Competitive Strategy for Cost Advantage -myassignmenthelp.com

Question: Discuss about theCompetitive Strategy for Cost Advantage. Answer: Microsoft-Introduction Microsoft is currently the largest software maker globally and has been posting consistent profits yearly. It commands 90% of the Operating System for desktops around the world. It posted revenues of more than $78 billion with a profit margin of 28% (Statista 2017). Its consistency in innovation over a period of 39 years is testimony of a culture of organizational excellence that is founded on an ethical business model. Having a concise CSR approach as a responsible corporate citizen, the company operates sustainably with social and environment considerations at its core. The business model rests on licensing of its software to businesses through enterprise agreement contracts. Practical source of excellence Cost advantage- Cost advantage can be defined as the cost of production for a firm that is lower than its competitor and therefore gives it an advantage. Microsoft enjoys an advantage of cost for its desktop operating software which is used globally (Damodaran 2012). The volumes produced help to push down the cost of production making it difficult for new entrants to compete. Economies of learning translate into improved organizational dexterity and coordination for its global operations. Maximum capacity utilization as a driver of advantages of cost push down the costs associated with installing and closing capacity for the company. Differentiation advantage- This can be defined as the creation of services or goods that are superior than that of the competitor and therefore avails the advantage of being different. Microsoft has managed to maintain an advantage over its competitors with its Office Suite that offers unmatched services. Users of different operating systems such as Mac and Linux still use Microsoft Office as a separate application (Satell 2013).Its ease of use and versatility for both home and office applications makes it different from other similar software. CAGE distance framework- This framework is founded on Cultural, Political, Geographic and Economic differences between nations that impact business entities. Microsoft has been able to overcome the distance of differences by offering products with universal appeal that cuts across cultures, land boundaries and economies. The Microsoft Office Suite has universal application for home and office use despite the above differences (Microsoft Corporation 2017). Another product is the Xbo that crosses boundaries of economics such as bilateral and multilateral arrangements. Business Model Innovation- The company has adopted a new business model based on innovating a new approach. Microsoft has relied on its licensing model of its products to generate revenue over the years. This is changing with a new model that is known as freemium ( Microsoft Corporation Industry Profile 2015). This model moves beyond free trials to a tier on free offering for some of its products. Once the pool of users has grown, revenue will be generated by increased engagement that will be volume based. This transition to a new business model is to ensure that revenues and profit in the long-term are maintained. This transition will ensure market relevance in the face of changing market dynamics in the technology sector. Introduction-Nike Nike is the leading sports footwear and apparel globally with a market share of 22%. Income revenue for 2016 stood at $32 billion which was due to growth in every geographical market (Nike 2017). The brand has been in operation for more than forty years and has been leading through innovation in the sports apparel industry. Through sustainable manufacturing that empowers local communities where it operates, Nike has shown leadership as a corporate citizen. Environmental stewardship has resulted in factory scrap being reused to manufacture premium apparel and footwear. Strong brand recognition has also contributed to the success of Nike with its distinctive logo and use of brand ambassadors to drive growth. Practical cause of excellence Strategic Marketing- Strategic marketing is the way a firm leverage on its core strengths in order to differentiate itself from its competitors. Nike uses two distinct forms of marketing that contributes to its strategic approach. The firm focuses on the high end in its market position and pricing strategy that is buttressed by products which are unique to offer a better value proposition for the customer. Nike (2015) states that the company competes competitively through its direct-to-consumer strategy that rests on the pillars of innovation, speed and direct connection with the end consumer. Business model innovation- the firm has consistently modeled its business with strong brand recognition that uses brand ambassadors. Starting with Michael Jordan, the company has become synonymous with leading sports stars and this helps to reinforce the positioning of being associated with success and industry leader (Matt Dom et al. 2016). The firm has also partnered with other strategic partners such as Apple to innovate new sports technologies that are wearables such as the Apple Watch Nike+ (Apple 2016). Nike leverages on the social and marketing capital of Apple to drive growth in sports wearables. Value chain- Value chain can be defined as the processes that are used by a firm in order to add value to its products or service. The firm leverages its core strengths in its primary and secondary activities of manufacturing. It exercises strong control over its global channels of distribution in order not to dilute brand recognition and premiums. In its secondary activity of procurement, it maintains relations which are progressive and sustainable with its manufacturers. The innovative Flyknit technology ensures that wastage in the designing stage reduces wastage by 60% which translates to savings on cost of production (Nike 2015). The firm ensures sustainability by engaging manufacturing contractors who are compliant with labour and environmental industry best practices. CAGE framework- Nike uses a strategy that seeks to maintain brand premium in every market where it operates. While factoring in the economic distance between the different markets, the firm sets prices that reflect the incomes of its target audience in each geographic market. The prices offered are still well above average in order to maintain the premium attached to the brand. This ensures that there is growth of revenue despite the different markets differing in incomes. It is also a key growth factor for emerging markets such as China which are forecast to be the major revenue driver in the future. Conclusion Competitive strategy is important in positioning companies and firms to market leadership and dominance. Success which is sustainable is also as the result of embracing competitive strategies in a business entity. Advantages in cost, value addition in supply chain are some of the approaches that can be employed. Positioning on brand recognition and leveraging the CAGE framework all contribute in achieving competitive advantages in the industry of operation. Microsoft and Nike have used the above strategies in achieving success in their respective industries. References Apple, 2016, Apple Nike launch the perfect running partner, Apple watch Nike+, viewed 18 August, https://www.apple.com/newsroom/2016/09/apple-nike-launch-apple-watch-nike/ Damodaran, A, 2012,Investment valuation: tools and techniques for determining the value of any asset, New Jersey: Wiley. Mat Dom, SS, Ramli, Hb, Audrey Lim Li, C, Tan Tze, F 2016, 'DETERMINANTS OF THE EFFECTIVENESS OF CELEBRITY ENDORSEMENT IN ADVERTISEMENT', Journal of Developing Areas, vol. 50, no. 5, pp. 525-535. 'Microsoft Corporation Industry Profile', 2015, Microsoft Corporation: Change in Direction Under Satya Nadella, pp. 1-31. 'Microsoft Corporation', 2017, pp. 1-51. Nike, 2015, Nike, Inc announces new consumer direct offense: a faster pipeline to serve consumers personally, at scale, viewed 18 August 2017, https://news.nike.com/news/nike-consumer-direct-offense Nike, 2017, Nike, Inc reports fiscal 2017 fourth quarter and full year results, viewed 18 August 2017, https://news.nike.com/news/nike-inc-reports-fiscal-2017-fourth-quarter-and-full-year-results Satell, G, 2013, The secret of Microsofts success (and some lessons for Apple), Forbes, viewed 18 August 2017, https://www.forbes.com/sites/gregsatell/2013/04/15/the-secret-of-microsofts-success-and-some-lessons-for-apple/#3e2489f21587 Statista, 2017, Microsoft statistics and facts, viewed 18 August 2017, https://www.statista.com/topics/823/microsoft/