How can a company measure its competitive advantage? Warren Buffett, one of the world’s greatest investors, says that the trick is to look for firms that already have competitive strengths and that operate in areas that are not susceptible to big changes: |”You will see that we favor businesses and industries unlikely to experience major change. The reason for that is | |simple: We are searching for operations that we believe are virtually certain to possess enormous competitive | |strength 10 or 20 years from now. A fast-changing industry environment may offer the chance for huge wins, but it | |precludes the certainty we seek. | More than anything, Buffett looks for companies that have a sustainable competitive advantage. Here is what he says in the December 1999 issue of Fortune Magazine: |”The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, | |but rather determining the competitive advantage of any given company and, above all, the durability of that | |advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards| |to investors. | Balanced Scorecard: A Tool for Measuring Competitive Advantage FROM BOOK-SM A generic corporate strategy map is provided below to illustrate the “Strategy Map” concept. [pic] Fig. 2. Example an ideal balanced scorecard [pic] Outline porter’s five forces model of industry competition The strength of each one of the five forces is a separate function of the the industry structure, but considered together affect prices, levels of investment for competitiveness, market share, potential profits, profit margins, and industry share.
The key to success in an industry is to analyze the dynamics and the constant flow of changes within each of these five forces in Porter’s 5 forces model. [pic] How are the various barriers of entry relevant to global marketing? Entry Barriers in Global Marketing An understanding of the entry barriers to internationalization and their effect on entry mode selection is important because they can assist in determining why global marketers are unable to exploit their full potential and why many firms fail or incur financial losses in their international activities.
The height and nature of market entry barriers directly influence the entry mode chosen by a company. Entry barriers increase the cost of entry and constraint the option available, and where they are high, the company might have only one choice of entry mode or else have to stay out. The concept of entry barriers comes from the economics of industrial organization. It generally connotes any obstacle making it more difficult for a firm to enter a product market. Thus entry barriers exist at home, as when limited self space prohibits a company from acquiring sufficient retail coverage to enter a market.
Overseas it can mean that customs procedures are so lengthy that they prohibit at importer’s fresh produces from getting to the stores before spoiling. In global marketing it is convenient to classify the entry barriers according to their origin. Although gradually less important because of dramatic improvements in technology, transportation costs sometimes force new investment in manufacturing to be close to the market. Proximity of supplies and service still matters when transportation costs are high.
Tariff barriers are obvious obstacles to entry into the country. Less visible non-tariff barriers for example slow custom procedures, special product tests for imports and bureaucratic inertia in processing import licenses can also make entry difficult. Government regulations of business, domestic as well as foreign, constitute another set of market barriers, sometimes creating local monopolies. A special subset of these barriers is regulations directly intended to protect domestic business against foreign competitors.
