Strategic Leadership in Action

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Table of Contents

Summary of the Article
Statement of the intentions of the paper
Threat of new entrants
Bargaining power of suppliers
Bargaining power of buyers
Threat of substitute products or services
Differentiation and Positioning
Conclusion
Works Cited

Summary of the Article

The title of the article under discussion in this paper is ‘Google building android game console’. The article is authored by Amir Efrati and Ian Sherr and published in the wall street journal. The article is about Google’s competitive strategy in the information and communication technology industry. The company plans to introduce two new products (wristwatch and video game console) to the market.

These products will be powered by Google’s android software launched in 2008 and will aim at combating Apple’s future devices and give the company (Google) a competitive edge. The two devices will also aim at expanding the usage of the android software beyond tablets and smart phones. Apart from the two devices, Google also plans to launch a second version of android called Nexus Q, which is used for live streaming of information.

Statement of the intentions of the paper

The paper intends to identify and elaborate some aspects of competitiveness which the authors did not address in the article. The only aspect of competitiveness addressed by the authors in the article is rivalry among existing competitors. However, they have not addressed bargaining power of buyers, bargaining power of suppliers, threat of new entrants, threat of substitute products and services, product positioning and differentiation.

Threat of new entrants

In order to gain a portion of a market and build trust with the customers, new entrants usually come with unique approaches in any given industry. In most cases, they use pricing as a strategy of entering the markets. They do this by setting the prices of their products at low levels than those of the incumbents.

Others may focus on improving the quality of their products so as to attract customers (Hill and Gareth 3). The reduction of price and quality improvement makes the industry very competitive for the incumbents and sometimes they may be forced to quit the industry especially if the new entrants posses huge capital.

In a reaction to price reduction and quality improvement, the incumbents may come up with strategies of putting barriers aimed at preventing new entrants from entering the industry. For example, they may adopt very sophisticated technologies which are not easily available. They may also consider putting barriers to the access of the distribution channels so that new entrants may be scared away by the restricted access to supply channels (Hill and Gareth 3).

Another reaction by the incumbents is what is referred to as ‘supply-side economies of scale’ which enables the incumbents to produce large quantities of goods at relatively low costs per unit. Supply side economies of scale also cushion the incumbents from the threat of lowered prices by the new entrants. It also discourages new entrants especially those who are not able to use price reduction as a strategy to penetrate the market and dislodge the incumbents (Hill and Gareth 3).

Bargaining power of suppliers

In some industries, there are monopolies in terms of supply of goods or services. In such industries, the powerful suppliers are able to manipulate the prices of goods or services the way they want. A supplier is regarded as powerful if for instance, he or she does not depend on a particular industry for revenues and therefore, he or she can do without that particular industry.

A powerful supplier is also one who supplies goods and services which are unique or one who has established a long term business relationship with certain companies. Powerful suppliers are also those who supply goods and services which cannot be substituted. A good example is pilots and the aviation industry. This is because it is not easy to get well trained and qualified pilots within a short notice and therefore, the pilots’ unions may have a big bargaining power (Hill and Gareth 4).

Another example is the Microsoft computer giant. It can decide to increase the price of operating systems. When this happens, the other computer dealers have no option other than cutting of their profits. In some cases, some powerful suppliers can also threaten to enter the markets themselves if the customers are not willing to purchase the goods at their desired prices. Companies may overcome this by having large capital base so that they can become suppliers themselves (Hill and Gareth 4).

Bargaining power of buyers

In some industries, there may be few but large buyers who purchase certain goods or services in bulk. Such buyers usually have a bargaining power to lower the price of goods or services in question because if the suppliers do not comply, they end up with minimal sales and profits. Buyers usually have power when the cost of switching suppliers is low and when the products in question are undifferentiated or are standardized.

The bargaining power of buyers can affect the profitability of an industry because they may lower buying prices and then lower their selling prices. When this happens, the people who suffer are the other small dealers in the industry and the suppliers. Buyers can increase their competitive strategy by teaming up and setting the buying price of the products at a certain level. This can cushion them from unscrupulous suppliers and new entrants (Hill and Gareth 5).

Threat of substitute products or services

A substitute is a product which plays similar function as the original product. Examples of substitutes include the electronic mail as a substitute for sending letters by mail, video conferencing as a substitute of actual conferences and the use of plastics instead of aluminum products.

Substitutes usually act as a threat to some industries, especially when they are priced in a friendly manner than the original products and when the cost of switching vendors is relatively low. Companies can guard themselves from the threat of substitutes by differentiation of their products and by teaming up to influence government policy on the introduction of substitute goods in the market (Hill and Gareth 6).

Differentiation and Positioning

In marketing, differentiation can be defined as the process of distinguishing a product or service from the rest through describing the major differences between the product or service and other products or services. As mentioned earlier, differentiation is one of the aspects of competitiveness done with a view of creating a market niche for a particular product or service.

Differentiation seeks to create a positive image of a particular product among the targeted consumers so as to ensure that they perceive it as unique and different from other similar products (Armstrong and Kotler 26).

Product differentiation prevents the targeted consumers from comparing a particular product with others thus giving that particular product a competitive advantage over the others. When doing differentiation, the marketing departments of companies mainly use advertisement, promotions, improved product quality, lowering or increasing the prices of products and ignorance of the consumers regarding the price and quality of the product being differentiated (Armstrong and Kotler 26).

Some companies may differentiate several products at the same time with the aim of acquiring a certain number of customers for the differentiated products or services; a concept called positioning. Positioning entails the use of various strategies like promotion, distribution of products or services and production of unique products with unique pricing to build an identity of a particular company or organization in the minds of particular consumers.

Through positioning, companies are able to stabilize and retain the positions of differentiated products thus retaining the competitive advantage of the company in regard to those products. In order for a company to create and maintain a particular position in a market, it needs to do a thorough research and be consistent in monitoring of market trends so as to modify or readjust the differentiation and positioning strategies for its respective products.

Conclusion

From the above discussion, it has emerged that competitiveness is a multidimensional concept. Many companies usually focus on their rivalry with existing competitors in designing their competitive strategies. This is the case with Google Inc. as featured in the article ‘Google Building Android Game Console’ by Amir Efrati and Ian Sherr and published in the wall street journal. However, there are other aspects of competitiveness which can enhance a company’s position in a certain industry.

These include bargaining power of buyers, bargaining power of suppliers, threat of new entrants, threat of substitute products and services, product positioning and differentiation. When all these aspects of competitiveness are taken into consideration, companies are able to enhance their competitiveness in their respective industries.

Works Cited

Armstrong, Gary, and K. Philiph. Marketing. An Introduction, Prentice Hall: Pearson Education Company, 2009.Print.

Hill, Charles, and J. Gareth. Strategic management: an integrated approach. Boston: Enfield Publishers, 2007.Print.

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