Instagram

Question 2. Is Competition Changing?

  5048567 orig       There is a body of opinion which holds that competition has become much more severe than in the period up to about 1990. It is claimed that the ‘rules of the game’ have changed and that now there is no such thing as sustainable competitive advantage and companies have to be in a state of continual change just to remain in the market. The reasons for this radical shift, it is claimed, include:

 

 

 

the increased pace of technological change;

improvements in communications;

the internet;

globalisation.

           So fundamental are these changes that a couple of new terms have been coined – ‘hypercompetition’ and ‘dynamic competition’ – to characterise the new competitive regime. As a result companies have to think afresh about the basis of competitive advantage.

The potential for competitive advantage does not lie in effective performance of each activity because that can always be imitated. The type of changes that the value chain must be capable of to provide an effective response to a competitor who has launched a higher quality product

International Expansion

 

There is no difference in principle in moving into a foreign market compared with opening up new domestic markets. The same considerations of strategic opportunities and threats and competitive advantage must be taken into account. But it has to be recognised that competitive conditions may be significantly different in another country. The competitive advantage of a company relates to its strengths relative to the competition in the market where it currently operates. The fact that a company has a competitive advantage in one location does not mean that it can be readily transferred abroad. Competitive advantage can be country specific or company specific and this determines whether it is appropriate to export to a foreign market or shift production there. But even if competitive advantage is company specific it does not follow that it can be transferred abroad.

A strong brand can generate a degree of monopoly power because it is a form of entry barrier. If any of these general characteristics are undermined then the expected cash flow attributable to all brands are likely to be adversely affected.