Exercises: Competitive strategies

Explain what a competitive advantage is and what two conditions it must meet to truly be one: that the customer values it and that it is difficult to imitate. Give an example of an advantage that meets both conditions and another of a supposed advantage that disappears quickly because competitors copy it.

Identify the generic competitive strategy of each business (cost leadership, differentiation, or focus) and justify your choice: an airline selling the cheapest tickets on the market, a premium mobile phone brand competing on design and features, and a workshop that only repairs classic cars over 30 years old.

The figure organizes Porter's generic strategies according to the source of advantage (cost or differentiation) and the competitive scope (broad market or a segment). Identify the strategy in the box marked with "?", explain it, and provide an example of a company that follows it.

Explain what cost leadership is and name three levers that make it possible (economies of scale, learning and accumulated experience, making full use of production capacity). Illustrate each lever with an example applied to a parcel delivery company.

Explain what differentiation is and why it allows charging higher prices than the competition. Then classify these differentiations according to whether they are based on the product, the service, the brand or the design: a burger restaurant with certified organic ingredients, a workshop that collects the car from the customer's home, a trainer brand that sponsors famous athletes and a lamp recognisable at first sight.

Explain what the focus or segmentation strategy is and how it differs from competing in the whole market. Then identify the segment or niche each business focuses on: a bookshop specialised in comics, a travel agency that only works with businesses and a gluten-free patisserie.

Explain in your own words what happens to a business that gets "stuck in the middle": it is neither the cheapest nor does it offer anything different. Give the example of a restaurant that falls into that mistake and explain why it is so hard for it to get out once it is stuck there.

Explain what a company's value chain is and what analysing it is for. Then classify these activities of a yoghurt factory into primary (creating and selling the product) or support (sustaining the former): receiving the milk, packaging the yoghurt, the accounting, the delivery to supermarkets and the training of the operators.

A hypermarket on the outskirts and a local supermarket sell very similar products. a) Explain which of the two can pursue cost leadership and why (high-volume purchasing, logistics, own brands). b) Reason what strategy is left for the local supermarket to survive (focus: proximity, opening hours, fresh produce, personal service) and why competing on price would be suicidal for it.

A clothing chain sells garments that are neither particularly cheap nor particularly original, and its shops are half empty. a) Explain what it means to be "stuck in the middle" between generic strategies and why it is a weak position. b) Propose two coherent ways out for that chain, one through costs and another through differentiation, with specific decisions for each.

The value chain divides a business into primary activities (inbound logistics, operations, outbound logistics, marketing and sales, after-sales service) and support activities (firm infrastructure, human resource management, technological development and procurement). a) Classify these activities for a home delivery pizzeria: buying ingredients, kneading and baking, maintaining the ordering app, delivering pizzas, handling complaints, and hiring staff. b) If the pizzeria's competitive advantage is always delivering within 20 minutes, state which activities generate this advantage and how it is supported by the others.

Two crisp manufacturers sell the same packet at $1\ \text{€}$: the leader produces 1 000 000 packets a month with a unit cost of $0,50\ \text{€}$ and the small one, 50 000 packets with a unit cost of $0,90\ \text{€}$. a) Calculate the margin per packet and the total monthly margin of each. b) Explain with the result why cost leadership is such a tough barrier for small rivals. c) State what strategy you would recommend to the small one instead of fighting on price.

An artisan gin brand triumphs with an original bottle and botanicals; the following year, three big brands launch almost identical products with much more advertising. a) Explain why an imitable differentiation stops being a competitive advantage. b) Propose two ways to make the differentiation harder to copy (recipe and know-how, brand and customer community, industrial property registrations, exclusive agreements with suppliers). c) Reason whether it pays off for the artisan to lower the price to defend himself.

A made-to-measure wedding dress company dominates its niche across the whole region, but two pieces of news arrive: the number of weddings falls and a large chain launches a cheap bridal line. a) Identify its generic competitive strategy and its two big risks (the niche shrinking and the big players taking notice of it). b) Propose two responses coherent with its strategy without abandoning the niche (extending to party and ceremony dresses, selling online to other regions) and justify them.

A pet shop chain analyses its value chain and discovers that its advantage lies in in-store advice, not in logistics, where it spends more than its rivals. a) Classify its activities into primary and support. b) Reason which activity it would be advisable to outsource and which it should never outsource, according to where its advantage originates. c) Explain what risks it runs when outsourcing (depending on the supplier, losing control over service quality).

In the juice market, a supermarket own brand with medium prices, extremely expensive freshly squeezed juices and a very cheap concentrate juice brand coexist. a) Assign each one its generic competitive strategy. b) Explain why all three can be profitable at the same time in the same market. c) State what type of new competitor would have the hardest time entering: one that half-copies all three.

A low-cost airline uses a single aircraft model, flies to cheaper secondary airports, sells tickets online only, and charges extra for luggage and food. a) Match each of these decisions with activities in its value chain and explain how they enable cost leadership. b) Analyse two risks of this strategy (price war, imitation, rising fuel prices, secondary airports becoming more expensive). c) Explain why another airline can make money on the same routes using the opposite strategy.

An artisanal ice cream parlour opens in a highly touristy coastal town where there are already six ice cream parlours, almost all of them commercial brands. a) Choose a generic competitive strategy for it and justify your choice based on the described market. b) Design two specific decisions within its value chain (procurement, production, sales or service) consistent with the chosen strategy. c) State what could cause this strategy to fail and how you would monitor it.

Two coffee shops coexist on the same street: "Exprés" charges $1\ \text{€}$ for a coffee, offering self-service and a high bar for standing, while "Origen" charges $3,50\ \text{€}$, with trained baristas, single-estate beans and guided tastings. a) Identify the competitive strategy of each coffee shop. b) Analyse what resources and skills each strategy requires (premises, staff, suppliers, brand). c) A third coffee shop wants to set the coffee price at $2\ \text{€}$ by offering "a bit of everything": assess its risk of being stuck in the middle and what you would recommend.

A designer furniture manufacturer mass-produces pieces with its own style and sells only online, with no stores, achieving prices 30% lower than the classic design brands. a) Analyse how its position differs from a pure cost leadership and from a pure differentiation. b) Explain which value chain decisions allow it to charge less without giving up design (mass production, online channel, absence of a store network). c) Assess whether that intermediate position is defensible in the long term or whether rivals will end up squeezing it from both sides.

A sportswear brand designs in-house, manufactures in external workshops, sells only on its website and handles returns itself, which it uses to improve the designs. a) Describe its value chain, pointing out which activities it does inside and which outside. b) Identify in which activities its competitive advantage originates and what type of advantage it is. c) Analyse what would happen to that advantage if it also outsourced the design or the handling of returns.

Two petrol stations on the same road enter a price war: each one lowers its price by one cent every time the other does, and after a year both sell the same as before but earn 40% less. a) Explain what has gone wrong from the competitive strategy point of view (competing only on price without having a cost advantage). b) Analyse in what situation lowering the price is a good strategy and what type of company can sustain it. c) Propose to the smaller one a way out through differentiation or focus (a local produce shop, services for lorry drivers, electric car charging).

A neighbourhood restaurant survives twenty years while much larger chains close down. Its owner says: "My advantage is that I know my customers and they know me." a) Discuss whether that advantage meets the requirements of a lasting competitive advantage: that the customer values it, that it is uncommon and that it is difficult to imitate. b) Explain the difference between having valuable resources (the premises, the kitchen) and having valuable capabilities (the relationship with the clientele, the know-how). c) Analyse whether that advantage would survive franchising the restaurant and what would happen to it as it grew.

A cleaning products company is considering entering the cosmetics market, where there is a leading brand with a 50% share and low prices, and dozens of expensive niche brands. Studies say that 70% of customers buy on price. a) Evaluate the three generic strategies as an entry route and reasonedly discard the two worst. b) Define the chosen strategy with three specific product, price and distribution decisions. c) Point out the main risk of the chosen strategy and how you would monitor it.

Unit challenge. You are advising an SME in your local area that plans to expand. Design a strategic business development plan following these phases:

1. Real local data: Access the Datacomex or INE website and extract the value of exports from your autonomous community in a specific sector (e.g., agri-food or textiles) for the last two years. Calculate its rate of change ($TV = \frac{V_t - V_{t-1}}{V_{t-1}} \cdot 100$), using a decimal comma if you get decimals.

2. Competitive strategy: Analyse whether it is advantageous for the company to compete through cost leadership, differentiation, or focus (according to Michael Porter) in the new market, justifying your choice based on its potential competitive advantages.

3. Direction and method of growth: Specify whether it should resort to internal or external growth, and select the most suitable international entry method (direct/indirect export, licensing, franchising, or joint venture).

4. Final product: Prepare a one-page executive report with the numerical analysis, the selected Porter strategy, and the justified roadmap.

Evaluation criteria:

• Rigorous extraction of official data and correct calculation of the rate of change.

• Economic consistency in the choice of Porter's competitive strategy.

• Appropriateness of the proposed growth and internationalisation method.

• Synthesis capacity and formal clarity in the presentation of the report.