness: this includes the quality of products, the image of the company,
service support, and many other aspects of the organization's activities.
In the outdoor advertising market, where many firms offering similar services
coexist, such a direction of the company's activity as the study of competitors is of
high importance. Analysis of the key success factors in the industry will allow
meeting the specific needs of the buyer and consumer earlier and better than other
firms. Knowing the strengths and weaknesses of competitors, it is possible to assess
their potential and goals, real and future strategies. This will allow the firm to
strategically focus its attention on the direction where the competitor is weaker.
Thus, you can expand your own competitive advantages.
It is especially important to determine the directions of competitiveness
development for a small enterprise that cannot compete due to the scale of its
activities, and therefore must find the weakest sides of its activities in comparison
with competitors, and try to eliminate them, thereby improving its market position.
The purpose of the project work is to identify ways to improve the
competitiveness of the company.
In accordance with this goal, it is necessary to solve the following tasks [2]:
1. to study the theoretical foundations of competition in general and the
competitiveness of the enterprise;
2. evaluate the competitiveness of the analyzed enterprise;
3. determine the strategy of increasing the competitiveness of the enterprise;
4. develop specific activities within the framework of the chosen strategy.
The structure of the project work consists of an introduction, three chapters, a
conclusion, a list of references and appendices.
The scientific novelty of the research lies in the development of theoretical
and methodological provisions, as well as practical recommendations for the
formation of a strategy to increase the competitiveness of the organization based on
an integrated approach.
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1 THEORETICAL FOUNDATIONS OF THE FORMATION OF THE
COMPETITIVENESS OF THE ORGANIZATION
1.1 Elements of forming an organization's competitiveness strategy
Organizational competitiveness is the ability of a company to maintain and
improve its position in the market over time. A company's competitiveness depends
on a range of factors, including its organizational structure, culture, technology, and
human capital. To enhance their competitiveness, organizations need to develop a
sound strategy that aligns with their vision and goals. This article discusses some of
the key elements that are involved in forming an organization's competitiveness
strategy.
1. Defining the organization's mission, vision, and goals:
The first step in developing a competitiveness strategy is to define the
organization's mission, vision, and goals. The mission statement should clearly
define the purpose of the organization and how it adds value to its stakeholders. The
vision statement should describe where the organization wants to be in the future,
while the goals should be specific, measurable, achievable, relevant, and timebound.
2. Analyzing the organization's internal and external environment:
The next step in developing a competitiveness strategy is to analyze the
organization's internal and external environment. This analysis will help the
organization identify its strengths, weaknesses, opportunities, and threats (SWOT).
The internal analysis should focus on the organization's resources, capabilities, and
competencies, while the external analysis should focus on the industry and market
trends, customer needs, and competitive landscape.
3. Identifying the organization's core competencies:
Core competencies are the unique capabilities and resources that give an
organization a competitive advantage over its rivals. Identifying the organization's
core competencies will help it focus its resources and efforts on what it does best.
Core competencies may include things like innovative technology, superior
customer service, or a strong brand image.
4. Developing a value proposition:
A value proposition is the unique value that an organization offers to its
customers. It should clearly communicate how the organization's products or
services solve customer problems or meet customer needs better than its
competitors. The value proposition should be based on the organization's core
competencies and should be aligned with its mission and vision.
5. Creating a strategic plan:
A strategic plan is a roadmap that outlines how the organization will achieve
its goals and objectives. It should include specific action steps, timelines, and
performance metrics. The strategic plan should be flexible enough to adapt to
changes in the external environment, such as shifts in customer needs, technological
advancements, or competitive threats.
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6. Developing a culture of innovation and continuous improvement:
To maintain its competitiveness over time, an organization needs to foster a
culture of innovation and continuous improvement. This means encouraging
employees to generate new ideas, experiment with new technologies, and embrace
change. It also means investing in employee training and development to enhance
their skills and knowledge.
Competitive creation strategy is a unique approach to business that has gained
popularity in recent years. This strategy is based on the idea that instead of
competing with other companies within an existing market, companies can create
new markets or product categories. By doing so, they can establish themselves as
pioneers in a new and untapped territory, and potentially gain a competitive
advantage that is difficult for others to replicate.
The key to competitive creation strategy is identifying an unmet need or
untapped market that other companies have overlooked. This could involve
developing a new product or service that solves a problem that existing products do
not, or creating an entirely new market by offering a product or service that has never
been seen before.
One of the key advantages of competitive creation strategy is the potential for
higher profit margins. By creating something unique and valuable, companies can
charge a premium price, which can lead to increased profitability. Additionally,
being the first in the market allows the company to establish barriers to entry, making
it difficult for competitors to enter the market.
However, there are also significant risks associated with competitive creation
strategy. Developing a new product or service requires significant resources,
including time, money, and talent. There is no guarantee that the product or service
will be successful, and if the market does not respond positively, the company may
incur significant losses. Furthermore, creating a new market or product category may
result in a limited market size, which can limit the potential for revenue growth and
economies of scale.
Despite the risks, competitive creation strategy has proven to be successful for
many companies, particularly those in industries that are highly competitive and
rapidly evolving. By constantly seeking out new opportunities for innovation and
growth, companies can stay ahead of the curve and maintain a strong competitive
position in the marketplace.
Competitive creation strategy is a business approach that has become
increasingly popular in today's highly competitive marketplace. Rather than
competing within established markets, companies are looking to create new markets
or product categories that offer unique value propositions for customers. This
approach involves identifying untapped customer needs and wants, and leveraging
technology, innovation, and creativity to develop new products and services that
meet these needs [3].
One of the key advantages of competitive creation strategy is the first-mover
advantage. By being the first to enter a new market or create a new product category,
companies can establish their brand, build customer loyalty, and develop a dominant
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market position. Being the first in the market also allows the company to establish
barriers to entry, making it difficult for competitors to enter the market.
Another advantage of competitive creation strategy is the ability to set its own
prices, which can result in higher profit margins. By creating something unique and
valuable, the company can charge a premium price, which can lead to increased
profitability. Companies that create something new and innovative also gain a
reputation for being innovative and forward-thinking. This can lead to increased
brand recognition, customer loyalty, and a positive image in the marketplace.
However, competitive creation strategy also carries significant risks and
requires significant resources. Creating something new and untested carries a high
degree of risk, and there is no guarantee that the product or service will be successful.
Additionally, creating a new market or product category may result in a limited
market size, and the investment required to develop it can be significant.
Competitive creation strategy offers a unique approach for companies to
differentiate themselves from competitors and generate higher profits. However, it
also requires careful consideration of the potential benefits and drawbacks before
embarking on this approach. Successful implementation of this strategy requires a
strong focus on innovation, creativity, and understanding of customer needs and
wants. Companies that can effectively balance the risks and rewards of competitive
creation strategy are likely to emerge as leaders in their respective markets [4].
Michael Porter divided competitive strategy in four different types of
strategies.
You can show it on picture 1.1
Picture 1.1 Types of competitive strategy
Cost Leadership Strategy
Cost leadership strategy is difficult to implement for small scale businesses as
it involves making long term commitment for offering products and services at lower
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prices in the market. For this purpose firms need to produce products at low cost
otherwise it will not make profit.
Since the cost leadership means to become low cost producer or provider in
the industry, Any large-scale business which can provide and manufacture products
at low cost by attaining economies of scale. There are many cost leadership factors
such efficient operation, large distribution channels, technological advancement and
bargaining power. Here Walmart is a good example.
Differentiation Leadership Strategy
Identifying attribute of a product which are unique from competitors in the
industry is the driving factor in the differentiation leadership strategy. When a
product is able to differentiate itself from other similar products or services in the
market through superior brand quality and value added features it will be able to
charge premium prices to cover the high cost.
There are few business examples who successfully differentiated their brands
e.g. Apple, Clif Bar and Company, Ben & Jerry’s and T Mobiles.
Cost Focus Strategy
This strategy is quite a resemblance to the cost leadership strategy; however,
a major difference is that the cost focus strategy businesses target a particular
segment within the market and that segment is offered the lowest price of the product
or service. This type of strategy is very useful to satisfy your consumer and increase
brand awareness.
For example, beverage companies manufacturing mineral water can target
market segment like Dubai, where people need and use only mineral water for
drinking, can be sold at a lower than competitors.
Differentiation Focus Strategy
Similar to the cost focus strategy, differentiation focus strategy targets a
particular segment within the market; however, instead of offering lower prices to
consumer; firms differentiate itself from its competitors. Differentiation strategy
offers unique features and attributes to appeal its target segment. For example,
Breezes Resorts, is a company having several resorts and caters only couple having
no children and offer peaceful environment without any children disruption [8].
1.2 Advantages and disadvantages of competitive creation strategy
Competitive creation strategy is a business strategy that focuses on creating
new markets, rather than competing within existing ones. This strategy involves
identifying and exploiting untapped customer needs and wants to create a unique
value proposition that sets the company apart from its competitors. In this project
work, we will examine the advantages and disadvantages of competitive creation
strategy.
Advantages of competitive creation strategy
1.
First-Mover Advantage
Competitive creation strategy allows companies to be the first to enter a new
market or create a new product category. This first-mover advantage gives them a
head start in establishing their brand, building customer loyalty, and developing a
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dominant market position. Being the first in the market also allows the company to
establish barriers to entry, making it difficult for competitors to enter the market.
2.
Increased profit margins
Creating a new product or service that is not available in the market allows
the company to set its own prices, which can result in higher profit margins. By
creating something unique and valuable, the company can charge a premium price,
which can lead to increased profitability.
3.
Enhanced reputation
Companies that create something new and innovative often gain a reputation
for being innovative and forward-thinking. This can lead to increased brand
recognition, customer loyalty, and a positive image in the marketplace.
4.
Reduced competition
By creating a new market or product category, companies can avoid direct
competition with established competitors. This can reduce the need for aggressive
pricing strategies or costly advertising campaigns to stand out in a crowded market
[5].
Disadvantages of Competitive Creation Strategy
1.
High risk
Creating something new and untested carries a high degree of risk. There is
no guarantee that the product or service will be successful, and the investment
required to develop it can be significant. If the market does not respond positively
to the new product, the company may incur significant losses.
2.
Limited market
Creating a new market or product category may result in a limited market size.
If the market is small or niche, it may be difficult to generate significant revenue,
and the company may struggle to achieve economies of scale.
3.
Requires significant resources
Creating a new product or service requires significant resources, including
time, money, and talent. This can strain the company's existing resources and limit
its ability to invest in other areas of the business.
4.
Copycat competition
Creating a new market or product category can attract copycat competition.
Established competitors may quickly develop similar products or services, making
it difficult for the company to maintain its competitive advantage [6].
Competitive creation strategy can offer significant advantages to companies
that are willing to take on the risk and invest in creating something new and
innovative. However, it also carries significant risks and requires significant
resources. Companies considering this strategy should carefully weigh the potential
benefits and drawbacks before making a decision [7].
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2 PRACTICAL EXAMPLES OF HOW A COMPETITIVE CREATION
STRATEGY CAN HAVE ADVANTAGES AND DISADVANTAGES
2.1 Practical Implementation of Competitive Creation Strategy
Identify Market Trends and Customer Needs:
To effectively implement a Competitive Creation Strategy, it is crucial to stay
updated on market trends and understand customer needs. Conduct market research,
gather customer feedback, and analyze industry insights to identify gaps and
opportunities for innovation.
Foster a Culture of Innovation:
Create an environment that encourages and rewards innovation within the
organization. Establish cross-functional teams, promote idea-sharing sessions, and
provide resources for experimentation and prototyping. Encourage employees at all
levels to contribute their creative ideas and empower them to take risks.
Establish Collaborative Partnerships:
Collaboration can amplify the effectiveness of a Competitive Creation
Strategy. Seek partnerships with research institutions, universities, startups, and
other organizations that bring complementary expertise and resources. Collaborative
efforts can accelerate the innovation process and provide access to diverse
perspectives.
Invest in Research and Development (R&D):
Allocate dedicated resources to research and development initiatives. Set
aside a budget for R&D activities, such as feasibility studies, technology scouting,
and product development. Build a team of skilled professionals who are well-versed
in emerging technologies and market trends.
Develop a Robust Idea Screening Process:
Implement a systematic process to evaluate and prioritize ideas. Establish
criteria for assessing the feasibility, market potential, and alignment with the
company's strategic goals. This will help filter out ideas with low viability and focus
resources on the most promising ones.
Prototype and Test:
Convert selected ideas into tangible prototypes or minimum viable products
(MVPs). Test them with target customers, gather feedback, and iterate based on the
insights obtained. This iterative approach allows for rapid validation and refinement
of ideas before full-scale implementation.
Ensure Intellectual Property Protection:
As you develop innovative solutions, safeguard your intellectual property
through patents, trademarks, copyrights, or trade secrets. Intellectual property
protection provides a competitive advantage by preventing others from replicating
or capitalizing on your innovations.
Monitor and Adapt:
Continuously monitor the market landscape, track customer preferences, and
stay updated on technological advancements. Regularly reassess your competitive
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positioning and adapt your offerings to meet evolving customer needs and industry
trends.
Foster a Learning Culture:
Encourage a culture of learning and continuous improvement. Encourage
employees to share their learnings and insights from both successes and failures.
Create mechanisms for knowledge sharing, such as internal innovation showcases,
workshops, or innovation awards.
Measure and Evaluate:
Establish key performance indicators (KPIs) to measure the effectiveness and
impact of your Competitive Creation Strategy. Track metrics such as revenue growth
from new products/services, customer satisfaction scores, or the number of
successful innovations launched. Regularly evaluate and refine your strategy based
on the insights gained.
Implementing a Competitive Creation Strategy requires a proactive and
systematic approach to drive innovation and gain a competitive edge. By identifying
market trends, fostering a culture of innovation, investing in R&D, and collaborating
with strategic partners, organizations can unlock their creative potential and deliver
unique value to customers. Remember to continuously monitor the market, adapt to
changing dynamics, and measure the outcomes to ensure the long-term success of
your Competitive Creation Strategy.
2.2 Examples of competitive Strategies
Case Study of Aldi
The rise of Aldi in the food retail industry is very impressive and this position
is mainly associated with its competitive strategy which is its use of ‘Lean
Production’ which makes the organization more efficient. Through lean production,
Aldi aims to reduce the number of resources that are used in the provision of goods
and services to consumers. Additionally, the concept also involves eliminating waste
and utilizing lesser material, space, labour and time. The overall result is a reduced
cost of production.
Another competitive strategy which stands for Aldi and against its competitors
is that its investment in staff members. Every member undergoes a comprehensive
training program which makes them multi-skilled and they are able to undertake
different roles in the workplace. In this way, Aldi has to hire lesser staff to run its
stores.
Case Study of Apple
Apple Inc. is the manufacturer and marketer of computers and consumer
electronic products including tablets, smartphones, and music players. The company
has attained a distinct position in the industry through its competitive strategy which
is innovation and premium pricing policy. Apple has a consistent practice of
developing new products and its ability to make product complement with each other
and strengthens customer loyalty and helps in creating a barrier for competitors in
the market.
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The company also sets premium prices for its products. The aim of the
company is to offer a high-quality product with unique features and uses higher
prices to reinforce the perception of added value along with maintaining profitability
[8].
Advantage: Market Leadership
Example: Apple Inc. is known for its innovative products, such as the iPhone
and the iPad. By continuously introducing new features and functionalities, Apple
has become a market leader in the smartphone and tablet industries.
Advantage: Competitive Advantage
Example: Netflix is a company that has differentiated itself from traditional
cable television by offering a unique video streaming service. By producing original
content and providing personalized recommendations, Netflix has created a distinct
value proposition.
Advantage: Customer Satisfaction
Example: Amazon is a company that has focused on addressing unmet
customer needs through continuous innovation. By offering fast and reliable
shipping, a broad selection of products, and user-friendly online shopping
experiences, Amazon has become a customer favorite.
Advantage: Adaptability and Resilience
Example: Tesla Inc. is a company that has demonstrated adaptability and
resilience by continuously innovating in the electric vehicle market. By introducing
new models and features, and investing in battery technology, Tesla has maintained
its position as a market leader.
Disadvantage: Cost and Investment
Example: Alphabet Inc. (parent company of Google) invests heavily in
research and development (R&D) to develop new products and services. However,
R&D expenses can be significant, and not all projects may result in successful
product launches.
Disadvantage: Uncertain Outcome
Example: Google's attempt to launch Google Glass, a wearable augmented
reality device, was met with mixed reviews and failed to gain mass-market
acceptance. The development costs were high, and the product failed to meet
customer needs, resulting in its discontinuation.
Disadvantage: Competitive Response
Example: Uber Technologies Inc. disrupted the traditional taxi industry with
its innovative ride-sharing service. However, traditional taxi companies quickly
responded with their own ride-sharing apps, resulting in increased competition and
a market share battle.
Disadvantage: Time to Market
Example: Samsung Electronics Co. faced significant delays in launching its
foldable smartphone due to technical difficulties during the development process.
This resulted in missed market opportunities and a delay in generating revenue from
the product.
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These practical examples illustrate how a Competitive Creation Strategy can
have advantages and disadvantages, depending on how it is implemented and the
specific market and industry conditions.
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CONCLUSION
In conclusion, a competitive creation strategy can offer several advantages
and disadvantages for businesses. On the one hand, this strategy can foster
innovation and differentiation, allowing companies to stand out in a crowded
marketplace and attract more customers. By continually striving to improve and
create new products and services, businesses can also stay ahead of their competitors
and maintain a strong market position.
However, there are also some potential drawbacks to a competitive creation
strategy. For one, it can be costly and time-consuming to constantly develop new
products or services. Additionally, there is always the risk that new products may
not be successful or that competitors may quickly replicate them, leading to wasted
resources and lost revenue.
Overall, while a competitive creation strategy can be an effective way for
businesses to stay ahead in a competitive market, it is important to weigh the
advantages and disadvantages carefully and consider the unique needs and
circumstances of each individual business. By doing so, companies can make
informed decisions about how best to pursue innovation and growth while
minimizing risks and maximizing their chances for success.
In conclusion, developing a competitiveness strategy requires a systematic
and comprehensive approach that involves analyzing the internal and external
environment, identifying core competencies, creating a value proposition,
developing a strategic plan, and fostering a culture of innovation and continuous
improvement. By following these steps, organizations can enhance their
competitiveness and position themselves for long-term success in the market.
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LITERATURE
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8. What is Competitive Strategy https://www.marketingtutor.net/what-iscompetitive-strategy/
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