Disadvantages: Competitive Advantage

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COMPETITVE ADVANTAGE: THE FOCAL POINT OF STRATEGY Does the foregoing discussion imply that managers should focus directly on creating economic value and positive EVA numbers? Probably not. To focus on EVA directly would be the equivalent of a coach focusing on the scoreboard instead of the game’s action. The coach is obviously interested in the score, but he or she seeks to improve it by focusing on other, more manageable aspects of the game. Throughout this text, we take the position that managers should be committed to creating economic wealth, and that the best means to create that wealth is to focus on competitive advantage as the key. We base this position on the idea that to be financially successful over the long term, a business…show more content…
Customer wants goods and services that are . 1) Better 2) Cheaper and they want them 3) Faster. We refer to corresponding forms of competitive advantage as 1) Differentiation 2) Cost…show more content…
In considering competition, one most naturally considers a firms immediate rivals, but the five forces frame work, the most widely known tool for analyzing the competitive environment, was developed to broaden your thinking about how forces in the competitive environment shape strategies and affect performance. Together, these five forces determine the nature and extent of competition and shape the strategies of firms in their particular competitive arenas. The five forces model of competition Threat of new entrants When a business begins operation in a new market, we say it has entered that market; when it ceases to operate in a market, we say it has exited. A new entrant in an industry represents a competitive threat to established firms, sometimes called the incumbents. Economies of scale These exist whenever large-volume firms enjoy significantly lower production costs then smaller volume operators. This discourages of new firms with less volume and higher production costs from entering the market. Learning or experience
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