Lolacc Competitive Advantage Essay

Pages: 3 (1493 words)  ·  Bibliography Sources: 1  ·  File: .docx  ·  Level: College Senior  ·  Topic: Business

SAMPLE EXCERPT . . .
There are a number of alternatives that can help take a good business and turn it into a great one. Diversification is one option, and there are a number of different ways that a company can diversify. Right now, Lola Savannah has a single business multiproduct strategy, which does not provide much diversification but this is a small company we are talking about. Lola does have the opportunity, however, to diversify through related diversification. This approach would mean something like opening a chain of coffee shops, or getting into the tea business. Lola Savannah has a good brand name and the product is exceptional. It should pursue other opportunities within the coffee business in order to grow. Unrelated diversification is not recommended because it moves too far from the company's skill set. Small enterprises like Lola Savannah should stick to just one business in order to retain management focus.

There are five generic strategies that the company can choose from. Lola should opt for focused differentiation. The total size of the market for Lola is small, because it operates only in the Houston area. It competes in a specialty coffee niche away from the large companies like Nestle that dominate the market. In this small nice market Lola is differentiated as a high quality local producer, and the 80-plus flavors provide another point of differentiation.

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The company needs to set this strategy in accordance with the industry conditions. There are a number of factors that go into the industry conditions, including the rivalry with existing competitors, the bargaining power of buyers, the bargaining power of suppliers, potential entrants and product substitutes. The rivalry with existing competitors is not that significant, because most of the major competitors, including Sunbelt, are quite large and do not compete directly with Lola. The industry is fragmented, so there is room for both cost leaders and differentiated companies.

Essay on Lolacc Competitive Advantage a Competitive Assignment

The bargaining power of buyers is high because of the competition. In order for Lola to have a differentiated strategy, for example, it needs to have a product so good that people will pay extra for it, as product uniqueness helps to overcome the high bargaining power of buyers. The bargaining power of suppliers is also high. Coffee is traded on the global commodities market, and Lola must generally pay the market price. Lola also competes with other roaster companies for the top beans. There is a high threat of potential entrants to the industry. There are low barriers to entry and the coffee business is usually quite profitable. . The cost of a roaster is not that high. This means a new competitor could emerge at any time. There is less risk of substitute, although there are a number of alternative ways to get caffeine, like tea, energy drinks, yerba mate and caffeine pills. The risk is low, however, because coffee drinkers are usually loyal to coffee.

The differentiation strategy means that the customers who Lola is targeting have different tastes, in this case they have a high appreciation for good coffee. Lola, being a small and local company, understands southern hospitality and therefore offers a higher level of service than do impersonal large coffee companies. The combination of high quality coffee and superior service allows Lola to be differentiated, and it can therefore charge a higher price for its coffee. It needs the higher price to compensate for lower volumes and a higher cost structure. An alternative strategy is to become a much larger company and seek the mass market as a differentiated player, like Starbucks, but Lola does not have the capital to become anywhere near large enough to leave the 'focused' category.

Another option would have been an integrated strategy. However, there is a premium to be paid for the best beans, and a cost leadership strategy requires strong control over input prices, usually from economies of scale. Lola does not have these economies, so is essentially a focused/differentiated player by default. However, it has designed its business around this strategy so is in a good position to succeed going forward.

It is recommended that Lola Savannah should pursue the differentiated strategy. It is a small company, and therefore cannot truly be a cost leader. However, it does have a lot of competitive advantages that leads one to see Lola Savannah as a differentiated player. The service and beans are particular are differentiated from the different competitors, to Lola's… [END OF PREVIEW] . . . READ MORE

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