How are the four generic building blocks of competitive advantage related to eachother?

The four generic building blocks of competitive advantage: efficiency,

q u a l i t y , innovation, and responsiveness to customers.T h e y a r e f i r m l y e l a t e d t o
e a c h o t h e r . S i n c e i t r e d u c e s w a s t e , t h e t i m e spent settling imperfections,and
the expense of after deals administration and support,accomplishing prevalent quality has a
key positive effect on potency. Besides, seeing thats u p e r i or q u a l i t y i s e s te em e d b y
c l i e n t s b u i l d s th e c om p a n y ’ s c u s to m e r r es p o n s i v e n es s . C o r r e s p o n d i n g l y , t h e
c a p a c i t y t o r a p i d l y d e v e l o p i n v e n t i v e n e w i t e m s w i l l b u i l d a n organization’s
capacity to serve its customers interests. Lastly, it is critical to stay as a primaryconcern that
accomplishing predominant potency, quality, and advancement are all 50% of
accomplishing prevalent customer responsiveness.

Discuss how companies can use (a) product differentiation and (b) capacity control to manage
rivalry and increase an industry’s profitability.(a) The virtue of product differentiation as a
competitive weapon is that it reduces the risk that companies will compete for customers on price.
Price competition decreases the level of industry profitability.In many industries, product-
differentiation strategies are the principal tools companies use to deter potential entrants and
manage rivalry within their industries. Product differentiation allows industry rivals to compete for
market share by offering products with different or superior features, such as smaller, more
powerful, or more sophisticated computer chips, or by applying different marketing techniques.
Product and market segment dimensions are used to identify four non-price-competitive strategies
based on product differentiation: market penetration, product development, market development,
and product proliferation. Market penetration involves using advertising and marketing to create a
differentiation advantage to increase market share. This also raises barriers to entry, thus
increasing industry profitability and reducing rivalry because companies can forecast their rivals’
actions. Product development means creating new and improved products to sustain consumer
demand for products. It keeps companies on their toes and lessens the likelihood that a new entrant
will be able to come into the industry with a superior product to seize market share. In this sense,
product development acts like a barrier to entry. At the same time, it builds reputation and brand
loyalty.

When is a company likely to choose (a) related diversification and (b) Unrelated
diversification? ( 10 Marks)

When a company has a financial resource that allows free cash flow, such company will usually
choose to diversify and invest in new business venture different from its core industry.
There are two models of diversification. They are (a) related diversification and (b) unrelated
diversification.
The company chooses related diversification as under It typically chooses a related diversification
because the products of the both the companies would have a relationship which commonly creates
related utilization.
Apart from this, the following could be the benefits that can
help the company in choosing a diversification strategy. They
are:
a) Benefit from transferring competencies,
b) Having a competency leverage,
c) An advantage of resource sharing.

d) Benefit of products bundling that means providing the

customer with a bundle of products related to each other.
For example, providing outdoor apparel with hiking shoes or boat shoes as a product bundle.

When is a company likely to choose (a) related diversification and (b) unrelated
diversification?a.Related diversification will be chosen when there are significant commonalities
between the two businesses. There will be commonalities identified throughout the value chain,
and competencies will be transferred and leveraged. Companies will pursue related diversification
when the benefits of resource sharing and skill transfer outweigh the costs of implementation.
Companies prefer related diversification when it can help them prevail in multipoint competition.
b.Unrelated diversification will be Favored when there are few, if any, functional competencies that
can be transferred and leveraged in the new industry. The company’s strategy is to increase
profitability throughout the organization and across all business units and, therefore, only general
organizational competencies are applied. Unrelated diversification requires skilled strategic
management and strong organizational design