Competitive Advantage Determinants
Competitive advantage in a strategic environment is most often defined as having greater profitability than the average rival firm. As in the case for Head Ski Company Inc. , we are not provided with extensive competitor information, thus only internal indicators will be evaluated. Profitability measures show a company’s overall ability to maintain efficiency and performance for their stakeholders.
Some of the key performance measures for Head Ski in determining a true competitive advantage are as follows: ROA, ROI, ROE or yearly comparative evaluations of Gross Profit Margin, Operating Profit Margin, and Net Profit Margin. Generic Strategy Identification With only two high-level generic sources that ultimately lead to a competitive advantage, it is clear that Head Ski is concentrated on employing a Differentiation strategy. He
...ad Ski provides a very unique and superior value to customers and in return, these customers are willing to pay a premium price.
The specific dimensions that demonstrate a differentiation strategy for Head Ski are: Product Quality, Ski Performance, Exterior Style, and their Dealer Relations. Case Evidence Combining his experience as an aircraft engineer with sheer dedication to skiing, Howard Head decided to simply build a ski that did not break, turned easily, and tracked correctly. He built a revolutionary product; a ski produced from metal. By disproving what many experts had believed to be the norm that a ski is only to be made of wood, Mr. Head provided a unique differentiated product to a broad market growing 20% yearly. By 1967, 60% of all high grade skis sold in the United States were now made of metal. It was clear and explicit from the case that product quality wa
Head’s top consideration in any decision they made. This is stated in the case that although realizing early that the metal ski will have larger costs than the wood alternative, the drive, passion and determination to produce the best quality ski in the market was the only goal.
This quality assurance was best displayed through Howard Head’s statement that attention to detail is what separates Head Ski from their competitors and that even during tough financial times, any defects or quality deviants were recalled without hesitation. Furthermore, the design of the ski is crucial to the performance of the skier and needs to take into consideration the 3 core functions of: Tracking, Traversing and Turning. Although in the early years as per Mr. Head, the main concentration was to make the best ski for the general public, by 1966, Head Ski was the top choice for performance for both, unskilled beginners and the top professional racers. This advantage in performance was prominent in a major international competition where one-third of all top 10 finishers were using Head products. Additionally, Head Ski truly believed in functionality before style. While competitors often introduced 6-8 different colours yearly for their skis, Head stuck to the basic colour of black and rarely made any model changes unless performance was lacking.
The simplicity of using one colour really made Head distinctive and unique on the slopes and ultimately creating a status symbol for the brand. The emphasis on selective dealer relationships was a very strategic and distinctive strategy by Head. Many large stores were declined the opportunity to sell Head products including Saks Fifth for 8 years. This was due to the
importance that Head placed on the sales personnel that sold their skis. The individual must be a good skier themselves and understand that selling Head Skis is really a true business science.
This was evident through the release of the 1967 bulletin stating that the dealer organization is the most valuable asset next to the product itself and that any future marketing efforts will be geared to the specific needs of each individual dealer. Sustainable Competitive Advantage A competitive advantage is sustainable if the activities that achieve this are rare and hard to imitate by competitors. Through examining Head Ski’s value chain activities, a sustainable competitive advantage is likely due to a variety of reasons.
Firstly, through inbound logistics, operations and continuous support of technological R&D development, Head Ski had established itself as a premium quality brand. Concentrated on performance first with focus on defect free products, Head Ski emerged as a one stop shop for all Ski users from beginners to competitors. The superior and selective service that Head provides to their retail partners is viewed as the best in the industry and a part of the value chain that is hard for newcomers with limited resources to emulate. This has led to Head Ski establishing them as a status symbol based on performance, innovation and simplicity.
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