When a firm sustains a profit that exceeds the average for its industry, the firm is said to possess a competitive advantage over its rivals. The goal of much of business strategy is to achieve a sustainable competitive advantage (SCA). (QuickMBA, 2007) Michael Porter identified basic types of advantages used by businesses. Cost and differentiation advantages are positional advantages used by organizations to achieve that competitive through creating superior value for its consumers and thus increase profits for itself. In this session long project I will discuss strategic plans including; low cost, differentiation, focus, and preemptive. By comparing each strategic plan with one of Kraft’s SWOT elements, I will discuss a tactic for taking advantage of strength, opportunity, or managing a threat or weakness, and ultimately recommending which strategic plan in order to achieve SCA.
Creating a Competitive Advantage
A competitive advantage exists when the firm is able to deliver the same benefits as competitors but at a lower cost (cost advantage), or deliver benefits that exceed those of competitors products (differentiation advantage). (QuickMBA, 2007) Creating this competitive advantage is produced using the organizations resources and capabilities b either a cost advantage or differentiated. Porter identified three basic strategies one of which is the cost leadership strategy. This strategy intends for the organization being the low cost producer in the industry. Such ways to lower prices include; improving process efficiency, vertical integration, and avoiding some cost for example.
The differentiation strategy intends to development of a product or service that offers unique attributes that are vale by the consumer and that consumers perceive to be better than or different from the products of their competitors. (QuickMBA, 2007) Within this session long project it Is important to understand that Krafts’ products are not necessarily unique but that Kraft maintains some unique attributes associated with their product like their branding.
A focused strategy is such that, a concentration on a narrow segment of the broader market. This attempt intends to achieve either a cost advantage or differentiation. Keep in mind that a cost leadership strategy normally targets a broad market.
The last strategy discussed is preemptive. As the name suggest, a preemptive strategy could be considered the first move or initial entrant.
Together with all four strategies, taking into account Porter’s Value Chain, and Kraft’s resources and capabilities, the below strength, weakness, opportunities, and threat (SWOT) analysis was developed to assist in generating a proper recommended strategy to pursue at the business level. Strategies at this level are medium range, including Kraft’s market position, its geographic location, and distribution channels. Table A will be referenced throughout the session long project.