Ways to create external and internal competitive advantage. Competitive advantages

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What are the competitive advantages of the company

Competitive advantages companies are those characteristics, properties of a brand or product that create a certain superiority for the company over direct competitors. The development of the economic sphere is impossible without competitive advantages. They are part of the corporate identity of the firm and also provide protection against attacks from competitors.

The sustainable competitive advantage of a company is the development of a profitable development plan for the company, with the help of which its most promising opportunities are realized. Such a plan should not be used by either real or prospective competing companies, and the results of the plan should not be adopted by them.

The development of the company's competitive advantages is based on its goals and objectives, which are achieved in accordance with the position of the company in the market for goods and services, as well as the level of success in their implementation. The reform of the functioning system should create the basis for the effective development of the factors of the company's competitive advantages, as well as create a strong relationship between this process and the existing market conditions.

What are the types of competitive advantages of the company?

What competitive advantages of the company can you highlight? There are two types of competitive advantage:

Artificial competitive advantages: individual approach, advertising campaigns, guarantee and so on.
Natural competitive advantages of the company: the cost of products, customers, competent management, and so on.

An entertaining fact: if a company does not seek to come out ahead in the market of goods and services, referring itself to a number of similar enterprises, it somehow has natural competitive advantages. In addition, it has every opportunity to develop artificial competitive advantages for the company, spending a certain amount of time and effort on this. This is where all the knowledge about competitors is needed, since their activities need to be analyzed first.

Why do you need an analysis of the company's competitive advantage

An interesting note about Runet: as a rule, about 90% of entrepreneurs do not analyze their competitors, and also do not develop competitive advantages using this analysis. There is only an exchange of some innovations, that is, firms adopt the ideas of competitors. It doesn't matter who first came up with something new, it will still be "taken away". This is how these clichés came to light:

Highly qualified specialist;
Personal approach;
Highest quality;
Competitive cost;
First class service.

And others, which in fact do not represent the competitive advantages of the company, since no self-respecting company will declare that its products are of poor quality, and the staff are newcomers.

Oddly enough, you can look at it from the other side. If the competitive advantages of companies are minimal, then it is easier for start-up firms to develop, that is, to collect their potential customers who receive a wider choice.

Therefore, it is necessary to competently work out strategic competitive advantages that will provide customers with a profitable purchase and positive emotions. Customer satisfaction should come from the business, not from the product.

What are the sources of the company's competitive advantage

There is a fairly well-established structure of the company's competitive advantages. At one time, Michael Porter identified three main sources for developing a company's competitive advantage: differentiation, cost, and focus. Now, in more detail about each of them:

Differentiation

The implementation of this strategy of competitive advantages of the company is based on more efficient provision of services to the clients of the company, as well as demonstration of the company's products in the best possible light.

Costs

The implementation of this strategy is based on the following competitive advantages of the company: minimal labor costs, automated production, minimal costs of scale, the ability to use limited resources, as well as the use of patented technologies that reduce production costs.

Focus

This strategy is based on the same sources as the previous two, but the company's accepted competitive advantage covers the needs of a narrow circle of buyers. Customers outside this group are either dissatisfied with such a competitive advantage of the company, or it does not affect them in any way.

The main (natural) competitive advantages of the company

Each firm possesses the natural competitive advantages of a company. But not all enterprises cover them. This is a group of companies whose competitive advantages are either obvious or disguised as clichés. So, the main competitive advantages of the company are:

Price... Whatever one may say, one of the main advantages of any company. If the prices for the firm's goods or services are lower than competitive prices, as a rule, this price gap is indicated immediately. For example, "prices are 15% lower" or "we offer retail goods at a wholesale price." It is very important to indicate prices in this way, especially if the company operates in the corporate sphere (B2B).
Timing (time)... Be sure to indicate the exact delivery time of products for each of its types. This is a very important point in developing a company's competitive advantage. Here it is worth avoiding inaccurate definitions in terms of time ("we will deliver quickly", "we will deliver just in time").
An experience... When the staff of your company are professionals in their field who know all the "pitfalls" of doing business, then convey this to consumers. They like to cooperate with specialists who can be contacted on all issues of interest.
Special conditions. They may include the following: exclusive supply offers (discount system, convenient location of the company, extensive warehouse program, attached gifts, payment after delivery, and so on).
Authority. The credibility factor includes: various achievements of the company, prizes at exhibitions, competitions and other events, awards, famous suppliers or buyers. All this increases the popularity of your company. A very significant element is the status of a professional expert, which involves the participation of your employees at various conferences, in advertising interviews, on the Internet.
Narrow specialization. This type of competitive advantage is best explained with an example. The owner of an expensive car wants to replace some parts in his car and he has a choice: to go to a specialized salon that serves only cars of his brand, or to a standard auto repair shop. Of course, he will choose a professional salon. This is a component of a Unique Selling Proposition (USP) that is often used as a competitive advantage for a company.
Other actual benefits. Such competitive advantages of the company include: a wider range of products, patented manufacturing technology, the adoption of a special plan for the sale of goods, and so on. The main thing here is to stand out.

Artificial competitive advantages of the company

Artificial competitive advantage are able to help the company tell about itself if it does not have special offers. This can come in handy when:

The firm has a set-up similar to that of its competitors (the competitive advantages of companies in a particular field of activity are the same).
The firm is located between large and small enterprises (it does not have a large assortment of goods, does not have a narrow focus and sells products at a standard price).
The firm is at an early stage of development, with no particular competitive advantages, customer base or popularity among consumers. This often happens when specialists decide to leave the workplace and create their own company.

In such cases, it is necessary to develop artificial competitive advantages, which are:

Added value. For example, a firm sells computers without being able to compete on price. In this case, you can use the following competitive advantage of companies: install an operating system and the necessary standard programs on a PC, and then slightly increase the cost of equipment. This is the added value, which also includes all sorts of promotions and bonus offers.
Personal adjustment. This competitive advantage of the company works well if competitors hide behind standard clichés. Its purpose is to show the face of the company and apply the WHY-formula. Successful in every field of activity.
Responsibility... Quite an effective competitive advantage of the company. It goes well with personality tuning. A person likes to deal with people who can vouch for their products or services.
Guarantees... As a rule, guarantees are of two types: for circumstances (for example, a liability guarantee - "if you are not given a check, we will pay for your purchase") and for a product or service (for example, the opportunity for a consumer to return or exchange goods within a period of up to one months).
Reviews... Unless, of course, they are ordered. For potential customers, the status of the person who speaks about your company is important. This advantage works great when reviews are presented on a special form with a certified signature of the person.
Demonstration... It is one of the main competitive advantages of the company. If the firm does not have advantages, or they are not obvious, then it can make an illustrated presentation of its product. If the company works in the service sector, then you can make a video presentation. The main thing here is to correctly focus on the properties of the product.
Cases... But there may not be any cases, especially for newbie firms. In this case, artificial cases can be developed, the essence of which is to provide services either to ourselves, or to a potential buyer, or to an existing client on a netting basis. Then you will receive a case that will show the level of professionalism of your company.
Unique selling proposition. It has already been mentioned in this article. The meaning of USP is that the company operates with a certain detail, or provides data that distinguishes it from competitors. This competitive advantage of the company is effectively used by the Practicum Group, which offers training programs.

Personnel as a competitive advantage of the company

Unfortunately, today not every management sees an excellent competitive advantage of the company in the staff. Based on the developed strategies and goals, firms come to the need to build, develop and strengthen the personal qualities of employees they need. But at the same time, companies come to the need to apply a certain combination of developed strategies (this also applies to internal management).

Based on this, you need to pay attention to a couple of important points: to identify and develop the qualities of personnel, creating a competitive advantage for the company, and to explain the usefulness of investing in this resource.

If the goal of management is to create a competitive advantage of the company in the person of personnel, then work on the personal characteristics of employees is very important here, as well as the concept of the essence and effectiveness of aspects that are revealed in team work (emergence and synergy).

The process of formation of the team as a competitive advantage of the company is not complete without the resolution of some points that must be taken into account by the company's management:

Competent organization of employees' activities.
The interest of employees in the successful achievement of the assigned tasks.
Formation of the team's desire to actively participate in the process of obtaining high results.
Supporting the personal qualities of employees necessary for the company.
Developing commitment to the company.

It is worth paying attention to the essence of the proposed aspects that form the company's competitive advantage in the person of its personnel.

Quite a few well-known large organizations win in the competition precisely due to the effective use of personnel as a competitive advantage of the company, as well as due to the gradual increase in the level of employee interest in achieving the assigned tasks. The main criteria for success in the process of using all possible resources are: the desire of employees to remain part of the company and work for its benefit, the dedication of the personnel to their company, the confidence of the personnel in success and the sharing of the principles and values of their company.

It is characterized by the following elements:

Identification... Assumes that employees have a sense of pride in their firm, as well as a factor of assignment of goals (when personnel take the tasks of the firm for their own).
Involvement... It assumes the desire of employees to invest their own efforts, to actively participate in achieving high results.
Loyalty... Assumes psychological attachment to the company, the desire to continue working for its good.

These criteria are extremely important in the formation of a company's competitive advantage in the person of personnel.

The degree of employee loyalty is closely related to the level of response of the staff to external or internal incentives.

When developing a company's competitive advantage in the person of its personnel, it is worth noting some aspects that reveal employee loyalty:

Dedicated employees strive to improve their skills.
Loyal employees lean on their views without being manipulated or otherwise negatively influenced.
Dedicated employees strive to maximize their success.
Dedicated employees are able to take into account the interests of all team members, to see something beyond the bounds of the goal.
Dedicated employees are always open to something new.
Loyal employees have a higher degree of respect not only for themselves but also for other people.

Devotion is a multifaceted concept. It contains both the ethics of the team, and the degree of its motivation, and the principles of its activity, and the degree of satisfaction with the work. That is why a competitive advantage in the person of staff is one of the most effective. This dedication is reflected in employee relationships with everyone around them in the workplace.

When management wants to create a competitive advantage in the face of its staff, the challenge is to build employee loyalty. The prerequisites for formation are divided into two types: personal characteristics of employees and working conditions.

The competitive advantages of the company in the person of the personnel are formed with the help of the following personal characteristics of the employees:

Reasons for choosing this field of activity.
Work motivation and labor principles.
Education.
Age.
Family status.
Existing work ethics.
Convenience of the territorial location of the company.

The competitive advantages of the company in the person of the personnel are formed using the following working conditions:

The level of interest of employees in achieving the maximum success of the firm.
Employee awareness level.
The degree of stress in the employees.
The degree to which the important needs of employees are met (salary, working conditions, the opportunity to show their creativity, and so on).

But it is necessary to take into account the dependence of loyalty on the personal characteristics of the staff and the atmosphere in the companies themselves. And therefore, if management has set itself the goal of creating a competitive advantage for the company in the person of personnel, first it needs to analyze how much the company has exacerbated problems that can negatively affect the loyalty of employees.

Brand as a competitive advantage of the company

Today, in order to fight competitors, companies include additional services in the list of basic ones, introduce new methods of doing business, prioritize both personnel and each consumer. The company's competitive advantages stem from market analysis, development of a plan for its development, and obtaining important information. Firms in the process of competition and constant change need to work both with the internal management of the organization and with the development of a strategy that provides a strong position of stable competitiveness and allows you to monitor the changing situation in the market. Today, in order to maintain competitiveness, it is important for firms to master modern principles of management and production of products that will create a competitive advantage for the company.

The trade mark (brand) of a company, if used correctly, can increase its income, increase the number of sales, replenish the existing assortment, inform the buyer about the exclusive advantages of a product or service, stay in this field of activity, and also introduce effective development methods. This is why a brand can serve as a competitive advantage for a company. Leadership that does not take this factor into account will never see its organization among the leaders. But a trademark is a rather expensive version of a company's competitive advantage, which requires special management skills, knowledge of firm positioning methods, and experience in working with a brand. There are several stages in the development of a trademark related precisely to the topic of its relationship with competition:

Goal setting:
- Formulation of the goals and objectives of the company (the initial stage for the formation of any competitive advantages of the company).
- Establishing the importance of the brand within the company.
- Establishing the required position of the brand (characteristics, durability, competitive advantages of the company).
- Establish measurable brand criteria (KPI).

Development planning:
- Assessment of existing resources (the initial stage for the formation of any competitive advantages of the company).
- Approval of customers and all performers.
- Approval of the terms of development.
- Identification of additional goals or obstacles.

Assessment of the existing position of the trademark (refers to the already existing trademarks):
- Brand popularity among customers.
- Brand awareness of potential customers.
- Brand loyalty among potential customers.
- Loyalty to the brand.

Assessment of the market situation:
- Assessment of competitors (the initial stage for the formation of any competitive advantages of the company).
- Assessment of a potential consumer (preferences and needs are the criterion).
- Sales market assessment (supply, demand, development).

Formulation of the essence of the trademark:
- Purpose, position and use of the brand for potential customers.
- Exclusivity (competitive advantages for the company, value, characteristics).
- Trademark attributes (components, appearance, main idea).

Planning brand management:
- Work on the development of marketing elements and clarification of the brand management process (entered into the organization's brand book).
- Appointment of employees responsible for brand promotion.

Introduction and increasing the popularity of the trademark (it is on this stage that the success of the company's competitive advantages in terms of brand promotion depends):
- Development of a media plan.
- Ordering advertising materials.
- Distribution of promotional materials.
- Multifunctional loyalty programs.

Analysis of the effectiveness of the brand and the work done:
- Assessment of the quantitative characteristics of the brand (KPI) established at the first stage.
- Comparison of the results obtained with the planned ones.
- Amendments to the strategy.

A necessary criterion for the effective implementation of a trademark as a competitive advantage of a company is adherence to a single corporate style, which is a visual and semantic integrity of the company's image. The components of the corporate style are: the name of the product, the trade mark, the trademark, the motto, the corporate color scheme, the uniform of the employees and other elements of the company's intellectual property. Corporate style is a combination of verbal, color, visual, individually developed constants (components) that guarantee the company the visual and semantic integrity of the company's products, its information resources, as well as its general structure. Corporate style can also act as a competitive advantage for a company. Its existence suggests that the head of the company aims to make a good impression on customers. The main purpose of branding is to create a positive feeling from the client, which he experienced when purchasing the products of this enterprise. If other components of marketing are at their best, then the corporate style is able to create some competitive advantages for the company (precisely within the framework of the topic of opportunities for competition):

It has a positive effect on the aesthetic position and visual perception of the company;
Strengthens the efficiency of collective work, can rally staff, increases the interest of employees and the feeling of their need for the organization (the company's competitive advantage in the person of personnel);
Contributes to the achievement of integrity in the advertising campaign and other marketing relationships of the organization;
Reduces the cost of developing communications;
Increases the effectiveness of advertising projects;
Reduces the cost of selling new products;
It makes it easier for clients to orientate themselves in information flows, and allows them to accurately and quickly find the company's products.

A trademark association consists of four elements that are also important to consider when developing a company's competitive advantage:

Intangible criteria. This includes everything that has to do with information about a brand: its idea, degree of popularity and distinctive features.
Tangible criteria. Here, the impact on the senses plays a very important role. These criteria are functional (a special form for more convenient use, for example), physical, as well as visual (displaying a trademark on advertising materials). Both tangible and intangible criteria are essential in developing a company's competitive advantage.
Emotional characteristics. A brand represents a company's competitive advantage when it evokes positive emotions and customer confidence. It is also necessary to use tangible criteria (for example, a unique advertising campaign). Experts say that these criteria create an opinion among customers about the intangible characteristics of the brand.
Rational characteristics. They are based on the functional criteria of the product (for example, fuel-efficient vehicles from Volkswagen or Duracell batteries that last "up to ten times longer"), the way they communicate with consumers (Amazon is an example), and relationships. between customers and the company that owns the brand (promotions for regular customers from various airlines). Taking into account rational characteristics is very important in the formation of a company's competitive advantages.

When developing a company's competitive advantages, it is necessary to know the main carriers of the corporate style components:

Service components (large stickers, large panels, wall-mounted calendars, etc.).
Office work components (corporate letterheads, registration forms, blocks of paper materials for notes, and so on).
Advertising on paper (catalogs, all types of calendars, booklets, brochures, and so on).
Souvenir products (pens, T-shirts, office supplies and so on).
Elements of propaganda (materials in the media, decoration of halls for various events, propaganda brochure).
Documentation (business cards, passes, ID cards for staff, and so on).
Other forms (corporate banner, packaging materials with company symbols, employee uniforms, and so on).

The brand also affects the competitive advantage of the company in the person of its personnel, contributing to the cohesion of employees who feel their importance to the organization. It turns out that a trademark is an element of the company's development process, increasing its revenues and the number of sales, as well as contributing to the replenishment of the product range and increasing customer awareness of all the positive aspects of a service or product. These conditions also strengthen the company's competitive advantages.

Competitive advantages of the company: examples of global giants

Example # 1. Apple's competitive advantages:

Technology. This is one of the main competitive advantages of an innovative company. Each element of software and technological support is worked out within the framework of one enterprise, and therefore the components are in perfect harmony in the whole. This makes the work of developers easier, ensures the product is of high quality and reduces costs of expenses. For the consumer, comfort in use and an elegant appearance of devices play an important role. A complete set of necessary parts and programs is not only a competitive advantage for the company, but also a fact that compels consumers to purchase new gadgets.
HR. One of the leading competitive advantages of the company is its personnel. Apple hires high-quality professionals (the most able-bodied, creative and advanced) and tries to keep them in the company, providing decent wages, various bonuses for personal achievements. In addition, it saves the costs of unskilled workers and child labor at the suppliers Inventec and Foxconn.
Consumer confidence. With the help of an effective PR strategy and the strategy of a marketing company, an organization manages to create a permanent customer base for itself, as well as increase the popularity of the brand. All this increases the success of using the competitive advantages of the international company Apple. For example, the company collaborates with promising musicians (YaeNaim, Royksopp, Feist, and so on). Famous organizations (for example, SciencesPoParis) conclude contracts for the complete packaging of their libraries with the company's goods. There are about 500 stores around the world selling only Apple products.
Innovation. This is the main competitive advantage of an innovative company. By investing in R&D, the organization responds quickly to emerging customer needs. An example is the Macintosh, developed in 1984, which gained commercial popularity and had graphic elements in demand among users, and also had changes in the command system. In 2007, the first iPhone was released, which gained immense popularity. The MacBookAir is not losing ground, still remaining the thinnest laptop of our time. These competitive advantages of the company are very successful and they are undeniable.
Organization of the supply chain. The popularity of the Apple brand contributes to the fact that the company has entered into many productive contracts with supplier factories. This gives the firm its own supply and cuts down on supply for competitors who need to purchase the right components from the market at a higher cost. This is a great competitive advantage for the company that weakens the competition. Apple often invests in improving its supply chain to generate more revenue. For example, in the 90s, many companies transported computers by water, but Apple overpayed about $ 50 million on Christmas Eve to transport products by air. This competitive advantage of the company eliminated competitors, because they did not want or did not guess to transport the goods in this way. Moreover, the company maintains strict control over its suppliers, constantly requesting documentation of expenses.

Example # 2. Coca-Cola's competitive advantages

.Main advantages The main competitive advantage of the Coca-Cola trading company is its popularity, because it is the largest brand among the producers of soft drinks, with about 450 types of products. This brand is the most valuable in the world, it includes 12 other manufacturing companies (Sprite, Fanta, Vitaminwater, Coca-Cola Lite, and so on). The company's competitive advantage also lies in the fact that it is the first supplier of all types of soft drinks.
Technologies from Coca-Cola(this is the main competitive advantage of the company). There were many who wanted to know the secret recipe for drinks. This recipe is in a Trust Company Of Georgia bank safe in the United States. Only a few top managers of the organization can open it. The already made base of the drink is sent to the manufacturing plants, where it is mixed with water using a specialized, precise process. Today, creating this basis for a drink is far from an easy task. The trick is that the composition of the drink contains "natural flavors", the specific elements of which are not specified.
Innovations(this includes the company's competitive advantage in the field of ecology):
- The company wants to boost low sales with modern equipment. Such machines are capable of dispensing more than 100 types of drinks and making original mixes (light and diet cola, for example).
- Coca-Cola's environmental competitive advantage lies in the development of the Reimagine recycling program. This contributes to the fact that it will be easier for the management of the company to dispose and sort waste. Such an automatic machine can be used to put containers made of plastic and aluminum, excluding the sorting process. In addition, the device calculates points that go to the purchase of company drinks, branded bags and attending various entertainment projects.
- This competitive advantage of the company works great as the company strives to produce an environmentally friendly product. In addition, Coca-Cola is developing a program to use eStar vehicles that operate without harmful emissions through electric motors.
Geographic advantage. The geographic competitive advantage of the company as a construction company lies in the fact that it sells its products in 200 countries around the world. For example, in our country there are 16 Coca-Cola manufacturing plants.

Example No. 3. Competitive advantages of Nestlé.

Product range and marketing strategy. The company's competitive advantage lies in the fact that it operates a wide range of products, as well as a large assortment of brands that strengthen it in the product market. The products consist of approximately 30 main brands and a huge number of local (local) brands. Nestlé's competitive advantage lies in creating a national strategy that is based on the needs of the people. For example, the Nescafe coffee drink, which has a different production structure for different countries. It all depends on the needs and preferences of the buyer.
Effective management and organization structure. A very significant competitive advantage of the company. The indicator of success is the increase in sales of the company by 9% in 2008, which was considered a crisis year. The organization carries out successful personnel management and effective financing of new projects and programs. These programs are the purchase of shares in other firms, even competing ones. Thus, the company's competitive advantage lies in its expansion. In addition, the decentralized management system of the company and the competent management of its structures help Nestlé to quickly respond to market changes.
Innovation. An extremely significant competitive advantage of the company lies in the fact that it is the largest investor in scientific projects and technological innovations that contribute to the development of the company through the introduction of technologies that satisfy the needs of customers, differentiate products, and improve taste sensations. Moreover, innovations are used to modernize manufacturing processes. This competitive advantage of the company solves the issue of optimizing the manufacture and production of an environmentally friendly product.
Global presence in world markets. The undeniable competitive advantage of the company, which is based on the history of its creation, since from the moment of its appearance on the market it has gradually expanded and improved, covering the whole world. Nestle is interested in bringing the consumer closer to the company. It allows its departments to independently appoint managers, organize the production and delivery process of products, and cooperate with reliable suppliers.
Qualified personnel. This competitive advantage of the company in the person of its personnel lies in the large costs of the company for training its employees at the international level. Nestle is building a highly qualified management team from its employees. The headquarters of employees in our country numbers about 4,600 people, and the global human resource of the company is about 300 thousand employees.

Example No. 4. Toyota's competitive advantages

High product quality... The main competitive advantage of the company is its top-level product. In our country, in 2015, about 120 thousand cars of this brand were sold. The fact that this competitive advantage of the company is decisive, said its ex-president Fujio Cho. And therefore, buying a Toyota car, the consumer is guaranteed a set of modern technological developments.
Wide range of models. Toyota salons operate with all models of the brand's cars: Toyota Corolla (compact passenger car), Toyota Avensis (versatile and comfortable car), Toyota Prus (new model), Toyota Camry (a whole series of cars is presented), Toyota Verso (car for the whole family), Toyota RAV4 (small SUVs), Toyota LandCruiser 200 and LandCruiserPrado (popular modern SUVs), Toyota Highlander (all-wheel drive crossovers), Toyota Hiace (comfortable, small car). This is an excellent competitive advantage of the company, because a model set of cars is presented to consumers with different preferences and material capabilities.
Effective marketing. An excellent competitive advantage of the company is the implementation of vehicle certification with checks from Toyota Tested. Customers who buy such a car in our country acquire the opportunity to receive round-the-clock assistance, which consists in the constant work of technical support services. The company's cars can be purchased under the Trade-In program, which simplifies the purchase due to the lucrative offers from Toyota.
The customer comes first. Another important competitive advantage of the company, for which Toyota developed the Personal & Premium program in 2010, presenting it at the international car show in Moscow. The program includes the availability of favorable loan offers when buying a car. Experts from the New Car Buy Survey found that Russian consumers are most loyal to Toyota.
Effective company management... This competitive advantage of the company is expressed in the availability of an effective ERP program that can control the entire set of activities for the sale of Toyota cars in Russia online. The program was developed in 2003. The uniqueness of this program in Russia lies in its combination with the position in the market, with various features of doing business in our country, with our existing laws. Another competitive advantage of the company is a holistic corporate structure, which helps the company and its partners to quickly operate with data on the availability of certain product models in showrooms, warehouses, and so on. Moreover, Microsoft Dynamics AX contains all the documentation on the transactions carried out with the vehicles.

Example No. 5. Samsung Group's competitive advantages

Consumer confidence. The company was founded in 1938 and over many years of hard work has achieved tremendous results (for example, 20th place in brand price, second place in equipment). Consumer confidence is the most important competitive advantage of the Samsung Group. The organization for work with documents turned out to be "the most reliable" in the world. These are indicators that demonstrate how the history of the formation of the company, its brand name and customer confidence turn into a huge competitive advantage for the company.
Company management. This competitive advantage of the company lies in its vast experience in the field of management, as well as in constantly improving ways of managing in a changing market. For example, the recent restructuring of the firm in 2009 resulted in more independence among the company's divisions, thereby simplifying the entire management process.
Technology. This competitive advantage of the company lies in the fact that it works with high technologies. Samsung Group pioneered the technology of reciprocating and rotary compressors, optical fiber, energy application and concentration. In addition, the company has developed the thinnest lithium-ion power supplies. The company's competitive advantages as a construction company are manifested in the fact that it ranks first in the development of communication systems for business areas of activity and moves forward in the field of creating technologies for gas and oil pipelines, as well as other areas of construction.
The presence of an innovative advantage of the company. This competitive advantage of the company lies in the fact that it works tirelessly in the field of modernization of equipment and innovative product components. The organization contains many scientific departments all over the world. They carry out research activities in the field of chemical current resources, software and various equipment. Samsung is implementing a scheme for promoting electrical engineering, is working on ways to retain energy resources. The company's competitive advantage is also the hiring of highly qualified employees from different parts of the world. In addition, the corporation is partnering with the best technological universities in the world, investing in their developments and ideas.
Successful marketing system of the company. The company's competitive advantage is also a strong marketing campaign in many areas of activity (in its competition with Apple, Samsung conducted a rather aggressive advertising policy, trying to surpass it). A division of the company called "Cheil Communications" operates in this area. It works in the field of advertising, marketing analysis and market analysis. In addition, an element of the company's competitive advantage is its assistance in the field of charity, which attracts consumers to it and increases its popularity. The corporation also has special charity departments.

How is the formation of the company's competitive advantages from scratch

Of course, any organization has its pros and cons, even when it does not occupy a leading position and does not stand out in the market. To analyze the causes of these phenomena and develop effective competitive advantages for the company, you need to turn, oddly enough, to your own consumer, who, like no one else, is able to correctly assess the situation and point out the shortcomings.

Customers can point to different competitive advantages of the company: location, reliability, simple preference, and so on. It is necessary to compile and evaluate this data in order to be able to increase the profitability of the enterprise.

However, this is not enough. Write down the advantages and disadvantages (what you have and what you don't) of your firm in writing. In order to develop an effective competitive advantage for a company, it is worthwhile to clearly and specifically indicate all the details, for example:

Abstraction	Specificity
Reliability guarantee	Our reliability is our feature: we insure transportation for 5 million rubles.
Guaranteed professionalism	About 20 years of experience in the market and more than 500 developed programs will help us understand even the most difficult situations.
We produce high quality products	We are three times ahead of GOST in terms of technical product criteria.
Personal approach to everyone	We say no! briefs. We work only individually, working out all the important details of the business.
First class service	Technical support 24 hours seven days a week! We solve even the most difficult problems in just 20 minutes!
Low cost of production	Prices are 15% below market prices due to the production of our own raw materials.

Not all the competitive advantages of the company should be reflected in this block, but here it is important to indicate all the pros and cons of the organization, from which it will be necessary to build on.

Concentrate, divide a piece of paper in two, and start bringing in the pros and cons of your firm. Then assess the disadvantages and turn them into a competitive advantage for the company. For example:

Flaw	Turning into an advantage
Distance of the company from the city center	Yes, but the office and warehouse are located nearby. Then buyers will be able to park their car without any problems and evaluate the quality of products right on the spot.
The price is higher than the competitive	The price includes additional services (for example, installation of an operating system and all major programs on a computer).
Long delivery time	But the assortment includes not only a standard set of products, but also exclusive products for individual use.
Newbie firm	But the company has modern qualities (mobility, efficiency, a new outlook on things, and so on).
Limited selection of products	But confidence in the originality of a certain brand and a more detailed knowledge of the products.

It's not all that complicated here. Then, with the help of this list, it is necessary to develop the competitive advantages of the company from the primary to the most insignificant. They should be clear to the potential client, concise and effective.

There is also an aspect kept secret by many firms. It can be used periodically when other competitive advantages of the company cannot be realized or when it is necessary to activate the effectiveness of its merits. The benefits of the organization must be intelligently combined with customer satisfaction.

Illustrative examples:

It was: Work experience - 15 years.

Became: Reduced costs by 70%, thanks to many years of experience of the company

It was: Reduced prices for goods.

Became: Production costs are 20% lower and shipping costs 15% lower thanks to our own vehicles.

How the competitive advantages of a company are assessed

The success of a company's competitive advantages can be assessed by a full assessment of the merits and demerits of the firm's competitive position and by comparing the analysis results with competitors' indicators. The analysis can be carried out by referring to the method of indicative assessment of KFU.

A well-designed action plan can turn the weaknesses of rival firms into a competitive advantage for your company.

The criteria for this analysis can be:

The firm's stability in protecting its position within the framework of market changes in the field of its industries, tough competition and competitive advantages of competing companies.
Whether the company has effective competitive advantages, or lack, or lack thereof.
Opportunities for achieving success in the competitive struggle when operating with this action plan (the company's position in the competitive system).
The firm's level of stability in the current period.

Analysis of competitors' activities can be carried out by the method of weighted or unweighted estimates. The former are determined by multiplying the firm's assessment for a certain indicator of competitive capabilities (from 1 to 10) by its weight. The latter presuppose the fact that all performance factors are equally important. A company's competitive advantages are most effectively realized when it has the highest marks.

The last stage assumes that the company's specialists must identify strategic mistakes that negatively affect the formation of the company's competitive advantages. An effective program must include ways out of any difficult situation.

The task of this stage is to create an integral list of problems, overcoming of which is of paramount importance for the formation of the competitive advantages of the company and its strategy. The list is displayed on the basis of the results of the assessment of the firm's activities, the market situation and the position of competitors.

It is impossible to identify these problems without addressing the following points:

In what cases is the adopted program incapable of protecting the company from external and internal problem situations?
Does the adopted strategy provide a decent degree of protection against the current actions of competitors?
To what extent does the adopted program support and align with the company's competitive advantages?
Is the adopted program effective in this area of activity, taking into account the impact of driving forces?

An attempt must be made to ensure that the company's competitive advantages are applied by the salespeople. They, as a rule, have a wide knowledge of the product and about the company, but not about the competitors of their own organization, which is a serious mistake. Knowing the competitive advantages of your company and the ability to work on competitive advantages is one of the important skills of sales managers.

Almost everyone has the opportunity to introduce a system of discounts. Competent use of the company's competitive advantages is expressed not in dumping, but in the art of strengthening the position of one's organization and its interests.

To master this art, you can take part in trainings from the organization "Practicum Group". It provides services for the conduct of training programs that contribute to improving the performance of personnel, management, the company's competitive advantages, as well as increasing sales and strengthening ties with the consumer.

Service list:

The training program for sales managers "PROFESSIONAL".
Trainings for managers and employees.
Trainings for leadership.
Trainings in a specialized center "Practicum Group".

The founder of the Practicum Group is Evgeny Igorevich Kotov. It has been operating since 2006 and during all this time has managed to train more than 40 thousand people: employees, managers, managers of all types, and so on.

The organization covers about 100 cities of the CIS countries, as well as Turkey, Moldova, Latvia, Kyrgyzstan and Kazakhstan

⏱ reading time: 15 minutes

The goal of a marketing strategy is to understand and handle the competition. Some companies are always ahead of others. Industry does not matter - the profitability gap between companies within the same industry is higher than the differences between industries.

Differences between companies are especially important in times of crisis, when the created competitive advantage is an excellent springboard for profitable growth.

Competitive advantages of the company

Advantage- any success factor that increases the willingness of the consumer to pay or reduces the costs of the company.
Competitive advantage- a factor of success that is significant for the consumer, by which the company surpasses all competitors

Building a competitive advantage means achieving a greater gap than the competition between costs and the buyer's willingness to pay for a product.

Step 1. Determine the success factors

The answer to the question “how to form a company's competitive advantage” is not so important. If you are confident that you will achieve superiority over the competition through 24/7 delivery, then you will find a solution to how to realize this competitive advantage. It is much more difficult to determine what exactly it will become.

To do this, first of all, we write out all the advantages, or success factors that are important for buyers. For example, these are.

Step 2. Segment the target audience

A separate shuttle for business class passengers is an advantage. But achieving this competitive advantage is completely indifferent for those flying in the economy segment. Determination of competitive advantages always occurs for a specific segment of the target audience - with its specific needs and desires.

The decision to sell to “everyone” leads to questions about where to look for these “everyone” and what to offer them. It turns out that “everyone” should be looked for “everywhere” and “everything” should be offered. This strategy will kill the budget of any company.

Take the example of achieving the competitive advantage of a flower company. Among the target audience, we will single out the segments of those who buy flowers impulsively, prepare a pre-planned gift, or, say, decorate at home.

Having determined for whom we are going to form a competitive advantage, we will assess whether it is worth it - we will give an assessment of the market capacity and the saturation of the competition in each segment.

More information about segmentation criteria - in our article: ""

Step 3. Identify the key success factors

The buyer is demanding. Many factors are important for him - from the smile of the consultant and the design of the site to low prices. But if the buyer wants something, this does not mean at all that he is ready to pay for it.

The value of a competitive advantage is the buyer's willingness to pay for it. The more money you are willing to pay for the development of a competitive advantage, the higher its significance.

Our task is to form a very short list of key success factors that can determine the competitive advantages of a company from a long list of various "wants" of the consumer.

In our example, the key success factors are the same for all three target audience segments. In real life, each segment usually has 1-2 of its own factors.

Step 4. Assess the significance of the key success factors for the target audience segments

What is important to one segment of the target audience may be a weak competitive advantage for consumers in another segment.

If you got the idea to buy flowers to give them this evening, then for an impulsive decision, the main thing is the appearance (the fullness of the opening of the bud) and the speed of purchase. This is more important than the opportunity to choose from a large assortment, the life of the bouquet - it is necessary that the flowers are and look good this evening.

The opposite situation is buying flowers to decorate your home. Delivery does not "burn", but the question of how long the flowers will last comes to the fore.

Therefore, the importance of the key success factors is determined for each segment of the target audience separately.

*) we clarify - KFUs are taken as an example, close to life, but not reflecting a real case.

For our company, identifying the right competitive advantage that allows our clients to attract more consumers, get more money from them and interact with them for longer is one of the main blocks of the developed marketing strategy. Therefore, in we strive to achieve an ideal situation - when each cell of all tables in this article is expressed in money. It is possible to create a working marketing strategy only by understanding the cost of KFU from the point of view of the buyer, market size, costs, etc.

All this information can be obtained. But sometimes there is no time or resources for this. Then we advise you to use a comparison on a 5 or 10 point scale. In this case, remember that any evidence is better than guesswork. Hypotheses should be put forward on the basis of the company's big data, monitoring customer reviews, observing the process of selling competitors, and not taking it out of my head "because it seems so to me." All too often, expert forecasts don't work.

Step 5. Comparing the achieved competitive advantages

At this point, we figured out what is important for your customers. This is good. It's bad that competitors are also aware.

To understand the starting conditions, it is necessary to assess the current level of development of the company's competitive advantages. Strictly speaking, you have a competitive advantage only when your offering outperforms all direct competitors in some key success factor.

The assessment of competitive advantages is carried out solely from the point of view of consumers. The opinion of the company's employees, and especially of the management, does not say anything. The director can be proud of the site developed according to his idea, on which millions have been spent, but this in no way indicates the convenience of the site for clients.

Step 6. Determine the sources of competitive advantage

Any competitive advantage is the result of the company's activities. Each action incurs costs and at the same time affects the customer's willingness to purchase the product. Differences in the results of these actions form a competitive advantage.

Therefore, we compile a list of all the company's activities by desegregating its activities into separate processes. In projects, we start the analysis with the actions that are necessary to produce a basic product or service, and only then add related activities.

Step 7. Linking the key success factors and the company's activities

Competitive advantage is formed at the junction of various activities. For example, the growth of assortment in the flower trade requires an increase in working capital, availability of storage space, sufficient area of points of sale, additional qualifications of sellers and service personnel, etc.

We determine which business processes are associated with the development of each of the found competitive advantages and the size of their contribution.

Step 8. Estimate the company's costs of creating competitive advantages

At this step, we look at how much it costs to achieve a competitive advantage. Any activity of the company has its own costs.

In our example, we estimate the level of costs on a 10-point scale, but in real life the company should more or less accurately know its costs. Pay attention to the calculation methodology - usually accountants tend to write down most of the costs in production, thereby reducing indirect costs.

Having understood the size of the costs, we determine their drivers. Why are the costs the way they are? Maybe we pay a lot for shipping because the size of the business is small and we don't have enough cargo? There are many cost drivers. They depend on the size of the firm, its geographic location, institutional factors, access to resources, etc.

Cost driver analysis helps assess the costs of competitors to create a similar competitive advantage. Obtaining data directly is difficult, but understanding the drivers that affect costs can help predict the costs of competitors.

Step 9. Looking for resources to create a competitive advantage

Maintaining the achieved competitive advantage at a constant level is possible only if there are sufficient resources. In addition, an analysis of the resources at the disposal of the company helps to select an area for the rapid formation of competitive advantage.

Step 10. Choosing a direction for developing a competitive advantage

We look at the two resulting final pictures and reflect. There are only three options for achieving a competitive advantage:

increase willingness to buy a product without significantly increasing costs
drastically reduce costs, practically without affecting the willingness to buy
increase willingness to buy while reducing costs.

The third direction looks the most attractive. But finding such a solution is extremely difficult. Typically, companies are simply wasting valuable resources trying to build a competitive advantage across the board.

Basic rules for determining competitive advantage.

We are looking for options that create the largest gap between the buyer's willingness to pay and our costs.
We are not trying to pick all the attractive options at once. Having decided to occupy one peak, we will no longer climb another. It is most beneficial to choose a peak that is not crowded by competitors.
Remember the competitors, what drives each of them. If you decide to change a business process, how will your closest competitor react?

Success factors. The more you find them, the better. Typically, managers habitually focus on a few characteristics of a product. This reduces the perception of the consumer benefits and aligns your marketing strategy with those of your competitors. To find competitive advantages that are less competitive, think about the benefits a company creates for all stakeholders: consumers, employees, suppliers, dealers, and so on.
Key success factors. The more significant the factor, the more restructuring of the company's activities it requires. If you are not one of the industry leaders, it is better not to try to compete immediately on the main factors, or groups of factors ("best in quality")
Market. The question should not be “can we create a competitive advantage for this segment of the target audience”, but “can we create a competitive advantage for this segment of the target audience and remain profitable”. With operating costs in hand, we assume how much the company will pay to turn a key success factor into a full-fledged competitive advantage
Current competitive position. It is difficult to build up a competitive advantage that you are hopelessly lagging behind. Especially if it is a capital-intensive or time-consuming process.
Costs. Competitive advantage can be gained by focusing on costs that are most different from competitors, are large enough to affect the overall cost structure and are associated with isolated activities.

Fear often gets in the way of building a competitive advantage. The desire to become the best will necessarily lead to an increase in prices or, conversely, a decrease in the desire to buy our product. Cost reduction reduces the client's desire to use our service (a low-cost airline ticket is cheap, but you can't take your luggage with you, there is no food, the airports are far away). Improving product performance leads to higher costs. This is totally normal. What matters is the widening gap between the buyer's willingness to pay and the company's costs.

Step 11. Forming competitive advantages by changing the company's actions

As I wrote above, the creation of competitive advantages is the result of the company's actions. In order for the offer to outperform all competitors, it is necessary to reconfigure some of the activities.

For example, achieving a “low cost” competitive advantage. It makes no sense to try to compete with a discounter simply by lowering prices. A successful discounter has become such because most of the company's activities are subordinated to the creation of this competitive advantage. If a Walmart employee wants to take a new pen, he returns the old one written out. There are no trifles in the formation of a competitive advantage.

Again, we look at the connection between the selected competitive advantage and the company's activities. Where this competitive advantage is created. And we invest in the development of the selected business processes.

Ask yourself the following questions

Are our actions different from those of our competitors?
Are we doing the same things in a different way?
How can we change our set of actions to gain a competitive advantage?

As a result, determine the minimum and sufficient set of activities that the company must perform in order to form a competitive advantage. Usually they try to copy only the obvious things, forgetting that much is hidden under water. It is the set of activities that creates a competitive advantage that cannot be copied.

Actions aimed at developing a competitive advantage should be linked by a single logic. Porter's classic example is SouthWest Airlines' set of actions that created its competitive advantage. As a result, the airline was the only low-cost airline on the market for 25 years. It is impossible to achieve a similar competitive advantage overnight.

In essence, this is a marketing strategy. Such a set of actions is almost impossible to copy and transcend.

Competitive advantage is those characteristics and properties of a product or brand, as well as specific forms of business organization, which provide an enterprise with a certain superiority over its competitors.
Competitive advantage is always relative in comparison with the company occupying the best position in the market for a product or service.
The relative advantage of a competitor is determined by various factors. Depending on the advantages created, the factors of competitiveness are divided into two groups:
external;
internal.
Competitive advantage is “ external"If it based on the distinctive qualities of the product, which form value for the buyer in terms of quality level, design, special characteristics, etc. A strategy resulting from external competitive advantage is a product differentiation strategy. It is based on marketing know-how, the company's excellence in identifying and meeting the expectations of customers who are not satisfied with existing products.
Internal competitive advantage is based on superiority(leadership) of the enterprise production and management costs. The internal advantage provides greater profitability, the enterprise's resistance to the reduction of the price of the goods, and therefore represents value for the manufacturer. A strategy based on internal competitive advantage is a cost dominance strategy. It is based mainly on production and management know-how.

Internal competitive advantage is based on the superiority of the firm in terms of costs, which allows the cost of manufactured products to be lower than that of competitors.

It should be borne in mind that a lower cost price gives the company an advantage if the products meet the industry average quality standard. Otherwise, a product of inferior quality can be sold through a decrease in its price, which reduces the share of profits. Accordingly, in this embodiment, the cost advantage is not beneficial.

A strategy based on internal competitive advantage is a cost dominance strategy. It is based mainly on production and management know-how.

External competitive advantage is based on the distinctive properties of a product or service that has a greater “consumer value” for the customer than similar products from competitors. This allows for higher sales prices than competitors that do not provide the appropriate distinctive quality.

An external competitive advantage strategy is a product differentiation strategy. It is based on marketing know-how, the company's excellence in identifying and meeting the expectations of customers who are not satisfied with existing products.

So, competitive advantage can be defined as the high competence of an enterprise in any area that creates the best opportunities to overcome the influence of competition, attract consumers and maintain their commitment to the firm's products. Competitive advantage ensures that consumers are offered a product that is of value to them and for which they are willing to pay.

8. Features of bankruptcy of strategic enterprises and organizations. Measures to prevent bankruptcy of strategic enterprises and organizations.
Strategic enterprises and organizations are understood as:
federal state unitary enterprises and open joint stock companies

a, whose shares are in federal ownership and which carry out the production of products (works, services) of strategic importance for ensuring the defense and security of the state, protecting morals, health, rights and legitimate interests of citizens. obligations and (or) fulfill the obligation to pay mandatory payments if the corresponding obligations and (or) obligations are not fulfilled within six months from the date when they should have been performed.
To initiate a bankruptcy case for a strategic enterprise or organization, claims are taken into account, amounting to an aggregate of at least five hundred thousand rubles.
In order to prevent the bankruptcy of strategic enterprises and organizations, the Government of the Russian Federation in the manner prescribed by the Federal Law and other regulatory legal acts of the Russian Federation:
organizes accounting and analysis of the financial condition of strategic enterprises and organizations and their solvency;
reorganizes strategic enterprises and organizations;
carries out the repayment of the federal budget debt to strategic enterprises and organizations that are executors of work under the state defense order resulting from untimely payment of the state defense order;
ensures the restructuring of debt (principal and interest, penalties and fines) of strategic enterprises and organizations that are executors of work on the state defense order, to the federal budget and state extra-budgetary funds;
contributes to the achievement of an agreement between strategic enterprises and organizations with creditors on the restructuring of their accounts payable, including through the provision of state guarantees;
conducts pre-trial reorganization of strategic enterprises and organizations in the manner prescribed by this Federal Law;
takes other measures aimed at preventing the bankruptcy of strategic enterprises and organizations.
The person participating in the bankruptcy case of a strategic enterprise or organization is the federal executive body that ensures the implementation of a unified state policy in the sector of the economy in which the relevant strategic enterprise or organization operates.
An external management plan in relation to a strategic enterprise or organization may provide for transactions that are not related to the economic activities of the debtor, related to:
· Sale of the enterprise;
· Alienation or encumbrance of real estate;
· Disposal of other property of the debtor, the book value of which is more than five percent of the book value of the debtor's assets, determined on the basis of the accounting statements for the last reporting period;
· Obtaining and issuing loans (credits), issuing sureties and guarantees, assignment of claims, transfer of debt, as well as by the institution of trust management of the debtor's property;
· Alienation and acquisition of shares, shares of business partnerships and companies;
The conclusion of contracts of simple partnership

The external manager does not have the right to refuse to execute the debtor's contracts related to the performance of work under the state defense order, the provision of federal state needs in the field of maintaining the defense capability and security of the Russian Federation. The external manager does not have the right to alienate certain types of property, property and other rights that are part of the debtor's property complex - a strategic enterprise or organization designed to carry out activities related to the performance of work under the state defense order, ensuring federal state needs in the field of maintaining defense capabilities and security of the Russian Federation.

9 Standard anti-crisis plan PR.

Before the onset of a crisis situation in the organization, the following directions should be developed and implemented. 1. Public relations policies and procedures. Approval of powers, priorities, programs, leadership. 2. A communications crisis plan is one of the most important parts of a crisis management plan. 3. Information picture of the organization. 4. Information on each program. Content and timely updates are most important. This can be saved electronically or printed on a special information sheet. 5. Useful links in crisis situations. Educational films available, public information. 6. List of key people. Work and home telephones, information about work, powers, area of responsibility - board, top management, responsible persons in each department. 7. Identification of those responsible for public relations, experienced in performing in front of a wide audience. These employees should be familiar with the organization's public relations channels. 8. Determination of the principles of interaction with the media. They should be practiced both with staff and with the media before the crisis. 9. Basic and detailed list of media. Creation of a media database. 10. Registration of contacts with the media (with whom they met, what they said, etc.).

10. Business cycles - fluctuations in economic activity (economic environment), consisting in repeated contraction (economic recession, recession, depression) and expansion of the economy (economic recovery). The cycles are periodic, but usually irregular. Usually (within the framework of neoclassical synthesis) they are interpreted as fluctuations around the long-term trend of economic development.

A deterministic point of view on the causes of economic cycles is based on predictable, well-defined factors that form at the stage of recovery (factors of recession) and recession (factors of recovery). The stochastic point of view assumes that cycles are generated by factors of a random nature and represent the reaction of the economic system to internal and external impulses.

Types of economic cycles

There are usually four main types of economic cycles:

· Short-term cycles of Kitchin (typical period - 2-3 years);

· Medium-term Juglar cycles (typical period - 6-13 years);

· Rhythms of Kuznets (characteristic period - 15-20 years);

· Long waves of Kondratyev (characteristic period - 50-60 years).

There are four relatively distinct phases in business cycles: peak, decline, bottom (or “trough”), and rally; but to the greatest extent these phases are characteristic of Juglar's cycles.

Climb occurs after reaching the lowest point of the cycle (bottom). It is characterized by a gradual growth in employment and production. Many economists believe that this stage is characterized by low inflation rates. Innovation is being introduced in the economy with a short payback period. Demand pent-up during the previous downturn is being realized.

Peak, or the top of the business cycle, is the “high point” of economic recovery. In this phase, unemployment usually reaches the lowest level or disappears altogether, production capacities operate at maximum or close to it load, that is, almost all the material and labor resources available in the country are involved in production. Usually, though not always, inflation rises during peaks. The gradual saturation of markets increases competition, which lowers the rate of return and increases the average payback period. The need for long-term lending is increasing with a gradual decrease in the ability to repay loans.

Recession(recession) is characterized by a decline in production and a decline in business and investment activity. As a result, the rise in unemployment is increasing. Officially, the phase of the economic recession, or recession, is considered to be a drop in business activity that has lasted for over three months

Bottom The (depression) of the business cycle is the “trough” of production and employment. It is believed that this phase of the cycle is usually not long. However, history knows exceptions to this rule. The Great Depression of the 1930s, despite periodic fluctuations in business activity, lasted 10 years (1929-1939).

Similar information.

Firms, not countries, compete on the international market. It is necessary to understand how a firm creates and maintains a competitive advantage in order to understand the role of the country in this process. At the present stage, the competitive capabilities of firms are not limited to the borders of their home country. Particular attention should be paid to the role of global strategies in creating a competitive advantage, as these strategies completely change the role of the home country.

Let's start with the basic principles of competitive strategy. In competition in the domestic and international markets, many principles coincide. We then look at ways to enhance competitive advantage through global rivalry.

Competitive strategy

To understand the nature of competition, the basic unit is an industry (it does not matter whether it is a processing or service sector), that is, a group of competitors producing goods or services and directly competing with each other. A strategically significant industry includes products with similar sources of competitive advantage. Examples include the manufacture of facsimile equipment, polyethylene, heavy-haul trucks and plastic injection molding equipment. In addition, there may be related industries, whose products - the same customers, production technology or distribution channels, but they have their own requirements for competitive advantage. In practice, the boundaries between industries are always very vague.

In many discussions about trade and competition, industry definitions are too general, such as “banking,” “chemicals,” or “mechanical engineering.” This is a very broad approach, since both the nature of competition and the sources of competitive advantage vary significantly within each such group. For example, mechanical engineering is not a single industry, but dozens of industries with different strategies, for example, the production of equipment for the weaving industry, for the manufacture of industrial rubber goods or for printing, and each has its own special requirements to achieve a competitive advantage.

When developing a competitive strategy, firms strive to find and implement a way to profitably and lastingly compete in their industry. There is no universal competitive strategy; only a strategy that is consistent with the conditions of a particular industry, the skills and capital that a particular firm possesses can be successful.

The choice of a competitive strategy is determined by two main points. The first is the structure of the industry in which the firm operates. The nature of competition varies widely across industries, and the likelihood of long-term profitability varies across industries. For example, the average profitability in the pharmaceutical and cosmetics industries is very high, but not in the production of steel and many types of clothing. The second major point is the position that the firm holds within the industry. Some positions are more profitable than others, regardless of the industry's average profitability per se.

Each of these points alone is not sufficient for choosing a strategy. Thus, a firm in a very profitable industry may not make a lot of profit if it chooses the wrong position in the industry. Both the structure of the industry and the position in it can change. An industry may become more (or less) “attractive” over time as the conditions for the creation of this industry or other elements of the structure of the industry change in the country. Position in the industry is a reflection of the never-ending war of competitors.

A firm can influence both the structure of the industry and the position in its "table of rank". Firms that are doing well not only respond to changes in the "environment", but also try to change it themselves to their advantage. A significant change in position in the competitive race entails changes in the structure of the industry or the emergence of new foundations for competitive advantage. So, Japanese firms that produce TVs have become world leaders due to the trend of transition to compact, portable TVs and the replacement of a semiconductor lamp element base. Firms in one country take over leadership from firms in another country if they are more capable of responding to such changes.

Structural analysis of industries

Competitive strategy should be based on a comprehensive understanding of the structure of the industry and the process of its change. In any branch of the economy - it does not matter whether it acts only on the internal market or on the external one too - the essence of competition is expressed by five forces: 1) the threat of the emergence of new competitors; 2) the threat of the appearance of goods or services - substitutes; 3) the ability of suppliers of components, etc. to bargain; 4) the ability of buyers to bargain; 5) the rivalry of existing competitors among themselves (see Figure 1).

Picture 1. Five forces driving industry competition

The significance of each of the five forces varies from industry to industry and ultimately determines the profitability of industries. In industries where the actions of these forces develop favorably (for example, in the production of soft drinks, industrial computers, in the software trade, in the production of medicines or cosmetics), numerous competitors can receive high returns on their capital invested. In the same industries where one or more forces are acting unfavorably (for example, in the production of rubber, aluminum, many metal products, semiconductor devices and personal computers), very few firms manage to maintain high profits for a long time.

The five forces of competition determine the profitability of an industry because they affect the prices that firms can dictate, the costs they have to incur, and the investment required to compete in the industry. The threat of new competitors diminishes the overall profitability of the industry because they bring new production capacity to the industry and seek to gain market share, thereby reducing positional profit. Powerful buyers or suppliers, when bargaining, benefit and reduce the firm's profits. Fierce competition in the industry diminishes profitability because it has to pay to stay competitive (advertising, sales, research and development (R&D) costs), or profits flow to the buyer through lower prices.

The availability of substitute products limits the price that firms competing in the industry can charge; higher prices will induce buyers to turn to substitutes and reduce industry output.

The importance of each of the five forces of competition is determined by the structure of the industry, that is, its main economic and technical characteristics. For example, the impact of the buyer is a reflection of such questions: how many buyers the firm has; what part of the sales volume falls on one customer; Is the price of the item a significant part of the total buyer's costs (this makes the item "price sensitive")? The threat of the emergence of new competitors depends on how difficult it is for a new competitor to "penetrate" into the industry (this is determined by such indicators as the loyalty of buyers to any brand, the scale of the economy and the need to connect to a network of intermediaries).

Each sector of the economy is unique and has a structure inherent only to it. For example, it is difficult for a new competitor to enter the pharmaceutical industry, since it requires huge R&D costs and a large-scale economy when selling products to doctors. It takes a long time to develop a substitute for an effective drug, and buyers are not afraid of high prices at any time. The influence of suppliers is not significant. Finally, competition between competitors has been and remains moderate and is not focused on price knocks that reduce industry-wide profits, but on other variables, such as R&D, that drive output across the industry. The presence of patents also discourages those who intend to compete by copying someone else's product. The structure of the pharmaceutical industry provides some of the highest return on investment in major industries.

The structure of the industry is relatively stable, but can still change over time. For example, the consolidation of distribution channels for goods, taking place in several European countries, increases the influence of the buyer. Through their strategy, firms can also change all five forces in one direction or another. For example, the introduction of computer information systems in airlines makes it difficult for new competitors to emerge, since such a system costs hundreds of millions of dollars.

Industry structure is important to international competition for a number of reasons. First, given the different structure in different industries, different requirements must be met to compete successfully. Competition in an industry as fragmented as apparel requires very different resources and skills than aircraft manufacturing. Domestic conditions for competition are more favorable in some industries than in others.

Secondly, the industries that are important for a high standard of living are often those that have an attractive structure. Industries with an attractive structure and a feasible environment for new competitors (in terms of technology, specialized skills, access to distribution channels, brand reputation, etc.) are often associated with high labor productivity and generate a large return on investment. The standard of living depends to a large extent on the ability of the country's firms to successfully enter industries with profitable structures. Reliable indicators of the “attractiveness” of an industry may not be the scale, rapidity of growth, or the novelty of technology (which are often highlighted by business or government planners), but the structure of the industry. By targeting structurally disadvantaged industries, developing countries often misuse resources that they do not have much.

Finally, another reason for the importance of industry structure in international competition is that restructuring creates real opportunities for a country to enter new industries. So, Japanese companies producing copying equipment began to successfully compete with American leaders in this area (specifically - Xerox and IBM) due to the fact that they turned to a sector of the market that was almost ignored (small-sized copiers), applied a new approach to the buyer (selling through dealers instead of direct selling), changed production (mass production instead of small-scale production) and approach to pricing (selling instead of renting, which is expensive for the customer). This new strategy made it easier to penetrate the industry and negated the advantage of the former leader. How domestic conditions guide or force firms to recognize and respond to structural changes is critical to understanding “patterns of success” in international competition.

Position in the industry

Firms must not only respond to changes in the structure of the industry and try to change it in their favor, but also choose a position within the industry. This concept includes the approach of the firm as a whole to competition. For example, in the production of chocolate, American firms (Hershey, M&M "s / Mars, etc.) compete by producing and selling a relatively small set of chocolate varieties in huge quantities. On the contrary, Swiss firms (Lindt, Sprungli, Tobler / Jacobs, etc.) and others) trade mainly fine and expensive products through narrower and specialized distribution channels. They produce hundreds of products, use the highest quality components and a longer production process. As this example shows, position in the industry is the firm's approach to competition. , and not just its products or whoever it is intended for.

Competitive advantage determines position in the industry. Ultimately, firms outperform their rivals if they have a solid competitive advantage. Competitive advantage is divided into two main types: lower costs and product differentiation. Low cost reflects a firm's ability to design, produce, and sell a comparable product at less cost than its competitors. Selling a product at the same (or approximately the same) price as competitors, the firm in this case makes a large profit. Thus, Korean firms producing steel and semiconductor devices have triumphed over foreign competitors in this way. They produce comparable goods at very low costs using a low-wage but highly productive labor force and modern technology and equipment purchased abroad or manufactured under license.

Differentiation is the ability to provide a customer with a unique and greater value in the form of a new product quality, special consumer properties or after-sales service. For example, German machine tool firms compete using a differentiation strategy based on high product performance, reliability and fast maintenance. Differentiation allows the firm to dictate high prices, which, at equal costs with competitors, again gives a large profit.

Any type of competitive advantage gives you higher productivity than the competition. A firm with a low production cost produces this value at a lower cost than competitors; a differentiated firm has a higher unit profit than its competitors. Thus, competitive advantage is directly related to the formation of national income.

It is difficult, but still possible to obtain a competitive advantage based on both lower costs and differentiation6. It is difficult to do this because the provision of very high consumer properties, quality or excellent service delivery inevitably leads to an increase in the price of the product; it will cost more than trying to just be on par with the competition. Of course, firms can improve technology or production methods so as to simultaneously reduce costs and increase differentiation, but ultimately competitors will do the same and force them to decide on what type of competitive advantage to focus on.

However, any effective strategy must address both types of competitive advantage, albeit strictly adhering to one of them. A firm focused on low costs must still provide acceptable quality and service. Likewise, the product of a firm producing differentiated products should not be so much more expensive than competitors' products that it would be to the detriment of the firm.

Another important variable in determining industry position is the scope of competition, or breadth of purpose, towards which a firm is oriented within its industry. The firm must decide for itself how many varieties of goods it will produce, which distribution channels to use, which customer base to serve, in which parts of the world to sell its products and in which related industries it will compete.

One of the reasons the area of competition is important is that industries are segmented. Almost every industry has well-defined product varieties, multiple distribution and distribution channels, and several types of buyers. Segmentation is important because different market sectors have different needs: a regular men's shirt, sold without any advertising, and a shirt created by a famous fashion designer, are designed for buyers with very different needs and criteria. In both cases, we have shirts, but each has its own type of buyer. Different market sectors require different strategies and different abilities; accordingly, the sources of competitive advantage in different market sectors are also very different, although these sectors are “served” by the same industry. And the situation when firms in one country are successful in one market sector (for example, Taiwanese firms - in the production of cheap leather shoes), and firms of another country in the same industry - in another sector (Italian firms - in the production of model leather shoes) - are not rarity.

The area of competition is also important because firms can sometimes gain a competitive advantage through the scale of their goals, competing around the world, or by exploiting linkages between industries, competing in related industries. For example, Sony benefits greatly from the fact that a wide variety of electronic products with its brand, using its technology, and distributed through its channels are produced around the world. Interrelationships between clearly delineated industries arise from the commonality of important activities or skills among firms competing in these industries. The sources of competitive advantage around the world will be discussed below.

Firms in the same industry may choose different areas of competition. Moreover, it is typical that firms from different countries in the same industry choose different areas of competition. Basically, the choice is this: to compete on a "wide front" or to target one sector of the market. Thus, in the production of packaging equipment, German firms offer lines of equipment for a wide range of purposes, while Italian ones tend to focus on highly specialized equipment used only in certain market sectors. In the automotive industry, leading American and Japanese firms produce a whole range of cars of different classes, while BMW and Daimler-Benz (Germany) primarily produce powerful, high-speed and expensive high-end cars and sports cars, and Korean firms Hyundai and Daewoo focused on on machines of small and ultra-small class.

The type of competitive advantage and the area in which it is achieved can be combined into the concept of typical strategies, that is, completely different approaches to what high performance in the industry is. Each of these archetypal strategies, depicted in Figure 2, represents a fundamentally different concept of how to compete and succeed in competition. For example, in shipbuilding, Japanese firms have adopted a strategy of differentiation and offer a wide variety of high quality vessels at high prices. Korean shipbuilding firms have adopted a cost leadership strategy and also offer a variety of types of ships, but not of the highest quality, but simply of good quality; however, the cost of Korean vessels is less than that of Japanese vessels. The strategy of successful Scandinavian shipyards is focused differentiation: they build mainly specialized types of ships, such as icebreakers or cruise ships. They use specialized technology and sell these vessels at a very high price to justify the labor costs, which are highly valued in the Scandinavian countries. Finally, Chinese shipbuilders, which recently began to actively compete in the global market (strategy - focus on the level of costs), offer relatively simple and standard ships at even lower costs and at even lower prices than Korean ones.

Figure 2. Typical strategies

Using the example of typical strategies, it becomes clear that no strategy is suitable for absolutely all industries. In contrast, many industries combine several strategies perfectly. Moreover, the structure of the industry limits the choice of possible options for strategy, but you will not find an industry in which only one strategy can bring success. In addition, variants of typical strategies with different methods of differentiation or focusing are possible.

The concept of generic strategies is based on the idea that each of them is based on competitive advantage and that in order to achieve it, the firm must choose its own strategy. The firm must decide what type of competitive advantage it wants and in what area it is possible.

The biggest strategic mistake is the desire to “chase all the rabbits,” that is, to use all competitive strategies at the same time. This is a sure way to strategic mediocrity and lousy performance, because a firm trying to use all strategies at the same time will not be able to properly use any of them due to their built-in contradictions. An example of this is the same shipbuilding: Spanish and British shipbuilding companies are declining, because their production costs are higher than those of the Koreans, they have no basis for differentiation compared to the Japanese (that is, they do not produce anything that the Japanese would not ), but they could not find any market segments where they could get a competitive advantage (like, for example, Finland in the icebreaker market). Thus, they do not have a competitive advantage, and they are held mainly by government orders.

Sources of competitive advantage

Competitive advantage is achieved in terms of how a firm organizes and carries out individual activities. The actions of any company are divided into different types. For example, salespeople talk over the phone, service technicians perform repairs at the buyer's request, scientists in the lab develop new products or processes, and financiers build up capital.

Through these activities, firms create specific values for their customers. The ultimate value created by a firm is determined by how much customers are willing to pay for the goods or services offered by the firm. If this amount exceeds the total cost of all necessary activities, the firm is profitable. To gain a competitive advantage, a firm must either provide customers with about the same value as its competitors but produce a product at a lower cost (lower cost strategy), or act to provide customers with a higher value product for which a higher price can be obtained ( differentiation strategy).

Competitive activities in a given industry can be categorized as shown in Figure 3. They are grouped together in a so-called value chain. All activities in the value chain contribute to use value. They can be roughly divided into two categories: primary activity (permanent production, marketing, delivery and service of goods) and secondary (providing production components, such as technology, human resources, etc., or providing infrastructure functions to support other activities ), that is, supporting activities. Each activity requires purchased “components”, human resources, a combination of certain technologies, and is based on the infrastructure of the firm, such as management and financial activities.

The competitive strategy chosen by the firm determines the way in which the firm performs individual activities and the entire value chain. In different industries, specific activities have different implications for achieving a competitive advantage. Thus, in the production of printing presses, the development of technology, quality of assembly and after-sales service are indispensable for success; in the production of detergents, advertising plays the main role, since the manufacturing process is simple here, and there is no question of after-sales service.

Firms gain a competitive advantage by developing new ways of doing business, by introducing new technologies or initial production components. For example, the Japanese firm Makita has become a leader in power tool manufacturing by using newer, cheaper materials and selling standard tool models from a single factory worldwide. Swiss chocolate companies have achieved worldwide recognition, as they were the first to introduce a number of new recipes (including creamy chocolate) and apply new technologies (for example, continuous mixing of chocolate mass), which significantly improved the quality of the finished product.

Figure 3. Value chain

But a firm is not only the sum of all its activities. A firm's value chain is a system of interdependent activities, between which there are links (linkages). These linkages arise when the method of an activity affects the cost or effectiveness of others. Relationships often lead to the fact that the additional costs of "adjusting" individual activities to each other pay off in the future. For example, more expensive design and components, or more rigorous quality control can help lower your after-sales service costs. Firms must incur such costs in line with their strategy in the name of competitive advantage.

Connections also require the alignment of different activities. In order not to disrupt the delivery time, for example, it is necessary that production, ensuring the supply of raw materials and components, auxiliary activities (for example, commissioning) are well coordinated. A clear agreement ensures the timely delivery of the goods to the customer without the need to have expensive delivery vehicles (that is, a large fleet of cars when you can get by with a small one, etc.). Aligning related activities reduces transaction costs, provides clearer information (making management easier), and replaces expensive transactions in one activity with cheaper transactions in another. It is also a powerful way to reduce the total time it takes to complete different activities, which is increasingly important for competitive advantage. For example, such an agreement significantly reduces the development and launch time of new products, as well as the acceptance of orders and delivery of goods.

Careful communication management can be a critical source of competitive advantage. Many of these connections are subtle and may be overlooked by competing firms. Benefiting from these connections requires both complex organizational procedures and trade-offs for the sake of profit later, including in cases where organizational lines do not intersect (such cases are rare). Japanese firms are particularly adept at managing communications. With their submission, the practice of overlapping development stages of new products has become popular in order to simplify their release and reduce development time, as well as enhanced quality control "on-line" to reduce the cost of after-sales service.

To achieve a competitive advantage, you must approach the value chain as a system and not as a collection of components. Changing the value chain by rearranging, regrouping or even excluding certain activities from it often leads to a significant improvement in the competitive position. An example of this is the production of electrical appliances. Italian firms in this area completely changed the manufacturing process and used a completely new distribution channel, which made them the world's export leaders in the 1960s and 1970s. Japanese companies for the production of photographic equipment have become world leaders by putting single-lens DSLR cameras on stream, introducing automated mass production and for the first time in the world organizing the mass sale of such cameras.

The individual firm's value chain as it competes in a given industry is part of a larger system of activities that can be called a value system (see Figure 4). It includes suppliers of raw materials, components, equipment and services. On the way to the final consumer, the product of a given firm often passes through the value chains of sales channels. Eventually, the product becomes an aggregate element in the customer's value chain, who uses it in the performance of their activities.

Figure 4. Value system

Competitive advantage is increasingly determined by how well the firm can organize the entire system. The aforementioned links not only connect different types of activities of the company, but also determine the mutual dependence of the company, subcontractors and distribution channels. A firm can gain a competitive advantage by better organizing these links. Regular and on-time deliveries (a practice pioneered in Japan and known there as "kenban") can reduce a firm's operating costs and reduce inventory requirements. However, opportunities to save money by coordinating relationships are by no means limited to securing supplies and taking orders; it also includes R&D, after-sales service and many other activities. The firm itself, and its subcontractors, and the distribution network can benefit from being able to recognize and exploit such connections. The ability of firms in a given country to use links with suppliers and buyers in their home country largely explains the country's competitive position in the relevant industry.

The value chain provides a better understanding of the sources of cost benefit. The cost gain is determined by the amount of costs in all the required activities (compared to competitors) and can occur at any stage. Many managers view costs too narrowly, focusing on the production process. However, firms leading the way by reducing costs also benefit from developing new, cheaper products, using less expensive marketing, and lowering maintenance costs, that is, gaining cost benefits from all links in the value chain. In addition, to obtain a cost benefit often requires careful "adjustment" not only of relationships with suppliers and the distribution network, but also within the company.

The value chain also helps to understand the differentiation reserves. A firm creates special value for the buyer (and this is the point of differentiation) if it provides the buyer with such savings or such consumer properties that he cannot get by buying a competitor's product. In essence, differentiation is the result of how a product, ancillary services, or other firm's activities affect the buyer's activities. The firm and its customers have many points of contact, each of which can be a source of differentiation. The most obvious of these is how a product affects the customer's activities in which the product is used (say, a computer used to receive orders, or a laundry detergent). Value creation at this level can be called first-order differentiation. But virtually all products have a much more complex impact on buyers. Thus, a structural element included in a product purchased by a customer must be capitalized and, in the event of a failure in the entire product, repaired as part of the product sold to the end customer. At each stage of such an indirect influence of the product on the buyer's activities, new opportunities for differentiation open up. In addition, almost all of the company's activities in one way or another affect the buyer. For example, the contractor's developers can help integrate the component into the final product. These high-order connections between the firm and customers are another potential source of differentiation.

The basis for differentiation is different in different industries, and this is of great importance for the competitive advantage of countries. There are several distinct types of firm-client relationships, and firms from different countries are taking different approaches to improve them. Swedish, German and Swiss firms are often successful in industries that require close cooperation with customers and high demands on after-sales service. In contrast, Japanese and American firms thrive where the product is more standardized.

The value chain concept provides a better understanding of not only the types of competitive advantage, but also the role of competition in achieving it. The scope of competition is important because it determines the direction of the firm, how it is done, and the configuration of the value chain. Thus, by choosing a narrow target market segment, a firm can fine-tune its activities to the requirements of that segment and, as a result, potentially gain a cost or differentiation benefit over competitors working for a wider market. However, targeting the broad market can provide a competitive advantage if the firm is able to operate in different segments of the industry or even in several interconnected industries. For example, German chemical companies (BASF, Bayer, Hoechst, etc.) compete in the production of a wide variety of chemical products, but individual product groups are produced at the same factories and have common distribution channels. Likewise, Japanese consumer electronics firms such as Sony, Matsushita, and Toshiba benefit from related industries such as televisions, audio equipment, and VCRs. They use the same brands, worldwide distribution channels, common technology and joint purchasing for these products.

An important reason for the competitive advantage is that the company chooses a sphere of competition that is different from the one chosen by competitors (other market segment, region of the world), or by combining products from related industries. For example, Swiss hearing aid firms have focused on high-power hearing aids for the severely hearing impaired, outperforming American and Danish competitors on a broader front. Another common technique for enhancing competitive advantage is to be among the first firms to move to global competition, while other domestic firms are still confined to the domestic market. The home country plays an important role in how these differences in competition are manifested.

Firms gain competitive advantage by finding new ways to compete in their industry and entering the market with them, which can be summed up as “innovation”. Innovation in the broadest sense includes both improved technology and improved ways and methods of doing business. Specifically, renewal can be expressed in a change in a product or production process, new approaches to marketing, new ways of distributing a product, and new concepts of the sphere of competition. Innovative firms not only grasp the possibility of change, but they also force the change to happen faster. Strictly speaking, most of the changes are evolutionary, not radical; often the accumulation of small changes gives more than a major technological breakthrough. Moreover, the truth is often confirmed that “the new is the well-forgotten old”: many new ideas, in fact, are not so new, they just have not been properly developed. Innovation is equally the result of organizational improvement and R&D. It always involves an investment in skills and knowledge, and most often in fixed assets and additional marketing efforts.

An innovation leads to a change of leadership in competition if other competitors either have not yet recognized a new way of doing business, or are unable or unwilling to change their approach. There are a lot of reasons for this: complacency and complacency, inertia of thinking (a wary attitude towards new things), funds invested in specialized funds and equipment (this “ties hands”), and, finally, there may be “mixed” motives. Such "mixed" motives were, for example, at the Swiss watch firms, when the American firm Timex threw into the market cheap watches that could not be repaired, and the Swiss were all afraid to undermine the image of their watches as an equivalent of quality and reliability. In addition, their factories turned out to be completely unsuitable for the mass production of cheap products. However, without a new approach to competition, the challenger is rarely successful (unless he changes the very nature of competition). Recognized leaders will more often than not immediately take decisive retaliatory actions and "avenge themselves."

In the international market, innovations that give a competitive advantage anticipate new needs both in the home country and abroad. So, with the growing global concern for the safety of goods, Swedish firms Volvo, Atlas Copco, AGA and others have succeeded because they had foreseen this development in advance. However, innovations undertaken in response to a situation specific to the domestic market can achieve the opposite effect of the desired one - to postpone the country's success in the international market!

The potential for new ways of competing to emerge usually stems from some kind of “gap” or change in the structure of the industry. And it so happened that the opportunities that arose with such changes went unnoticed for a long time.

Some of the most common reasons for innovation that provide a competitive advantage are:

New technologies. Changes in technology can create new opportunities for product development, new ways of marketing, manufacturing or delivering, and improving related services. It is this that most often precedes strategically important innovations. New industries emerge when a change in technology makes it possible for a new product to emerge. Thus, German firms became the first in the market for X-ray equipment, because X-rays were discovered in Germany. Leadership changes are likely to occur in industries where a dramatic change in technology is making the knowledge and assets of former industry leaders obsolete. For example, in the same X-ray and other types of medical equipment for this purpose (tomographs, etc.), Japanese firms have overtaken German and American competitors due to the emergence of new technologies based on electronics, which have made it possible to replace traditional X-rays.

Firms that are “embedded” in old technology find it difficult to understand the meaning of a new technology that has just appeared, and it is even more difficult to respond to it. So, the leading American companies that produced radio tubes - RCA, General Electric, GTE-Sylvania - got involved in the production of semiconductor devices, and all to no avail! The same firms that started building semiconductor devices from scratch (for example, Texas Instruments) were more committed to the new technology, better adapted to it in terms of personnel and management, had the right approach to how to develop this technology.

New or changed customer requests. Competitive advantage often arises or changes hands when buyers have completely new needs or their views on “what is good and what is bad” change dramatically. Those firms that are already entrenched in the market may not notice or be unable to respond appropriately, because in order to respond to these requests, a new value chain must be created. For example, American fast food companies have achieved an advantage in many countries because customers needed cheap and always available food, and restaurants were slow to respond to this demand, because the fast food chain operates in a completely different way than a traditional restaurant.
The emergence of a new segment of the industry. Another opportunity to gain a competitive advantage arises when an entirely new segment of the industry is formed or when existing segments are regrouped. Here there is an opportunity not only to reach a new group of buyers, but also to find a new, more efficient way to produce certain types of products or new approaches to a certain group of buyers. A striking example of this is the production of forklift trucks. Japanese firms have spotted a neglected segment - small multipurpose forklift trucks - and tackled it. At the same time, they achieved the unification of models and highly automated production. This example shows how, by taking on a new segment, you can greatly change the value chain, which can be a very difficult task for competitors already established in the market.
Changes in the cost or availability of production components. Competitive advantage often changes hands due to changes in the absolute or relative costs of components such as labor, raw materials, energy, transportation, communications, media, or equipment. This indicates a change in the conditions of suppliers or the possibility of using new or different components in their qualities. The firm achieves a competitive advantage by adapting to new conditions, while competitors are tied hand and foot by investments and tactics adapted to old conditions.

A classic example is the change in the ratio of the cost of labor between countries. Thus, Korea, and now other Asian countries, have become strong competitors in relatively simple projects of international construction, when salaries in more developed countries have risen sharply. Recently, the sharp drop in the prices of transport and communications opens up opportunities to reorganize the management of firms and thus gain a competitive advantage, for example, the ability to rely on specialized suppliers or expand production around the world.

Changes in government regulation. Changes in government policy in areas such as standards, environmental protection, new industry requirements, and trade restrictions are another common incentive for innovation that brings competitive advantage. Existing market leaders have adapted to certain "rules of the game" from the government, and when these rules suddenly change, they may not be able to respond to these changes. American bourses benefited from reduced regulation of securities markets in other countries because the United States was the first to introduce the practice, and by the time it spread around the world, American firms had already adapted to it.

It is important to react quickly to changes in the structure of the industry

The above can give firms a competitive edge if firms understand their importance in time and take a decisive offensive. In many industries, these early movers have held the lead for decades. Thus, German and Swiss companies producing dyes - Bayer, Hoechst, BASF, Sandoz, Ciba and Geigy (later merged into Ciba-Geigy) - took the lead even before the First World War and have not surrendered their positions so far. Procter & Gamble, Unilever and Colgate have been world leaders in the detergent industry since the 1930s.

Early birds gain the advantage of being the first to capitalize on economies of scale, lowering costs through intensive training, building brand image and customer relationships at a time when competition is not yet fierce, choosing distribution channels, or gaining the best plant locations and the best profitable sources of raw materials and other factors of production. A quick reaction to a new situation can give the firm a different kind of advantage that it may be easier to retain. The innovation itself may be copied by competitors, but the benefits gained from it often remain with the innovator.

Early birds benefit the most in industries where economies of scale are important and where customers have a strong hold on their subcontractors. In such conditions, it is very difficult for a competitor to be well established in the market to challenge. How long an early bird can hold on to an advantage depends on how soon there are changes in the structure of the industry that negate that advantage. For example, in the manufacture of consumer packaged goods, customer loyalty to a given brand of product is very strong and changes in the situation are insignificant. Firms such as Ivory Soap, M&M "s / Mars, Lindt, Nestle and Persil have held their ground for generations.

Every major change in the structure of the industry creates the opportunity for new early birds. For example, in watchmaking, the emergence of new distribution channels, mass marketing and mass production in the 1950s and 1960s allowed the American firms Timex and Bulova to surpass their Swiss competitors in terms of sales. Later, the transition from mechanical to electronic watches created a "breakthrough" that allowed the Japanese firms Seiko, Citizen, and then Casio to get ahead. That is, the "early birds" who win in one generation of technology or product may well be the losers when changing generations, since their investments and skills are specialized in nature.

But the above example with the watch industry reveals another important principle: "early birds" will succeed only if they can correctly predict changes in technology. American firms (for example, Pulsar, Fairchild and Texas Instruments) were among the first to take up the production of electronic watches, based on their position in the production of semiconductors. But they relied on watches with LED indication (LED), and LEDs were inferior to liquid crystal indicators (LCD) in cheaper watch models, and traditional hand indication combined with a quartz movement in more expensive and prestigious models. Seiko, on the other hand, decided not to produce watches with LEDs, but from the very beginning focused on watches with LCD and quartz analogue watches. The introduction of LCD and quartz watch movements ensured Japan's leadership in mass watch sales, and Seiko's world leadership in the industry.

Notice what is new and implement it

Information plays an important role in the updating process: information that competitors are not looking for; information not available to them; information available to everyone, but processed in a new way. Sometimes it is obtained by investing in market research or R&D. And yet, strikingly often, innovators are firms that simply look for the right place, without complicating their lives with unnecessary reasoning.

Often, innovation comes from outsiders in the industry. The innovator can be a new firm whose founder entered the industry in an unusual way, or simply was not appreciated in an old firm with a traditional mindset. Or, managers and directors who have not previously worked in the industry, and therefore are more able to see the opportunity for innovation and more actively implement these innovations, can act as innovators. In addition, innovation can occur when a firm expands its business and brings new resources, skills, or perspectives to another industry. Another country with different conditions or methods of competition can serve as a source of innovation.

“Outside” people or firms are often more likely to see new opportunities or have different skills and resources than those of long-standing competitors — just the ones needed to compete in a new way. Leaders of innovative firms are often outsiders in a latent, social sense (not in the sense that they are the dregs of society), they just do not belong to the industrial elite, they are not even recognized as full competitors, and therefore they will not stop before to violate established norms or even use not very fair methods of competition.

With rare exceptions, innovations come at the cost of tremendous effort. Success in applying new or improved methods of competition is achieved by the firm that stubbornly bends its line, despite all the difficulties. This is where the lone wolf or small group strategy works. As a result, innovation is often the result of necessity, if not the threat of failure: fear of failure is far more stimulating than hope of victory.

For the reasons listed above, innovations often do not come from recognized leaders or even from large companies. The economies of scale in the performance of R&D, which play into the hands of large firms, are not so important, since many innovations do not require complex technology, and large companies, for various reasons, are often unable to see a change in the situation and respond quickly to it. In our study, along with large firms, we also analyzed smaller ones. Where large firms have found themselves in the role of innovators, they have often emerged as newcomers in one industry, with strong positions in another.

Why are some firms able to recognize new ways of competing and others not? Why do some firms guess such methods earlier than others? Why do some companies better guess the direction in which the technology will develop? Why are such tremendous efforts being made to find new paths? These intriguing questions will be central to subsequent chapters. The answers lie in terms such as the choice of direction for the firm's core efforts, the availability of the necessary resources and skills, and the forces that influenced the change. In all this, the national environment plays an important role. In addition, the extent to which conditions in a country are conducive to the emergence of the aforementioned domestic outsiders, and thereby prevent foreign firms from taking over the country's leadership in existing or new industries, largely determines national prosperity.

Maintain the advantage

How long you can maintain a competitive advantage depends on three factors. The first factor is determined by what the source of the advantage is. There is a whole hierarchy of sources of competitive advantage in terms of their retention. Low-ranked benefits, such as cheap labor or raw materials, can be obtained fairly easily by competitors. They can copy these advantages by finding another source of cheap labor or raw materials, or they can negate them by producing their products or drawing resources from the same place as the leader. For example, in the production of consumer electronics, Japan's labor price advantage has long since ceded to Korea and Hong Kong. In turn, their firms are already threatened by even lower labor costs in Malaysia and Thailand. Therefore, Japanese electronic firms are transferring production overseas. Also at the bottom of the hierarchy is an advantage based solely on the scale factor from the use of technology, equipment, or techniques borrowed from (or available to) competitors. Such economies of scale disappear when new technology or methods make old ones obsolete (similarly, when a new type of product appears).

Higher-order benefits (proprietary technology, differentiation based on unique products or services, a firm's reputation based on enhanced marketing activities, or close customer relationships reinforced by the cost to change suppliers) can be retained for longer. They have certain characteristics.

First, achieving these benefits requires greater skill and ability — specialized and more trained personnel, appropriate technical equipment, and, in many cases, close relationships with key customers.

Second, higher-order benefits are usually possible with long-term and intensive investments in manufacturing facilities, in specialized training of personnel, often fraught with risks, in R&D or in marketing. Certain activities (advertising, sales of products, R&D) create tangible and intangible values - a firm's reputation, good customer relationships and a knowledge base. Often, the first to respond to a changed situation is the firm that has been investing in these activities longer than competitors. Competitors will have to invest as much, if not more, to reap the same benefits, or invent ways to achieve them without spending so much. Finally, the longest-lasting benefits are the combination of high capital investment with better performance, which makes the benefits dynamic. Constant investments in new technologies, marketing, development of a branded service network around the world or the rapid development of new products further complicate the task for competitors. Higher-order benefits not only last longer but are associated with higher levels of productivity.

Benefits based on cost level alone are generally not as persistent as based on differentiation. One reason for this is that any new source of cost reduction, however simple it may be, can overwhelm a firm's cost advantage. So, if labor is cheap, you can bypass a firm with a much higher labor productivity, while in the case of differentiation, in order to bypass a competitor, as a rule, you need to offer the same range of products, if not more. In addition, cost-only advantages are more vulnerable because the emergence of new products or other forms of differentiation can destroy the advantage gained from the production of old products.

The second determinant of competitive advantage retention is the number of clear sources of competitive advantage available to firms. If a firm relies on only one advantage (say, less expensive design or access to cheaper raw materials), competitors will try to take that advantage away from it or find a way to get around it by gaining on something else. Firms that have been in the lead for many years strive to secure as many advantages as possible at all levels of the value chain. So, Japanese small-sized copiers have modern design features that increase ease of use, they are cheap to manufacture due to a high degree of flexible automation, they are sold through a wide network of agents (dealers) - this provides a larger clientele than traditional direct sales. In addition, they are highly reliable, which reduces after-sales service costs. The fact that the firm has a large number of advantages over competitors significantly complicates the latter's task.

The third and most important reason for maintaining a competitive advantage is the constant modernization of production and other activities. If a leader, having achieved an advantage, rests on its laurels, virtually any advantage will be copied over time by competitors. If you want to maintain an advantage, you cannot stand still: the firm must create new advantages, at least as fast as competitors can copy existing ones.

The main challenge is to relentlessly improve the firm's performance in order to leverage existing benefits, such as operating capacity more efficiently or providing more flexible customer service. Then it will be even more difficult for competitors to bypass it, because for this they will need to urgently improve their own performance, for which they may simply not have enough strength.

Nevertheless, in the final analysis, in order to retain a competitive advantage, it is necessary to expand the set of its sources and improve them, to move to higher-order advantages that last longer. This is exactly what Japanese car firms did: initially, they entered overseas markets with low-cost, small-class, high-quality cars, succeeding at the expense of cheap labor. But even then, while still having this advantage, Japanese car manufacturers began to improve their strategy. They began to invest heavily in the construction of large factories with modern equipment and benefit from economies of scale, then they began to update the technology, being the first to implement the "just in time" system and a number of other methods to improve quality and efficiency. This gave a higher quality than that of foreign competitors, and, as a result, reliability and customer satisfaction with the product. Recently, Japanese car firms have taken the lead in technology and are introducing new brands with enhanced consumer properties.

Changes are needed to maintain the advantage; firms must capitalize on industry trends without ignoring them in any way. Firms must also invest to protect sites that are vulnerable to competitors. Thus, if biotechnology threatens to change the direction of research in the pharmaceutical industry, a pharmaceutical company seeking to maintain a competitive advantage must immediately create a biotechnology base that surpasses that of its competitors. Hope that a competitor's new technology will fail, or ignore a new market segment or distribution channel are clear signs that a competitive advantage is slipping away. And such a reaction, alas, is common!

In order to maintain positions, firms sometimes have to give up existing advantages in order to gain new ones. For example, Korean shipbuilding firms became world leaders only when they dramatically increased the capacity of shipyards, significantly increased efficiency through new technologies, while reducing the need for labor, and mastered the production of more complex types of ships. All of these measures reduced the importance of labor costs, although Korea still had an edge in this regard at the time. The seeming paradox of giving up previous advantages is often scary. However, if the firm does not take this step, however difficult and counterintuitive it may seem, competitors will do it for it and ultimately win. How the “environment” in a country encourages firms to take such steps will be discussed later.

The reason that few firms manage to maintain leadership is because it is extremely difficult and frustrating for any successful organization to change strategy. Success breeds complacency; a successful strategy becomes routine; search and analysis of information that could change it stop. The old strategy takes on an aura of holiness and infallibility and is deeply rooted in the mindset of the firm. Any proposal to make a change is regarded as almost a betrayal of the interests of the firm. Successful firms often seek predictability and stability; they are overwhelmingly preserving the positions they have achieved, and changes are held back by the fact that the firm has something to lose. They think about replacing old advantages or adding new ones only when there is nothing left of the old advantages. And the old strategy is already ossified, and when the structure of the industry changes, the leadership changes. The innovators and new leaders are small firms, whose hands are not tied by history and previous investments.

In addition, the change in strategy is also blocked by the fact that the old strategy of the company is embodied in skills, organizational structures, specialized equipment and the reputation of the company, and with the new strategy they may not work. This is not surprising, because it is precisely on this specialization that the advantage is based. Rebuilding the value chain is difficult and costly. In large companies, moreover, the sheer size of the firm makes it difficult to change strategy. The process of changing strategy often requires financial sacrifices and troublesome, often painful changes in the organizational structure of the firm. Firms unencumbered by the old strategy and previous investments are likely to be cheaper to adopt a new strategy (purely financially, not to mention fewer organizational problems). This is one of the reasons the outsiders mentioned above are innovators.

Further, tactics to maintain a competitive advantage are in many ways unnatural for established firms in the industry. Most often, companies overcome the inertia of thinking and obstacles to the development of an advantage under pressure from competitors, the influence of buyers or difficulties of a purely technical nature. Few firms make significant improvements or change strategies voluntarily; most do this out of necessity, and this happens mainly under pressure from the outside (that is, the external environment), and not from within.

The management of companies that maintain a competitive advantage are always in a somewhat alarming state. It acutely senses the threat of its firm's leadership position from the outside and takes action in response. The influence of the situation in the country on the actions of the management of firms is an important issue that will be discussed in detail in subsequent chapters.

Competing in the global market

The above basic principles of competitive strategy exist regardless of whether the company operates in the domestic or international market. But when analyzing the role of the country in the formation of a competitive advantage, the interest is primarily represented by those industries where competition is international in nature. It is necessary to understand how firms achieve a competitive advantage through a strategy of acting in the international market and how this enhances the advantages gained in the domestic market.

The forms of international competition in different industries differ significantly. At one end of the spectrum of forms of competition is what might be called “multidomestic”. Competition in each country or small group of countries is essentially independent; The industry in question is present in many countries (for example, there are savings banks in Korea, Italy and the United States), but in each of them the competition is different. The reputation, circle of clients and capital of a bank in one country do not affect (or hardly affect) the success of its operations in other countries. MNCs may also be competitors, but the effect of their competitive advantages in most cases is limited to the borders of the country in which these companies operate. Thus, the international industry is, as it were, a set of industries (each within its own country). Hence the term - "multiple-national" competition. Industries where competition has traditionally been in this form include many types of trade, food manufacturing, wholesale, life insurance, savings banks, basic metal goods and corrosive chemicals.

At the opposite end of the spectrum are global industries in which the competitive position of a firm in one country significantly affects its position in other countries. Here the competition is on a truly global basis, with competing firms relying on the advantages that derive from their operations around the world. Firms combine advantages gained in their home country with those gained through a presence in other countries, such as economies of scale, the ability to serve customers in many countries, or a reputation that can be established in another country. Global competition takes place in industries such as civil aircraft, televisions, semiconductors, copiers, cars and watches. The globalization of industries has intensified especially after the Second World War.

With the extreme expression of the "plural-national" industry, achieving national advantage or competitiveness in the international market is not even a question. Almost every country has such industries. Most (if not all) of the firms competing in these industries are local, because when competition in each country follows its own rules, it is very difficult for foreign firms to achieve a competitive advantage. International trade in such industries is modest, if not absent altogether. If the firm is owned by a foreign company (which is rare), there is very little control by the foreign owner from its headquarters. Securing jobs in an overseas branch, being a “local corporate citizen” and where the necessary research is carried out (domestically or abroad) is not his concern: the national branch oversees all or almost all of the activities necessary to ensure competitive status. In industries such as trade or hardware manufacturing, there is usually no heated debate about trade issues.

In contrast, global industries are an arena for firms from different countries, where competition is fought in ways that significantly affect the economic prosperity of countries. The ability of a country's firms to gain a competitive advantage in global industries bodes well for both trade and overseas investment.

In global industries, firms have to compete in the international market willy-nilly to gain or not lose a competitive advantage in critical industry segments. True, in such industries there may well be purely national segments, due to the unique needs in such segments, only firms of this country can flourish. But focusing primarily on the domestic market, operating in a global industry, is a dangerous business, regardless of which country the firm is based in.

Achieve Competitive Advantage Through a Global Strategy

A global strategy can be called a strategy in which a firm sells its products in many countries, while applying a unified approach. The mere fact of transnationality does not automatically mean that there is a global strategy; if MNCs have branches that operate independently and each in their own country, this is not yet a global strategy. For example, many European MNCs, such as Brown Boveri (now Asea-Brown Boveri) and Phillips, and some American ones, such as General Motors and ITT, have always competed in this way, and yet this weakened their competitive advantage, giving competitors the opportunity to get ahead of them.

With a global strategy, the firm sells its goods in all countries (or at least in most countries) that are an important market for its products. This creates economies of scale that reduce the burden of R&D spending and enable the use of advanced manufacturing technology. The main issue is the placement of different links in the value chain and ensuring its work, so that the firm's goods can be sold around the world.

In a global strategy, there are two well-defined methods by which a firm can achieve a competitive advantage or offset various disadvantages due to country conditions. The first is the most advantageous location of various activities in different countries in order to best serve the global market. The second is the ability of a global firm to coordinate the activities of branches scattered around the world. The placement of the links in the value chain that are directly related to the buyer (marketing, product distribution and after-sales services) are usually tied to the buyer's placement. So, in order to sell its product in Japan, a firm usually needs to have sales agents or distributors there and provide after-sales service on site. In addition, the location of other activities may be tied to the location of the buyer due to high transport costs or the need for close interaction with the buyer. So, in many industries, production, delivery and marketing should be carried out as close to the buyer as possible. Most often, such a physical linkage of activities to the client is required in all countries where the firm operates.

In contrast, activities such as manufacturing and securing the supply of raw materials, etc., as well as ancillary activities (development or acquisition of technology, etc.) can be located regardless of the location of the client - such activities can be performed anywhere. As part of its global strategy, the firm locates such activities with the benefit of lower cost or worldwide differentiation. It could, for example, build one large factory for the global market, reaping the benefits of economies of scale. As such, very few activities are required to be performed only in the home country of the firm.

Decisions inherent only to a global strategy can be divided into two essential areas:

Configuration. In which and in how many countries is each activity in the value chain performed? For example, do Sony and Matsushita build VCRs at the same major plant in Japan, or are they building additional plants in the US and UK?
Coordination. How are dispersed activities (i.e. activities carried out in different countries) coordinated? For example, do different countries use the same brand and marketing tactics, or does each branch use a different brand and tactic that is tailored to local conditions?

In multinational competition, MNCs have autonomous branches in each country and operate them in much the same way that a bank manages securities. In the face of global competition, firms are trying to gain a much greater competitive advantage from their presence in different countries, locating their activities with a global focus and clearly coordinating them.

Configuration of activities in the global strategy

When planning its activities around the world within the framework of this industry, the firm is faced with the need to choose in two directions. First, should activities be concentrated in one or two countries, or scattered across many countries? Second: in which countries to place this or that activity?

Concentration of activities. In some industries, a competitive advantage is obtained by concentrating activities in any one country and exporting finished products or parts abroad. This takes place in the following cases: when there is a large scale effect in the performance of a particular activity; when there is a sharp drop in production costs as a new product is mastered, due to which it is profitable to release products at one plant; when it is beneficial to place related activities in the same location, making it easier to reconcile. A focused, or export-driven, global strategy is typical of industries such as aircraft, heavy engineering, structural materials, or agricultural products. As a rule, the activities of the firm are concentrated in the country of origin.

A focused global strategy is especially common in some countries. It is common in Korea and Italy. Today, in these countries, most of the goods are developed and produced within the country, and only marketing falls on foreign countries. In Japan, this strategy is followed by most of the industries in which the country is successful internationally, although Japanese firms are now rapidly dispersing activities such as purchasing raw materials or assembling operations for various reasons. The type of international competitive strategy encouraged and developed in a country determines the nature of the industries in which that country competes successfully in the international market.

Dispersal of activity. In other industries, they gain a competitive advantage or neutralize disadvantages from the conditions in the home country by dispersing their activities. Dispersal requires foreign direct investment. It is preferable in industries where high transportation, communication or storage costs make concentration unprofitable or risky for various reasons (political motives, unfavorable exchange rates or the danger of supply interruptions).

Dispersal is also preferable where local needs for different products vary greatly. The resulting need to carefully tailor products to local markets mitigates the economies of scale or falling costs as they are developed from using one large plant or laboratory to develop new products. Another important reason for dispersal is the desire to improve marketing in a foreign country; in this way the firm emphasizes its commitment to the interests of its customers and / or provides a faster and more flexible response to changing local conditions. In addition, the dispersal of activities across many countries also provides the firm with valuable experience and professionalism obtained through the analysis of information from different parts of the world (although the firm must be able to coordinate the activities of its branches).

In some industries, the government can very effectively induce a firm to choose a dispersal strategy through tariffs, non-tariff barriers, and national procurement. Very often, the government wants the firm to locate the entire value chain in its country (they say, this will give the country additional benefits). Finally, the dispersal of some activities sometimes allows gains at the expense of the concentration of others. Thus, by performing final assembly in your home country, you can “appease” your government and get freer import of components from large-scale centralized component factories located abroad.

Ultimately, the choice between concentration and dispersal depends on the type of activity being performed. In truck manufacturing, leaders such as Daimler-Benz, Volvo and Saab-Scania do most of their R&D at home and assemble in other countries. The best options for concentration-dispersal in different industries are different, they can be different even in different segments of the same industry.

Here is an illustration of the above reasoning. Swedish firms in a number of mining-related industries use a highly dispersed strategy as customers in the industry value close collaboration with equipment suppliers providing service and technical assistance. In addition, the mining industry is almost everywhere state-owned or heavily influenced by the public sector. Therefore, for political reasons, the firm needs to have branches abroad, since other governments prefer to have an equipment supplier in the country rather than import equipment. Swedish firms such as SKF (ball bearings) or Electrolux (electrical appliances) tend to adopt a strong dispersion strategy with large foreign direct investment and essentially autonomous subsidiaries; it is a result of the existing differences in the needs for certain products between countries, the need for close interaction with customers in marketing and service, as well as pressure from the governments of the countries where the firm operates. Swiss firms also tend to disperse their activities across many industries, including trade, pharmaceuticals, food and dyes.

A global dispersal strategy with large foreign investment also applies to industries such as consumer packaged goods, healthcare, telecommunications and many services.

Activity placement. In addition to choosing places where this or that type of activity will be carried out, it is also necessary to select a country (or countries) for this. Usually all activities are initially concentrated in the home country. However, with a global strategy, a firm can perform assembly operations, manufacture components and parts, or even carry out R&D in any country of its choice - where it is most profitable.

The benefits of accommodation often manifest themselves in well-defined activities. One of the major advantages that a global firm possesses is the ability to distribute different types of activity between countries, depending on where it is preferable to produce one or another type of it. Thus, it is possible, for example, to produce computer components in Taiwan, write programs in India, and produce basic R&D in Silicon Valley in California.

The classic reason for the location of an activity in a particular country is the lower cost of factors of production. For example, assembly operations are carried out in Taiwan or Singapore in order to benefit from a well-trained, motivated, but cheap labor force. Capital is accumulated wherever possible, on the most favorable terms. Thus, the Japanese company NEC, in order to expand its production capacity for the production of semiconductor devices, financed convertible debt not in Japan, where this practice is not common, but in Europe. It should be noted that global competition is causing an increasing dispersal of activities based on just such considerations. Many American firms are transferring production to the Far East (for example, almost all disc drives of American firms are produced there), and Japanese manufacturers of sewing machines, sporting goods, radio components and some other goods are actively investing in Korea, Hong Kong, Taiwan, and now in Thailand by locating production there.

Recently, there has been a tendency to move activities overseas, not only to take advantage of production costs there, but also to conduct R&D, gain access to specialized skills available in these countries, or develop relationships with key clients.

For example, German firms that produce equipment for the manufacture of plastics and Swiss firms that produce geodetic equipment have located design bureaus in the United States for the development of electronic control units. SKF (Sweden), the world leader in the production of ball bearings, now has a production and design base in Germany in close proximity to many German factories - leaders in various fields of mechanical engineering and from the automotive industry, which consumes ball bearings on a large scale.

Firms also locate their activities abroad if this is a prerequisite for their business operations in the respective countries. In some industries, the assembly, marketing, or service performed by a firm in a given country is critical to the sale of its products and services to consumers in that country. High-tech industrial air conditioners are a good example: industry leaders (American firms such as Carrier and Trane) are active in many countries to best suit local conditions and meet demanding service requirements.

Government directives also affect the location of the activity. Thus, many Japanese investments in the United States and Europe (in such industries as the production of cars and spare parts for them, consumer electronics, etc.) are caused by existing or possible restrictions on imports to Japan. Likewise, many Swedish, Swiss and American firms moved overseas before World War II because trade restrictions were more important then and transportation costs were higher (which is why their activities are often more dispersed than Japanese or German firms at that time.) the same industry). The once dispersed firm is difficult to bring under one control, as branch managers in different countries try to maintain the power and autonomy of their branches. The resulting inability of the firm to move to the more focused and coherent strategies needed to gain competitive advantage is one of the reasons for the loss of the latter in some industries.

However, this is not all the reasoning about the best location for this or that type of activity. After all, choosing the best location to locate the activities that determine the country where the firm is based (primarily strategy development, R&D and the most complex production processes) is one of the main issues discussed in this book. Suffice it to say that the motives for choosing countries to carry out a particular activity are by no means limited to the classical explanations given here.

Global coordination

Another important means of achieving competitive advantage through a global strategy is the coordination of the firm's activities in different countries. Coordination (coordination) of activities includes the exchange of information, distribution of responsibility and coordination of efforts of the firm. It can provide some benefits; one of them is the accumulation of knowledge and experience gained in different places. If the firm learns to better organize production in Germany, the transfer of this experience may come in handy at the factories of this firm in the USA and Japan. Conditions in different countries are always different, and this provides a basis for comparison and an opportunity to assess the knowledge gained in different countries.

Data from different countries provide information not only about a product or its production technology, but also about customer requests and marketing methods. By aligning the marketing activities of all its divisions, a firm with a truly global strategy can be alerted in advance of anticipated changes in the structure of the industry, see the dotted lines in the industry before they become obvious to everyone. Coordination of types of activities when it is dispersed can give a scale effect due to the division of the task into separate tasks for the branches, which determine their specialization. For example, SKF (Sweden) at each of its foreign factories produces different sets of ball bearings and, organizing mutual deliveries between countries, ensures that each of them has the entire range of products.

Diffusion of activities, if agreed, can allow the firm to react quickly to changes in exchange rates or the cost of factors. Thus, a gradual increase in production in a country with a favorable exchange rate can reduce overall costs; this tactic was used by Japanese firms in a number of industries in the late 1980s, since the Japanese yen was then strong.

In addition, coordination can enhance product differentiation in a firm whose customers are mobile or multinational. Consistency in the location of production of a particular product and in the approach to doing business on a worldwide scale strengthens the brand's reputation. The ability to serve multinational or mobile customers wherever they want is often critical. Coordinating the activities of subsidiaries in different countries can make it easier for a firm to influence the governments of those countries if the firm has the ability to expand or curtail activities in one country at the expense of others.

Finally, the coordination of activities in different countries allows you to flexibly respond to the actions of competitors. A global firm can choose where and how to fight a competitor. It can, for example, give him a decisive battle where he has the largest production volume or cash flow, and thereby reduce the opponent's resources to compete in other countries. IBM and Caterpillar used this very defensive tactic in Japan. A firm that focuses only on the domestic market does not have this flexibility.

The sharply differing needs of buyers and local conditions from country to country make it difficult to reconcile activities in different countries, making the experience gained in one country not applicable in others. In such conditions, the industry becomes multinational.

However, while coordination has significant advantages, achieving it in the implementation of a global strategy is organizationally difficult due to its scale, language barriers, cultural differences and the need to exchange open and reliable information at a high level. Another serious difficulty is reconciling the interests of the managers of the branches of the firm with the interests of the firm as a whole. For example, the German subsidiary of a firm does not want to inform the US subsidiary of its latest advances in technology for fear that the American subsidiary will, by all means, bypass it in the annual debriefing. In other words, branches of a firm in different countries often see each other not as allies, but as competitors. Such annoying organizational problems lead to the fact that complete coordination in global firms is the exception rather than the rule.

Benefits due to location and structure of the company

It is useful to divide the competitive advantage of a global firm into two types: resulting from the location of the activity (in which country it is located) and not depending on the location (based on the system of the firm's activities around the world). Benefits based on the location of activities in a particular country come either from the home country of the firm or from other countries in which the firm operates. A global firm seeks to use the advantages gained in the home country to penetrate foreign markets, and can also use the benefits gained from performing certain activities abroad to enhance the advantages or compensate for disadvantages in the home country.

Benefits based on a firm's structure, however, result from the firm's total trade, the speed of product adoption in all of the firm's factories around the world, and the firm's ability to coordinate activities “at home” and abroad. Economies of scale in manufacturing or R&D are not in themselves tied to a country - a large plant or research center can be located anywhere.

To start global competition, it is necessary that some firms achieve an advantage in their countries that allows them to enter foreign markets. The competitive advantage achieved exclusively in the country where the firm is based is sufficient to trigger global competition. However, over time, successful global firms begin to combine the advantages achieved “at home” with the benefits of locating certain activities in other countries and from the firm's system of operations around the world. These additional advantages, combined with those achieved “at home”, make the latter more persistent, and at the same time compensate for the disadvantageous moments of the situation in the home country. Thus, the advantages of different sources are mutually reinforced. The overall economies of scale from worldwide locations have allowed, for example, the German firms Zeiss (optics) and Schott (glass) to devote more R&D funds and better take advantage of technology and demand in their home country.

Practice shows that firms that do not exploit and develop the advantages of their home country through a global strategy are vulnerable to competitors. It is the combination of advantages from the conditions in the home country, from the location of certain activities abroad and from the system of the global activities of the firm, and not each separately, that creates international success.

Now that the globalization of competition has become an established fact, the focus is on the benefits of firm structure and the location of activities in other countries. In fact, the benefits of home country conditions are usually more important than others (we will return to this topic in subsequent chapters).

Choosing a global strategy

There is no single type of global strategy. There are many ways to compete, and each requires a choice of where to place the activity and how to coordinate it. Each industry has its own optimal mix. Most global strategies are an inextricable mix of trade and foreign direct investment. Finished products are exported from countries importing components and vice versa. Foreign investment reflects the location of production and marketing activities. Trade and foreign investment are complementary rather than substitutes.

The degree of globalization in different segments of the industry often differs, and the optimal global strategy is accordingly also different. For example, in the production of lubricating oils, there are two distinct strategies. In the production of automotive engine oils, competition is multinational in nature, that is, it is conducted separately in each country. Traffic patterns, climatic conditions and local legislation are different everywhere. During production, different brands of base oils and additives are mixed. Economies of scale are small and transport costs are high. Distribution and distribution channels, which are critical to competitive success, vary greatly from country to country. In most countries, the leaders are firms working for the domestic market (for example, Quaker State and Pennzoil in the US) or MNCs with autonomous subsidiaries (for example, Castrol in the UK). In the production of oils for marine engines, everything is different: here is a global strategy; ships move freely from country to country, and it is necessary that in every port they call in, there is an oil of the right brand available. Therefore, the reputation of the brand has become global, and successfully operating companies that produce oils for marine engines (Shell, Exxon, British Petroleum, etc.) are global companies.

Another example is the hospitality industry: competition in many segments is multinational, since most links in the value chain are tied to customer location, and differences in needs and conditions between countries reduce the benefits of coordination. However, if we consider high-class hotels or those designed primarily for businessmen, then the competition here is more global in nature. Global competitors such as Hilton, Marriott or Sheraton have properties scattered around the world, but use a single brand name, a single design, a single service standard and a room reservation system from anywhere in the world, which gives them an advantage when serving businessmen, all the time. traveling around the world.

When the production process is broken down into stages, different degrees and patterns of globalization are also often observed. So, in the production of aluminum, the initial stages (enrichment and smelting of metal) are global industries. The next stage (production of semi-finished products, such as castings or forgings from aluminum) is already a number of industries with multinational competition. Demand for different products varies from country to country, transportation costs are high, and so does the requirement for on-site customer service. The economies of scale throughout the value chain are modest. In general, the production of raw materials and components is usually more global than the production of finished goods.

Differences in the types of globalization of different industry segments, stages of the production process and groups of countries create the possibility of drawing up focused global strategies aimed at a specific segment of the industry on a global scale. So, Daimler-Benz and BMW, having chosen this strategy, focused on high-performance and business-class cars with high technical performance, and the Japanese firms Toyota, Isuzu, Hino and others - on light trucks.

A firm with a focused global strategy focuses on a segment of the industry that is undeservedly forgotten by broad-based firms. Global competition can create entirely new segments of the industry, because a firm operating in a sector of its industry around the world can gain economies of scale on this basis. The reasons for this strategy can be different. For example, it is unprofitable to work in this segment of the industry in only one country because of the high costs. In some industries, this is the only correct strategy, since the benefits of globalization are achievable in only one segment (for example, expensive hotels for businessmen).

Global focus can be the first step towards a broader global strategy. A firm enters into global competition in this segment when it has unique advantages in its home country. For example, in industries such as automobiles, forklift trucks, and televisions, Japanese firms initially took hold of the foothold, focusing on an overlooked sector of the market — the most compact product of each of these industries. Then they expanded their product range and became world leaders in their industries.

Relatively small firms, not just large ones, can also compete globally. Small and medium-sized firms account for a large share of international trade, especially in countries such as Germany, Italy and Switzerland. They often focus on narrow segments of the industry or operate in relatively small-scale industries. A focused global strategy is also typical for MNEs from small countries such as Finland or Switzerland, and for small and medium-sized firms from all countries. For example, Montblanc (Germany) pursues such a policy in the production of expensive writing instruments, and most of the Italian companies producing footwear, clothing and furniture also compete around the world in a narrow segment of their industries.

Small and medium-sized firms tend to build their strategy primarily on exports - foreign direct investment is modest. Nevertheless, the number of medium-sized OLS is growing. For example, Denmark, Switzerland and Germany have many relatively modest MNEs that focus on certain segments of their industries. With limited resources, small firms find it difficult to enter foreign markets, identify needs in those markets, and provide after-sales services. These problems are handled differently in different industries. One way is to sell the goods through sales agents or their importers (typical for Italian firms), the other is to act through distributors or trading firms (typical for Japanese and Korean firms). Another way is to use industry associations to create a common distribution infrastructure, organize trade shows and trade fairs, and do market research. So, without cooperatives, the success of agricultural industries in Denmark would not be possible. Recently, small firms have been forging alliances with foreign firms to compete globally.

Industry globalization process

The globalization of industries occurs because changes in technology, customer demands, government policies, or infrastructure within a country enable firms in one country to “break away” from competitors in other countries, or increase the value of the benefits arising from global strategy. For example, in the automotive industry, globalization began when Japanese firms achieved a significant competitive advantage due to quality and productivity, the needs for cars in different countries became more similar (to a large extent due to the rise in fuel prices in the United States), and transportation costs for international transport fell ( and these are just some of the reasons).

Strategic innovation itself often opens up opportunities for industry globalization. International industry leadership is often the result of a firm discovering a way to make global strategy viable. For example, she might find a way to more cheaply adapt a product designed and manufactured in one location to different countries (say, modifying a standard product to a different voltage on a local power grid). Thus, in the production of intercom systems, computer and other systems used in telecommunications, Northern Telecom, NEC and Ericsson have benefited from the design of the manufactured equipment, which allows the use of modular software and requires only minor alterations to combine with the local telephone network. In addition, the firm may develop a new product that is popular with everyone, or a marketing method that makes the product popular. Finally, innovative solutions can be found to remove obstacles to a global strategy. For example, American firms were not only the first to produce plastic disposable syringes, which immediately gained widespread popularity, but also reduced transport costs compared to glass syringes and gained economies of scale by producing products at one global plant.

Emerging leaders in global industries always start with some advantage at home, be it a more promising design, better workmanship, a new marketing method, or a gain in factor costs. But as a rule, in order to maintain the advantage, the firm must go further: the advantage achieved “at home” must become a tool for entering the foreign market. Once established there, successful firms supplement their initial benefits with new ones - based on economies of scale or brand reputation gained from operations around the world. Over time, the competitive advantage is enhanced (or the disadvantages are offset) by locating certain activities overseas.

While the advantages achieved in the home country are difficult to sustain, a global strategy can complement and enhance them. Consumer electronics are a good example. Matsushita, Sanyo, Sharp, and other Japanese firms initially focused on low cost with simple portable TVs. Having entered the foreign market, they received economies of scale and further reduced costs by cutting costs in the development of new models. Through worldwide trade, they were then able to invest very actively in marketing, new equipment and R&D, in technology ownership. Japanese firms have long since moved away from a cost-centered strategy and are now producing a wide range of increasingly differentiated TVs, VCRs, and more, using the highest quality materials and technology. And the strategy of focusing on costs has been adopted today by their Korean competitors - Samsung, Gold Star, etc. - and are producing simpler, standard models using cheap labor.

The cost of factors is a low-order advantage and is also very volatile for a firm competing in the domestic market and for competing internationally. This can be seen in industries such as tailoring or construction. By relocating activities abroad, a firm with a global strategy can neutralize or even exploit changes in the cost of factors that harm the interests of its country. For example, Swedish companies that produce heavy trucks (Volvo and Saab-Scania) have long since transferred part of their production to countries such as Brazil and Argentina. In addition, firms whose only advantage is factor cost gains rarely become the new leaders in the industry. Leadership imitation strategies are all too easily rendered ineffective by offshore production or offshore collateral. Firms with low factor cost will only be able to become leaders if they combine this advantage with a focus on an industry segment ignored or not occupied by the leaders, and / or with an investment in large factories equipped with the most modern technology at the moment. And they will be able to retain their advantage only by competing globally and constantly increasing this advantage. The influence of domestic conditions on firms' initial advantage, the ability of firms to develop those advantages through global strategy, and the ability and will of firms to achieve new advantages over time is the focus of the chapters that follow.

Leading the way in global strategy

An immediate response to any change in industry structure is as important in global competition as it is in domestic competition, if not more. Ultimately, the leaders in many global industries are those firms that are the first to recognize a new strategy and apply it globally. For example, Boeing pioneered a global strategy for aircraft, Honda pioneered motorcycles, IBM pioneered computers, and Kodak pioneered film. American and British consumer packaged goods firms retain their leadership in no small part because they pioneered a global strategy.

Global competition amplifies the benefits of a quick response to change. The Early Birds are the first to spread their activities around the world; this additional benefit, in turn, leads to benefits in reputation, scale and speed of uptake. And already the positions won on the basis of such advantages can be held for decades or even longer. So, in the production of tobacco products, whiskey and high-quality porcelain, British firms have been leading for more than a century, despite the recession of the British economy as a whole. Similar examples of long-term leadership can be found in Germany (printing presses, chemical products), the United States (soft drinks, movies, computers) and virtually all other developed countries.

The reasons for the change in the position of countries in the competitive race are the same as in the more general cases discussed above. Recognized international leaders are losing ground if they do not respond to changes in industry structure, which give other firms the opportunity to bypass them through rapid transition to new technologies or products. This loses economies of scale, reputation and links with the distribution channels of established leaders. Thus, the traditional leaders of some industries gave way to Japanese firms in those industries that were greatly changed by the advent of electronics (for example, the production of machine tools and tools) or where mass production has replaced the traditional small-scale production (the production of cameras, forklifts, etc.). Existing leaders also fail if other firms discover new market segments that were ignored by the leaders. Thus, Italian firms producing electrical appliances saw the opportunity to produce compact, unified models using mass production, and sell them to newly emerging retail chains, so that they would sell them under their own brand. By actively developing this rapidly growing new segment, Italian manufacturers of electrical household appliances have become the European leaders. Firms that are the first to take advantage of changes in industry structure often become new leaders, as they benefit from the next change in industry structure. Home country significantly affects the ability of firms to respond to these changes, and, as discussed earlier, firms from one or two countries often become global leaders in the industry.

Firms' ability to retain the advantages gained from previous strategies is often the result of sheer luck, namely, that there are no major changes in the industry. Still, more often it is the result of constant updating in order to adapt to changing conditions. Subsequent chapters explore in detail the country characteristics that explain this adaptability. The forces that enable a country's firms to maintain a competitive advantage once achieved are the mainstay of a country's prosperity.

Alliances and global strategy

Strategic alliances, which can also be called coalitions, are an important vehicle for global strategies. These are long-term agreements between firms that go beyond normal trading operations, but do not lead to a merger. The term "alliance" refers to a number of types of cooperation, including joint ventures, sale of licenses, long-term supply agreements, and other types of inter-firm relationships24. They are found in many industries, but especially in the automotive, aircraft, aircraft, industrial robots, consumer electronics, semiconductor and pharmaceutical industries.

International alliances (of firms of the same industry, based in different countries) are one of the means of global competition. In an alliance, there is a division between partners of the activities included in the value chain around the world. Alliances have been around for quite some time, but their nature has changed over time. Previously, firms from developed countries formed alliances with firms from less developed countries for marketing (often such a maneuver was required to gain market access). Now more and more firms from highly developed countries are entering into alliances in order to work together in large regions or around the world. In addition, alliances are now being made not only for marketing, but also for other activities. Thus, all American car companies have alliances with Japanese (and in some cases, Korean) firms to produce cars sold in the United States.

Companies join alliances to gain benefits. One of them is economies of scale, or reduction in the time and cost of product development, achieved through joint efforts in marketing, in the production of components, or in the assembly of certain finished product models. Another advantage is access to local markets, the necessary technologies or meeting the requirements of the government of the country in which the company operates, so that the company operating in the territory of the country belongs to that country. For example, General Motors Corporation's alliance with Toyota - NUMMI - was conceived by General Motors in order to learn from Toyota's production experience. Another advantage of alliances is the sharing of risk. For example, some pharmaceutical companies have entered into cross-licensing agreements for the development of new drugs to reduce the risk that research at each individual company will fail. Finally, firms with sophisticated and advanced technology often use alliances to influence the nature of competition in an industry (for example, by selling licenses for technology that is in high demand to achieve standardization). Alliances can compensate for competitive disadvantages, be it high cost factors of production or outdated technology, while maintaining the independence of companies and eliminating the need for costly mergers.

However, alliances are costly strategically and organizationally. Take, at least for a start, the very real problems of coordinating the activities of independent partners, which have significantly different and even contradictory goals. Coordination difficulties jeopardize the benefits of the global strategy. In addition, today's partners may well be competitors tomorrow; this is especially true for partners with a more persistent or more rapidly developing competitive advantage. Japanese firms have confirmed this idea many times. To top it all off, the partner gets a part of the firm's profits, sometimes quite substantial. Alliances are fragile and can disintegrate or fail. It often starts out great, but soon the alliance falls apart or ends with a merger.

Alliances are often temporary, they are common in industries undergoing structural change or competition, and managers of firms fear that they will not be able to do it alone. Alliances are the result of firms' lack of confidence in their strengths and are most often found among second-tier firms trying to catch up with leaders; at first, they give weak competitors the hope of maintaining independence, but in the end it may well come to the sale of the company or its merger with another.

As you can see from the above, the alliance is not a panacea. And in order to maintain its place in the competitive race and come out ahead, the firm must develop internal reserves in the areas most important to achieving competitive advantage. As a result, world leaders rarely (if ever) rely on partners for the funds and skills they need to gain a competitive edge in their industry.

The most successful alliances are very specific. Alliances from global leaders such as IBM, Novo Industry (an insulin firm) and Canon are narrowly focused, targeting specific markets or technology. Alliances are generally a means of enhancing competitive advantage, but they are rarely effective means of building it.

The Impact of National Conditions on Competitive Success

The principles of competitive strategy outlined above show how much needs to be taken into account when highlighting the role of the home country in international competition. Different strategies are more suitable for different industries, since the structure of the industries and the sources of competitive advantage in them are not the same. And in the same industry, firms may choose different strategies (and apply them successfully) if they seek different types of competitive advantage or target different segments of the industry.

A country succeeds when conditions in the country are conducive to pursuing the best strategy for an industry or segment. A strategy that works well in this country should lead to a competitive advantage. Many of the characteristics of a country make it easier or, conversely, difficult to implement a particular strategy. These features are heterogeneous - from the behavioral norms that determine the methods of managing firms, to the presence or absence of certain types of skilled labor in the country, the nature of demand in the domestic market and the goals set by local investors.

Gaining a competitive advantage in complex industries requires improvement and innovation - finding new, better ways to compete and applying those ways everywhere, as well as continually improving products and technologies. A country is successful in these industries if the conditions in it are conducive to such activities. Achieving an advantage requires anticipation of new ways to compete and a willingness to take risks (and invest in risky ventures). And those countries that succeed are those in which the conditions give firms unique opportunities to recognize new competitive strategies and the incentive to immediately apply those strategies. Those countries whose firms do not properly respond to changes in the environment or do not have the necessary capabilities are the losers.

Maintaining competitive advantage over the long term requires improving its sources. Improving the advantage, in turn, requires more sophisticated technologies, skills and production methods, and constant investment. Countries succeed in industries that have the skills and resources to change strategy. Firms that rest on their laurels using the once and for all fixed concept of competitive advantage are quickly losing ground, as competitors copy the techniques that once allowed these firms to take the lead.

The constant change required to maintain a competitive advantage is both inconvenient and organizationally difficult. Countries succeed in industries in which firms are under pressure to overcome inertia and continually improve and innovate rather than sit idly by. And in those industries where firms stop improving, the country loses.

The country is successful in industries where its strengths as a national base have weight in other countries and where improvements and innovations anticipate international needs. To be successful internationally, firms must transform domestic leadership into international leadership. This allows the benefits gained “at home” to be leveraged through a global strategy. Countries succeed in industries where domestic firms compete globally, either sponsored by government or pressured by circumstances. In the search for the determinants of the competitive advantage of countries in different industries, it is necessary to determine the conditions in the country that are conducive to success in competition.

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