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

The four generic building blocks of competitive advantage: efficiency, quality,

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 that s u p e r i o r q u a l i t y i s e s t e e m e d b y
c l i e n t s b u i l d s t h e c om p a n y ’ s c u s t o m e r r e s p o n s i v e n e s 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 primary concern 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. Profit differ enation

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