Competitive Strategy Assignment Critically Evaluating Business Case Scenarios
Question
Task:
Questions to be answered in the competitive strategy assignment are:
Week 2 - German luxury cars
Q2. Apply a PESTEL analysis to BMW, Mercedes Benz or Audi (note: the same opportunities and threats will apply to each of them)
Week 3 – Zara case
Q1. Examine the Zara mini-case and identify their Tangible and Intangible resources.
Week 4 - Apple vs Samsung mini-case
Q2. Using Apple, demonstrate how the differentiation strategy can be well implemented.
Week 5 - TESCO PLC
Q3. Identify the competitive behaviour responses of Tesco to build or defend its competitive advantages and to improve its market position.)
Week 6 - LVMH
Q2. What do you think was the reasons why LVMH diversified?
Answer
First Tutorial Submission – Answers to Tutorial Questions to Week 1-6.
Week 2
Q2. Pestle analysis of BMW, Mercedez Benz or Audi outlined in the competitive strategy assignment
BMW, Mercedez Benz, and Audi are Germany based luxury/Performance cars in the automotive industry. It represents some of the major competitive models such as A8, S-class, and BMW 7 series or the respective roadsters.
Political factors
Political environment exerts a high influence on the effective functioning of these leading luxury automobiles. Brexit, and trade wars between the countries, US, and China, are major factors. Besides, trade restrictions, custom policies, import duty, and international trade policies, has impacted the sales of these cars in last two years (Lindström, 2016). The uncertainty in the political environment of Europe has negatively impacted sales, and disrupted trade (Hwee, 2015).
Economic Factors
The global economic environment influences the automobile brands and their business directly, affecting their sales. In BMW, the general economic environment of the world, and other local economies impacted sales of this brand. Germany accounts to be the 4th largest by the nominal GDP in the world, therefore luxury brands are the leading companies, and acquired high importance from the customers. Also, tariffs and economy fluctuations are impactful to BMW, which affect their performance, valuation and profits. Economic downfall in different regions can also lead to a major impact on the buying decisions of the customer demands for these premium cars (Hwee, 2015).
Sociological factors
Sociocultural factors are prominent for the conduct of business across the borders due to the cultural differences. BMW, has adopted digital technologies for providing superior customer experiences, and also comply with the social responsibilities (or CSR program) such as social engagement, providing benefit to the community. The luxury cars also integrate with people using social networking sites i.e. such as Facebook and Instagram. Thus, it highlights the increasing value and demand of these luxuries in the markets of India, China and other regions (Favarò, Eurich and Nader, 2018).
Technological factors
Technology plays a dominant role in the performance and growth of the luxury cars. Audi invests in technological advancements, and BMW Group prides itself in the innovation and artificial intelligence for customer satisfaction. Thus, technology is the key to enhance the sales for the car manufacturers. Another major technological advancement is innovation of ‘self-driving autonomous cars, adopted by these German luxuries attracts large number of customers (Candelo, 2019).
Legal factors
BMW abides by some copyright laws related to their vehicles, and technology. Compliance to the legal laws is significant to the automobile industry, and BMW and Audi has maintained a strong brand image in the legal environment. This contributes to their success and growth. Discrimination laws by government ensure the fair and equal treatment of employees in Mercedes Benz.
Ecological factors
Each region has different norms and values for the protection of their environment and community. Legal auto firms like, Audi and Mercedes are investing in managing their environmental footprint, and conserving resources to attain sustainability. This provides them with benefit of reducing operational costs of their products. On the top of this, BMW is producing more electric car models for the public (Candelo, 2019).
Week 3
Q1. Zara mini case and identification of tangible and intangible products
Zara is a Spanish apparel, a well renowned brand in the business of clothing, other material and accessories around the globe. The Spanish brand is a fashion designing and manufacturing company, that beats their competitors through innovative designs and following ‘fast-fashion’ trend. Innovation in the manufacturing methods or use of technology may impact the clothing business and growth of Zara in the industry (Park and Hwang, 2016).
Zara offers their products in 68 countries with the optimum use of technology and style of speedy fashion, which differentiates it from other rival firms. This states how company utilises resources to build core competencies in the clothing market. Zara manages various resources, characterised as tangible and intangible resources (Park and Hwang, 2016). The fashion business runs 507 stores in different regions with their total sales area of 488,400 m² and huge capital investment from the company. Financial segment, and high profit margins earned by the company presented in financial statements are the tangible resources. This is one of the main and important financial assets of the firm.
The intangible resources at Zara include quick and creative design team, unique online marketing strategy, effectively managed and controlled supply chain and relationship-oriented partners, and unity of operations. Therefore, these are the vital resources, which are hard to substitute by their competitors, as effective as Zara. Additionally, Zara has a unique in-store inventory model, which builds a competitive advantage to the firm, on brand image in the emerging fashion trends (Xuejie, Chang and GuangHao, 2019).
Thus, an effective integration between these (tangible and intangible) resources, lead company attains capabilities for providing value to the end customers. In summation, Zara’s core competency is highly sustainable in the clothing market, and aims to earn huge profit margins and large customer base in the future years. Hence, these tangible resources may be easily imitated by the rival firms, whereas intangible resources cannot be easily substituted (Favarò, Eurich and Nader, 2018).
Week 4
Q2. Implementation of differentiation strategy using Apple
Differentiation strategy refers to the strategy adopted by business managers for marketing their products and services in a unique way, so as to draw the attention of the customers towards them. It simply creates value for the products to be purchased by the customers in the market through innovation. This is done in terms of product features, brand image, quality, product design, or customer services. There are several basis of differentiation used by the firms i.e. price, product, and organisation (Jing, 2016).
The company has efficiently implemented product differentiation for distinguishing their products i.e. Macintosh home computers to the iPod music players and iPhone mobile services. The company has also used the strategy for tapping an area of the total consumer market and insisting them to purchase their electronic items. Also, to increasing market demand that attracts customers towards products and services by making them unique. The company has also invested in the R&D for strategizing and marketing their products effectively in comparison to their rivals in the market.
Product differentiation has been used by Apple by creating innovatory products ensuring a high-quality experience. The company’s product design is considered a ‘hallmark’ for their differentiation from the beginning. The company has provided many features along with a single product, which is not available with other firms in the electronic industry (Hammerschlag, Bick and Luiz, 2020).
Pricing strategy of Apple has been propounded to match with the level of quality of their produce. Minimum Advertised Price (MAP) has been used as a retail strategy, which maintains high profit margin in Apple. They prevent their retailers from gaining revenue from customers by providing retail outlets monetary incentives for selling goods at minimum price. Also, the company maintained their high prices popularity products with the retailers Walmart or Best buy (Shi et al., 2018). The strategy of pricing is effective in preventing retailers for battling with the Apple products. Moreover, the company is able to organise their distribution channels effectively, and making high levels of sales. Thus, above description states well that Apple, has built customer loyalty and managed to grow through innovation in the gigantic electronic market (Baroto, Abdullah and Wan, 2012).
Week 5
Q3. Identify competitive behavior responses of Tesco to build or defend its competitive advantages and to improve its market position
Tesco plc, trading as Tesco is a British multinational company that deals in selling grocery and items of general merchandise. The company is known to be the third largest retailer in UK, and manages the competition from the firms Woolworths and Coles effectively. Tesco has efficient dealt with the rival firms in a dynamic environment, through competitive behaviour responses towards the challenges in the retail industry. The company faced challenges and decline in profits in 2012, and other financial losses, which then led to strategic actions by the retailer. Some tactical actions has been taken by the company in the light of consequences faced after downfall in profit margins, these are: Hiring trained and skilled staff in their outlets, and renovating stores, and updating product lines, and changing prices for some of their products is significant actions taken by the retail company (Rothaermel, 2016).
One of the major strategic actions was entering the US market, with fresh and easy concept, and taking positions in other companies, to convert their stores in a retailing destination. This was done purposefully as competitive response behaviour to build competitive advantage. Other responses included ‘contributing in Harris & Hoole coffee chain, collaborating with Euphorium bakery based in London, represented the competitive behaviour of Tesco.
Tesco has also improved their performance and market position, in the recent years by engaging them in digital marketing. This helped them to tap the bigger markets in different regions, by execution of strategic actions and covering a large segment in the retail industry (Yuliansyah, Gurd and Mohamed, 2017).
The retail outlet faced the difficulty of stabilising their market position in the past in their home market. After making a shift towards the digitalisation, the company improved their customer service and other aspects of operations, which led to the competitive advantage in the industry. Thereafter, above mentioned aspects and strategic actions described the efforts put by retailer towards outperforming their competitors, and increasing growth in the industry (Wang et al., 2016).
Week 6
Q2. What do you think was the reasons why LVMH diversified?
Louis Vuitton (LVMH), is a multinational conglomerate in the luxury goods, headquartered in Paris, France. The company has grown significantly since the very beginning in the late 1980s. The company has deals in different products such as wines, perfumes and cosmetics, watches and Jewellery, and fashion group. The case of LVMH, stated about the diversification in their operations, products and the services to the customers. In the earlier years, the company made certain collaboration and mergers & acquisitions with other companies to tap prospect markets, but it resulted into a major downfall in the company’s performance (LVMH, 2018).
Thus, the reason behind the LVMH diversification is the negative performance by the acquisitions, which were considered to be the strength for future growth. Now, LVMH has made investments in the new products to add to their existing product line for improving their product base in long-term. Additionally, one special characteristic of this brand consists ‘personalization’ and designing the custom goods for their customers. This attracts, even the most demanding customers to get what they actually need in their products (Seong and Godart, 2018).
As per the research over the company’s growth through products, it has been found that creation of shareholder value will lead to development and success in longer period. Additionally, one special characteristic of this brand consists ‘personalization’ and designing the custom goods for their customers. This attracts, even the most demanding customers to get what they actually need in their products. In other words, personalisation acts to be another important reason behind the diversification of LVMH. This is because of the current scenario, as younger customers tend to demand more personalised products and services from these stores (Wang et al., 2016).
Thusly, corporate strategy of the brand, LVMH’s in reference to the Arnault demonstrated the diversification for sale of luxury items, with multiple variants. Hence, LMVH focused largely on the internal growth, and was further able to gain a high reputation in the luxury goods market for their creativity, product excellence, thereby outshining other firms.
References
Baroto, M.B., Abdullah, M.M.B. and Wan, H.L. (2012) Hybrid strategy: A new strategy for competitive advantage. International Journal of Business and Management, 7(20), p. 120.
Candelo, E. (2019) Innovation and Digital Transformation in the Automotive Industry. In Marketing Innovations in the Automotive Industry (pp. 155-173). Berlin: Springer.
Favarò, F., Eurich, S. and Nader, N. (2018) Autonomous vehicles’ disengagements: Trends, triggers, and regulatory limitations. Accident Analysis & Prevention, 110, pp. 136-148.
Hammerschlag, Z., Bick, G. and Luiz, J.M. (2020) The internationalization of African fintech firms: marketing strategies for successful intra-Africa expansion. Competitive strategy assignmentInternational Marketing Review.
Hwee, E.Q.C. (2015) Building & Sustaining Strategy: Bayerische Motoren Werke (BMW)–Automotive Industry. International Issues, p.29.
Jing, B. (2016) Lowering customer evaluation costs, product differentiation, and price competition. Marketing Science, 35(1), pp. 113-127.
Lindström, I. (2016) Market Research of the Luxury Car Market in China.
LVMH. (2018). Group. Available from: https://www.lvmh.com/group/ [Accessed 11-05-20].
Park, K. and Hwang, J. (2016) Organizational capability, competitive strategy and firm performance in venture businesses. Journal of the Korea Academia-Industrial cooperation Society, 17(2), pp.272-281.
Rothaermel, F.T. (2016) Strategic management: concepts (Vol. 2). United Kingdom: McGraw-Hill Education.
Seong, S. and Godart, F.C. (2018) Influencing the influencers: Diversification, semantic strategies, and creativity evaluations. Academy of Management Journal, 61(3), pp. 966-993.
Shi, Y., Lim, J.M., Weitz, B.A. and France, S.L. (2018) The impact of retail format diversification on retailers’ financial performance. Journal of the Academy of Marketing Science, 46(1), pp. 147-167.
Wang, H., Pappadà, R., Durante, F. and Foscolo, E. (2016) September. A portfolio diversification strategy via tail dependence clustering. In International Conference on Soft Methods in Probability and Statistics (pp. 511-518). Berlin: Springer.
Wang, Y. (2018) July. An Exploratory Study of Brand Strategy in Fast Fashion Brand--Using Zara as an Example. In 3rd International Conference on Contemporary Education, Social Sciences and Humanities (ICCESSH 2018). Atlantis Press.
Xuejie, C., Chang, Q. and GuangHao, Z. (2019) August. Research on Innovation supply chain Management in Fast Fashion Industry——A comparative analysis of ZARA and H&M. In 2019 3rd International Conference on Education, Culture and Social Development (ICECSD 2019). Atlantis Press.
Yuliansyah, Y., Gurd, B. and Mohamed, N. (2017) The significant of business strategy in improving organizational performance. Australia: Humanomics.
