Theoretical part

Influence of innovations on achievement of competitive advantage by the automobile company: case study Russian sports car producer Marussia Motors

Prepared by

the 2^nd year student

Daria Ivannikova

St. Petersburg

Theoretical part

In the strategic management competitiveness of organization is considered to be an explanation for organizations’ success. Porter was the first to introduce concepts of competitive strategy, competitive forces and competitive advantage. (Christopher Heywood, Russell Kenley, 2008)In fact, without a competitive advantage firms have a limited number of economic reasons to exist. Without it the firm will decline. Creation of competitive advantage is one of the main parts of the strategy of the firm. In order to understand the ways of achieving competitive advantage we should define and describe the basic concepts of competitiveness.

Competitiveness is the relative strength that one needs to have to win in competition against competitors. This takes for granted the existence of a competitor, i.e., a decision-making subject apart from oneself, and indicates the relative share of oneself that is determined by someone else's decision making. The "payoff matrix" of oneself is influenced by what one's opponent decides, and therefore, it is relative in nature. Existing studies on competitiveness are divided into three categories according to differences in unit entity: firm competitiveness (Chandler, 1990; Womack et al. 1990), industry competitiveness (Porter, 1990), and competitiveness of nations (Ohlin,1952; Leontief,1953).

There are different models to evaluate the competitiveness.

The Nine-Factor Model where three aspects should be taken into consideration. The first comprises four physical factors: endowed resources, business environment, related and supporting industries, and domestic demand. The second is that in developing countries the key engine for economic growth has been an abundant and diverse group of people with generally high levels of education, motivation and dedication. The third is chance as an external factor. Although Porter has identified four factors as the sources of competitiveness, he added two more —government and chance events, as external factors. There is a similarity between Porter's model and the nine-factor model: four of the nine factors are identical—endowed resources, related and supporting industries, domestic demand, and chance events; while one factor is similar in nature —strategy, structure and firm rivalry vs. business environment. The difference, however, is that the latter emphasizes human factors by separating workers from endowed resources, using the word politicians and bureaucrats in place of government, and identifying entrepreneurs, professional managers and engineers as uniquely independent components.

An Integrated Model of Competitiveness, where 9 factors play different roles in determining competitiveness, collectively named "ser-M (pronounced as sir-em)", their roles can be categorized into four groups, each of which is a determinant of business performance (refer to Figure 2). The paradigm of "ser-M" views four factors — subject (s), environment (e), resource (r), and mechanism (M)—as the deciding factors of performance (Cho & Lee, 1995).

Taking into account the theory on competitiveness of the firm we then move to the competitive advantage which is considered to be one of the main parts in the strategy of organization. Until now, there are two perspectives in the classical strategic view: A resource-based view and capability-based view.

Firstly, a resource-based view believes that firms can provide competitive advantage only when a firm possesses valuable, scarce, inimitable and irreplaceable resources. In other words, the firm’s resources must meet three requirements: non-tradable, non-imitable, and non-substitutable. Secondly, the capability-based view suggests that the success of a firm’s strategy is completely dependent on the ability of transforming the resources to competitive advantage. Therefore the capability-based view actually moves a step closer to understanding how enterprises develop and maintain their sources of competitive advantage. (Liqin Ren, Guangya Xie, Koos Krabbendam, 2009).

A firm's competitive advantage often arises from one or more of the following three sources: ownership-based; proficiency-based; and access-based. That is, a firm can gain advantage by ownership or possession of certain valuable assets or factors, e.g. strong market position (Porter, 1980), unique resource endowment (Barney, 1991), or reputation (Hall, 1992); by opportunity or rights to gain superior access to inputs and markets (Lieberman and Montgomery, 1988), e.g. exclusive relationship with supplier or distribution channel; by superior knowledge, competence, or capabilities in conducting and managing its business processes (Nonaka, 1991; Prahalad and Hamel, 1990; Teece et al., 1997): producing quality products at lower costs and delivering the right products and/ or service to its customers in the right place at the right price and time through the right channels. Simply put, to achieve any advantage in business, a firm has to look deeply and systematically into what it has, what it knows and does, and what it can get.

The competitive advantage is created when a firm discovers a new or a more efficient way to come into the industry and put the discovery in concrete form, than its competitors, when it creates an innovation. So, the word innovation is understood as creating new value and/or capturing value in a new ways.

Defining the source of innovation is equivalent to describing the ways to create competitive advantages. It is in fact possible to distinguish five main sources of innovation:

* The new technologies;

* The modification of the demand or a new demand;

* The occurrence of a new segment;

* The changes in the costs or the availability of means of production;

* The changes in the regulation.

Porter offered the three methods for creating a sustainable competitive advantage are

through the following:

1. Cost leadership - Cost advantage occurs when a firm delivers the same services as its competitors but at a lower cost.

2. Differentiation - Differentiation advantage occurs when a firm delivers greater services for the same price of its competitors. They are collectively known as positional advantages because they denote the firm's position in its industry as a leader in either superior services or cost.

3. Focus (economics) - A focused approach requires the firm to concentrate on a narrow, exclusive competitive segment (market niche), hoping to achieve a local rather than industry-wide competitive advantage. There are cost-focused seekers, who aim to obtain a local cost advantage over competition and differentiation focusers, who are looking for a local difference.

The goal of the proposed research is to define the ways of achieving competitive advantage based on innovations by the companies in automotive industry and discuss the opportunities of Russian companies on the automotive market using the case of Russian car producer “Marussia Motors”.

Дата добавления: 2015-11-14