Ways of increasing competitiveness

 

The Russian Presidential Academy of National Economy and Public Administration

Faculty of Economics and Social Sciences

 

 

 

 

 

Ways to increase competitiveness of the product in modern reality

 

 

 

 

 

 

 

Termpaper of  the student

of the 3 course

Marchenkov Sergey

Scientific adviser

Gorshunova Elizabeth

 

 

Contents

Introduction …………………………………………………………………………………..…….3

Chapter I …………………………………………………………………………………………....4

1. Types of Competitive Advantages …………………………………………………………...5
2. Marketing strategy …………………………………………………………………………...8
3. Branding as a way to increase competitiveness ………...…………………………………………………………………………………………..…9
4. The various forms of Branding …………………………………………………………...….13
5. Conclusion….. ……………………………………………………………………………....12

Chapter II Marketing strategy of McDonald’s Corporation ……………………………………………………………………………………….……………...13

2.1. Business Strategy…………………………………………………………………….…...……15

2.2. Mcdonalds s marketing mix (5PS) strategy…………………..……………………………………………………………...…………..17

2.3 Competitive Strategy ………………………………………………………………...………....18

 

Conclusion …………………………………………………………………………………...…..…20

Bibliography …………………………………………………………………………………...........21

 

 

 

 

 

 

 

 

 

 

 

 

Introduction

The topic of product’s competitiveness is greatly debated today among managers, politicians as well as academics. Globalization and changes in the world economy over the last years have raised new challenges for firms, industries and countries. The popularity of the concept of competitiveness is clearly demonstrated by the fact that there is an increasing interest around the issue of competitiveness benchmarking at the country level as well as the policies through which governments can enhance national industrial competitiveness.

A competitive advantage refers to the position of superiority within an industry that a firm has developed in comparison to its competitors. Firm level competitiveness indicated a firm’s ability to design, produce and market products superior to those offered by competitors, where superiority can be evaluated from several factors, like price, quality, technological advancement, etc. Competitiveness can be considered at different levels of aggregation: firm, industry, and country.

In very simple terms, success can be intended as achievement of company objectives. Hence, performance should be measured in terms of how an organization manages its critical success factors. Today, beyond financial or market-based indicators, measures of competitiveness increasingly include other variables such as innovativeness, quality, and social ones like ethical standing, social responsibility, working conditions of employees, etc. Given the aim of our study, the first question we should address is why and to which extent it makes sense to analyze competitiveness at the firm level.

From an empirical point of view, research on the influence of firm and industry effects on performance shows that a relevant percentage of the variance in profitability is attributed to firm-level variables. The analysis of the sources of variance in firm performance is a key issue in both industrial organization and strategic management studies. Fundamentally there are least two main views of the origin of a firm's competitive advantage.

 On one side, industrial organization scholars focus on the influence of industry-related determinants of firm performance and particularly emphasize the importance of factors like concentration, entry and exit barriers and economies of scale. Classical industrial organization scholars claim that a firm can neither influence industry conditions nor its own performance. Therefore, the competitive advantage originates from external sources rather than internal (firm-specific) sources. A modified

 

framework has been advanced by the new industrial organization scholars which recognizes that firms have a certain influence on the relationship between industry structure and a firm's performance . According to Porter, competition within an industry is defined by five structural parameters: current competition within the industry, bargaining power of suppliers, bargaining power of buyers, threat of new entrants, threat of substitute products or services.1 In Porter’s view, the paths of industry evolution depend (among other things) on firms’ strategic choices. On the other hand, strategic management

 

 

Chapter 1. Components of competitiveness of the product

 

1.1 Types of Competitive Advantages

Sources of competitive advantage

Technology and innovation for competitive advantage

The term innovation has a commercial aspect different from scientific research. Innovation has a very important role in economic development of countries, because innovative companies, through commercializing their research and development results, are creating new and nonexistent value. Furthermore these same companies are getting an important share of the newly created value. By this way, they are mainly creating wealth for themselves, for their country and for the world. Innovation includes both product and service and process innovations. Product innovations are products that are perceived to be new by either the producer or the customer; the latter includes both end- users and distributors. Process of innovation refers to new processes which either reduce the cost of production or enable the production of new products . In spite of the increasing importance of innovation and the role played by technological capabilities in a firm’s growth trajectory, little is known how technological innovation in different organizations is driven by their technology strategy, the plan that guides the accumulation and deployment of technological resources and capabilities. 2

That is, the most innovative firms engage in a continual search for better products, services, and ways of doing things. They try to continuously upgrade their internal capabilities and other resources. Aggregate innovative capacity of a nation is derived from the collective innovative capacity of its firms. The more innovative firms a nation has, the stronger that nation’s competitive advantage. Innovation also promotes productivity, the value of the output produced by a unit of labor or capital. The more productive a company is, the more efficiently it uses its resources. The more productive the firms in a nation are, the more efficiently the nation uses its resources . Innovation and entrepreneurial activity are the engines of long-run economic growth. Often, entrepreneurs first commercialize innovative new products and processes, and entrepreneurial activity provides much of dynamism in an economy. For example, the economy of the United States has benefited greatly from a high level of entrepreneurial activity, which has resulted in rapid innovation in products and processes.

 

Human resources for competitive advantage

Human resources are a term used to describe the individuals who comprise the workforce of an organization, although it is also applied in labor economics to, for example, business sectors or even whole nations. Firms can develop this competitive advantage only by creating value in a way that is difficult for competitors to imitate. Traditional sources of competitive advantage such as financial and natural resources, technology and economies of scale can be used to create value. However, the resource-based argument is that these sources are increasingly accessible and easy to imitate. Thus they are less significant for competitive advantage especially in comparison to a complex social structure such as an employment system. If that is so, human resource policies and practices may be an especially important source of sustained competitive advantage.3

Within the best practices approach to strategic HRM, 4the first practice, internal career opportunities, refers to the organizational preference for hiring primarily from within. Second, training systems refers to whether organizations provide extensive training opportunities for their employees or whether they depend on selection and socialization processes to obtain required skills. Third, appraisals are conceptualized in terms of outcome-based performance ratings and the extent to which subordinate views are taken into account in these ratings. Fourth, employment security reflects the degree to which employees feel secure about continued employment in their jobs. Although formalized employment security is generally on the decline, organizations may have either an implicit or an explicit policy. Fifth, employee participation, both in terms of taking part in decision making and having opportunities to communicate suggestions for improvement, has emerged as a strategic HRM practice. Sixth, job description refers to the extent jobs are tightly and clearly defined so that employees know what is expected of them. Finally, profit sharing reflects the concern for overall organizational performance on a sustainable basis argue that the future HR professional will need four basic competencies to become partners in the strategic management process.5 These include business competence, professional and technical knowledge, integration competence and ability to manage change. Human Resources seeks to achieve this by aligning the supply of skilled and qualified individuals and the capabilities of the current workforce, with the organization's ongoing and future business plans and requirements to maximize return on investment and secure future survival and success. In ensuring such objectives are achieved, the human resource function purpose in this context is to implement the organization's human resource requirements effectively but also pragmatically, taking account of legal, ethical and as far as is practical in a manner that retains the support and respect of the workforce.

Organizational structure for competitive advantage

Organizations are a variant of clustered entities. An organization can be structured in many different ways, depending on their objectives. The structure of an organization will determine the modes in which it operates and performs. Organizational structure allows the expressed allocation of responsibilities for different functions and processes to different entities such as the branch, department, workgroup and individual. Individuals in an organizational structure are normally hired under time-limited work contracts or work orders, or under permanent employment contracts or program orders. Also, this correlate of changing structures and processes is reinforced by increased competitive pressure forcing companies to focus on their core competencies, redrawing their boundaries around what constitute and support their competitive advantage. This pressure is reflected in the changing organizational structures from a functional to a multi-divisional one, through the shifting of business towards smaller, decentralized units. When superior skills or resources exist outside the company, firms are making increased use of strategic alliances to supplement and sometimes enhance their own competencies. Whenever by alliances, outsourcing or downscoping, firms appear to be drawing in their boundaries around narrower spheres of activities 6

An effective organizational structure shall facilitate working relationships between various entities in the organization and may improve the working efficiency within the organizational units. Organization shall retain a set order and control to enable monitoring the processes. Organization shall support command for coping with a mix of orders and a change of conditions while performing work. Organization shall allow for application of individual skills to enable high flexibility and apply creativity. When a business expands, the chain of command will lengthen and the spans of control will widen. When an organization comes to age, the flexibility will decrease and the creativity will fatigue. Therefore organizational structures shall be altered from time to time to enable recovery. If such alteration is prevented internally, the final escape is to turn down the organization to prepare for a re-launch in an entirely new set up.

Strategies for Competitive Advantage

The differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry segments. By contrast, the differentiation focus and cost focus strategies are adopted in a narrow market or industry. A firm positions itself by leveraging its strengths. Porter has argued that a firm's strengths ultimately fall into one of two headings: cost advantage and differentiation. By applying these strengths in either a broad or narrow scope, three generic strategies result: cost leadership, differentiation, and focus. These strategies are applied at the business unit level. They are called generic strategies because they are not firm or industry dependent. The following Porter's generic strategies:

Strategy - Differentiation

This strategy involves selecting one or more criteria used by buyers in a market - and then positioning the business uniquely to meet those criteria. This strategy is usually associated with charging a premium price for the product - often to reflect the higher production costs and extra value- added features provided for the consumer. Differentiation is about charging a premium price that more than covers the additional production costs, and about giving customers clear reasons to prefer the product over other, less differentiated products. Firms that succeed in a differentiation strategy often have the following internal strengths:

 

 

 

1. Access to leading scientific research.
2. Highly skilled and creative product development team.
3. Strong sales team with the ability to successfully communicate the perceived strengths of the product.

 

Strategy - Cost Leadership

With this strategy, the objective is to become the lowest-cost producer in the industry. Many (perhaps all) market segments in the industry are supplied with the emphasis placed minimising costs. If the achieved selling price can at least equal (or near) the average for the market, then the lowest-cost producer will (in theory) enjoy the best profits. This strategy is usually associated with large-scale businesses offering standard products with relatively little differentiation that are perfectly acceptable to the majority of customers. Occasionally, a low-cost leader will also discount its product to maximise sales, particularly if it has a significant cost advantage over the competition and, in doing so, it can further increase its market share. Firms that succeed in cost leadership often have the following internal strengths:7

• Access to the capital required making a significant investment in production assets; this investment represents a barrier to entry that many firms may not overcome.
• Skill in designing products for efficient manufacturing, for example, having a small component count to shorten the assembly process.
• High level of expertise in manufacturing process engineering.
• Efficient distribution channels.

 

Strategy - Differentiation Focus

In the differentiation focus strategy, a business aims to differentiate within just one or a small number of target market segments. The special customer needs of the segment mean that there are opportunities to provide products that are clearly different from competitors who may be targeting a broader group of customers. Companies following focused differentiation strategies produce customised products for small market segments.

They can be successful when either the quantities involved are too small for industry-wide competitors to handle economically, or when the extent of customisation (or differentiation) requested is beyond the capabilities of the industry-wide differentiator. The important issue for any business adopting this strategy is to ensure that customers really do have different needs and wants - in other words that there is a valid basis for differentiation - and that existing competitor products are not meeting those needs and wants.

 

Strategy - Cost Focus

Companies that compete by following cost leadership strategies to serve narrow market niches generally target the smallest buyers in an industry (those who purchase in such small quantities those industry-wide competitors cannot serve them at the same low cost). Here a business seeks a lower-cost advantage in just on or a small number of market segments. The product will be basic - perhaps a similar product to the higher-priced and featured market leader, but acceptable to sufficient consumers.

1.2 Marketing strategy

INTRODUCTION OF MARKETING STRATEGY

Marketing strategy is very much important for developing any of the business. Without it, the effort of the business to attract customer is random and very inefficient. The main focus of efficient strategy must make sure that the product should fulfill the demands of the consumers and as well as it maintains the long-term relationship with those consumers.

To achieve this, it is necessary to initiate flexible strategy that responds to

change in customer demand and perception. It may also give brand name to the product which will help you to run your business in new markets smooth and efficient manner.8 First of all the main purpose of marketing strategy should be to identify the weather the target customers are satisfied with your product and services of your business. Once you have created and implemented your strategy, try to identify the feed from you customer and if any changes or improvement is required apply it for the maximum satisfaction of customers. This helps you to identify that, where your strategy needs to be improved and how it can be developed, so that it can be implemented for effective action. Before applying any strategy in the business proper planning

programs must be organized within the members of the organization.

MEANING OF MARKETING STRATEGY

A Marketing strategy defines and describes the objectives or planning through which you are going to satisfy your consumer needs in the selected target market. It does not involve written work but, it includes communication between different departments of the business enterprise for example: sales department, managers, executives etc.

In fact it is a set of strategies that implied by the organization in order to increase the growth and development of the business.

Normally strategy deals with the manner in which your organization plan to achieve the

consumer satisfaction and maximize the profit.

 

DEFINITION OF MARKETING STRATEGY

Marketing Strategy is a set of specific ideas and actions that outline and guide decisions on the best or chosen way to create, distribute, promote, and price a product or service (manage the marketing mix variables). ́

A marketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage. A marketing strategy should be centered on the key concept that customer satisfaction is the main goal.

 

Business Advantages

1. identifies needs and wants of consumers
2. determines demand for product
3. aids in design of products that fulfill consumer s needs
4. outlines measures for generating the cash for daily operation, to repay
5. debts and to turn a profit
6. identifies competitors and analyzes your product's or firm's competitive

advantage

7. identifies new product areas
8. identifies new and/or potential customers
9. allows for test to see if strategies are giving the desired results

 

Business Disadvantages

1. identifies weaknesses in your business skills
2. leads to faulty marketing decisions based on improperly analyzed data
3. identifies weaknesses in your overall business plan

 

1.3.Branding as a way to increase competitiveness

 

To create a brand is not limited in any particular kind of product or service, but it is necessary for organization too; no matter public organization, private organization, political party and even through education institute. Obviously, having a unique and strong brand will bring the notable, reputation and good image to its organization.

The advance of technology, new inventions, innovation has been developed rapidly and continuously. The main purpose is to response the customers’ uncertain favor and needs caused by the aging of the population, income ratio, tastes and values ​​that have been imitated; People pay much attention to health and beauty as well as rules that became something that many countries will need to take action in order to be part of a global economic, social and politic.

These factors result in increasing of competition of goods production and services more seriously. With the competitive advantage through the use of limited productive resources, many countries have turned to setting up strategies and seeking new approaches to create advantages beyond their competitors. There is one strategy that many countries might not deny and it’s gaining popularity as a business strategy to success which is branding. As mentioned above, any business with a reputable brand, loyal consumers, the greater chance to be succeeded.

In short, the main purpose of branding is to get more people to buy more stuff for more years at a higher price.

Since each company has its own characteristic and there are a number of ways how to branding, manager can choose whether which one it is suitable with company’s situation. This paper presents the trend of various forms of branding that widely used by successful companies which also describe the pros and cons of each method.

1.4 The various forms of Branding

1. Corporate Branding.

Corporate Branding was began due to the overpopulated in the market with both large and small companies and overexposed with marketing advertising. It has made the complexities and difficulties for company to be differentiation. Plus, the competition in the global business environment is tough and achieving a unique position and competitive advantage is becoming more and more difficult and expensive.

Corporate branding is the practice of using a company's name as a product brand name. It is an attempt to use corporate brand equity to create product brand recognition. It is a type of family branding or umbrella brand. Disney9, for example, includes the word "Disney" in the name of many of its products; other examples include IBM and Heinz. This strategy contrasts with individual product branding, where each product has a unique brand name and the corporate name is not promoted to the consumer.

 

2. CEO Branding

When brand is to present the company’s soul to the world, can CEO be a brand then? In today’s crisis-prone environment, the CEO and senior executive team are personally responsible for the brand, not just in selecting and managing the people who develop and protect it, but also by their own behavior and personal standards.

In many ways, the CEO, whether past and present, personifies the corporation and presents its values to the world.

The method is to make CEO as the Spokesperson in communication, introduction and delivery the business content to customers, also create a good image to company as well as products. However, the qualification of person who is going to be CEO Branding must be reliable, honest, and talented and have the ability to communicate, influence customers, also know how to solve problem in right way with the right time.

Good CEO Branding must treat consumers feel two things. 1st is the feel that they got the most valuable thing that more than worth enough for what they have paid and 2nd is the feel of sincerity of the executives did not exploit, sell goods just for profit, instead of it is to maximize the benefits to consumers.

The good example of CEO brand can be Steve Jobs the co-founder of Apple Corporation. When people think of Apple, the thing pop up in their mind is Steve Jobs; and he is an American businessman and inventor widely recognized as a charismatic pioneer of the personal computer revolution. He is the CEO Branding by his super genius innovator, his characteristic, his appearance, his speech, his dress and so on, that reflects the brand of his product. People, believes and trust on what he presented. That can add significant impact toward the brand of Apple product too.