Option trading strategies with examples differentiated


Whilst easy to say, in practice it is not easy to do. Many competitive industries and organisations are very difficult to penetrate, despite all the intelligence techniques that may be available to get information. The Kenya flower industry, for example, whilst willing to give general information on their production and marketing, are very reluctant to give away their "trade" secrets.

Other industries, like the diamond industry, are very exclusive in the sense that few companies dominate, the most famous being De Beers. Despite this, any successful organisation has to look at the competition, and moreover, be aware how the nature of competition can guide its strategy. The Kenyan flower industry is facing increasingly stiff competition from Zimbabwe. Its response has to be rapid in order to preserve its stance. Whilst Kenya may have been a market "leader" with the appropriate strategy to go with it, Zimbabwe as a market "challenger," may have made Kenya now to think, more in the future, to go with a "niche" strategy as a counteraction.

As we saw earlier, this certainly option trading strategies with examples differentiated the case with Kenyan vegetables. Chapter Objectives The objectives of this chapter are: Structure Of The Chapter The chapter opens with a discussion on the nature of competition and then looks at a number of competitive analyses, including the seminal work by Michael Porter on industry analysis.

Examples are given to reinforce the theory and the chapter finishes by looking at "outsourcing" as an important competitive strategy. In the fertiliser industry for example, few companies dominate - including Norsk Hydro. Substitute competition has also become an increasingly bitter battleground, with products being able to replace others as technology and tastes have changed.

Industry analysis One way to look at competition is by industry analysis. Competition drives down rates of return on invested capital. If the rate is "competitive" it will encourage investment, if not, it will discourage competition. Porter 1 and looked at the forces influencing competition in an industry and the elements of industry structure.

In this analysis, the Malawian and Ugandan Birds Eye chili example is a good case. Uganda was a world supplier of chilies. Uganda, devastated by the war, saw Malawi, a new entrant take over its position.

Now Uganda is hitting back by resurrecting its shattered industry and strongly marketing its product to Malawi's detriment. InPorter 2 hypothesised in his text "The Competitive Advantage of Nations", why some nations were more competitive than others. As well as being able to successfully manoeuvre through the environment he identified that the foundation of success lay in the "diamond" of "home" advantage.

To successfully launch an international challenge he identified four "home" prerequisites - the maximum use of endowed resources natural and human the forming of domestic networks to fully exploit these resources, domestic demand which may involve the invitation to world class players to help develop these resources in country and finally, an industry option trading strategies with examples differentiated environmental structure the latter provided by Government in order that these forces can thrive.

Unfortunately, in many developing nations, the first stage only has been reached and even then much of the added value is exported. Thankfully this is not the case in other LDC's. We can examine this further by looking at the application of the above theory in the food industry.

Firstly it must be competitive with other agricultural systems or any other system for that matter say wildlife management in attracting resources, and secondly it must be absolutely competitive against similar commodity systems or industries in other countries. The commodity system may have to compete against those industries in international markets or be threatened by them in its domestic markets.

Porter would refer to this as "competitive advantage" or "international competitiveness". Whilst Porter concentrates on two factors in the control of manufacturing industries i. However, complementary supply option trading strategies with examples differentiated not be a competitive strategy per-se, in the long term, because a supplier must still look at itself as a low cost or product differentiated supplier.

As in industrial products, many factors go into making up the comparative or competitive advantage of a supplier. Similarly in food systems, many technological, market or natural resource endowment factors go towards making up competitive advantage. Many of these factors have actually been discussed, and these are summarised in table 6.

These factors are primarily related to the size and patterns of food demand shaped by incomes, tastes, technological developments etc.

In Porter's 3 analysis industry competitors can be "threatened" by new or potential entrants and substitutes. In food marketing systems, barriers to new entrants can exist, as well as barriers to international competitiveness.

These barriers can be related to technical characteristics of commodities, perishability, bulkiness; production characteristics - small scale producers option trading strategies with examples differentiated higher transport costs; production support systems; dissemination of information to producers; processing and distribution functions - economies of scale, and laws; rules and standards - hygiene option trading strategies with examples differentiated, sizing, grading, phytosanitary systems.

Conversely these factors can also be "standardised" by Government or other market intermediaries and players to make the "threat" of new entrants even more real. These include standard technological measures like containerisation, packaging, waxcoating, use of accredited pesticides, mechanical handling; standard laws, rules and regulations -phytosanitary requirements, size, standards, grades and rules defining property rights; permissable forms of cooperation and competition; unusual brand marks or reputations; spot or contact trading; standard channels of distribution and so on.

All these can help facilitate the entry of a newcomer and make the incumbent be particularly on guard and responsive. It is an example of how, through low cost of production and product differentiation it has been able to maintain its international competitiveness. It had always exported salted meet and later chilled beef, but with the establishment of "barriers" internationally the Commonwealth preference System, and other environmental factors like World War II, Argentina's international beef market contracted and so it standardised the domestic market.

Argentina's beef consumption per capita is almost four times that of Western Europe kgs compared to kgs Despite its domestic orientation recently. Argentina is stilt the world's third largest beef producer and fourth in exporting terms behind Australia, Germany and the US. This success was not necessarily built on favourable trading conditions but its ability to maintain international competitiveness through rampant inflation, currency overevaluation, heavy taxation, potential uncertainty and increased competition from substitute products internationally and from the Argentine cereals subsector which was clamouring for more resources, Its success was sustained by a low cost production of quality beef climate and extensive grasslands ; b well developed, flexible and transparent livestock marketing system; c Innovations in beef distribution domestically option trading strategies with examples differentiated chain stores, vacuum packing ; d development of new: Mid East ; and, e debt rescheduling by banks for livestock and trading enterprises.

With recent measures to make the industry viable again, including capacity rationalisation, Argentina beef is now back in profit and. But this is not limited to LDC's alone. Israel found itself unable to compete internationally with its citrus products, but found a new way to remain competitive internationally. Hectarage rose from 14 to over 40 hectares. With the well respected "Jaffa" label and the Citrus Marketing Board as the Only exporter in Porter's term's giving huge, "supplier power" Israel oranges and grapefruit dominated many markets.

However, by the late 's stiff competition from Spain, Morocco and Option trading strategies with examples differentiated and changing consumer tastes led to a levelling off of demand, and the once powerful, Citrus Marketing Board found it had to shift its orientation from powerful, bargaining seller to a marketer" naturing new demand patterns.

Whilst it succeeded in some of its promotion and utilisation campaigns, it option trading strategies with examples differentiated found Itself with excess supply and a product which was option trading strategies with examples differentiated in demand.

Consumer tastes had shifted to "easy peeling" oranges and tangerines and sweeter red grapefruit, away from Israeli Shamuti Jaffa orange and white grapefruit.

The once powerful Citrus Marketing Board's monopoly was rescinded in Several factors led to Israel's decline.

The CMB's unit of accounting was USD; c a significant rise in international shipping costs in the early 's; d financial option trading strategies with examples differentiated within Israel's agricultural settlements; e improper export product mix; f conflict of interest in the subsector giving weakened incentives for product innovations and quality; g inability of the Citrus Marketing Board CMB to reposition itself to maintain competitiveness; and, h Quality and supply of competitors, especially in demanded products for example Spain.

The Israeli citrus industry experienced all the problems envisaged by Porter In maintaining industry competitiveness. Bargaining power option trading strategies with examples differentiated the CMD shifted from supplier to the buyer. Competitors had a better product and lower costs and a product that was now demanded. These directly substituted for the Israeli product. In a few cooperatives and processors began processing fruit, despite the unsuitably of the product in many cases, and were able to absorb one million tons of fresh fruit product.

Export of processed citrus products concentrates, bases, essential oils etc first exceeded its value of fresh fruit in and are now double the export of fresh fruits. Technological advances and the ability to tailor make to niches has ensured international competitiveness. However, the greatest potential, looks like in the supply of root stock to other producers and processors, although Florida and Brazil are doing the same.

Competition analysis In order to know how best to compete, as well as the analysis given above, one option trading strategies with examples differentiated to know the way competitors measure themselves, their strategy to date, option trading strategies with examples differentiated major strengths and weaknesses and likely future strategy. In the first of these - knowing the way competitors see themselves - much can be learned from public accounts, interviews and the trade press.

Other ways are to have competitive personnel, take part in trade fairs, purchase the competitor's product and take it apart, or indulge in "espionage". In identifying the competitor's strategy to date, it is not enough to believe option trading strategies with examples differentiated they say option trading strategies with examples differentiated to reconstruct their strategy. Evaluating resources is difficult. It is essential to look at their production, marketing, financial and management resources.

On the basis of these first three, it is possible to guess the future. Not all competitors are necessarily bad. Good competitors can absorb demand fluctuations, expand the market, increase motivation, and option trading strategies with examples differentiated responsively to the industry.

There is, for example, room for all developing countries to take a share in most world markets in commodities, without one country wishing to be too aggressive. Competitive strategy Value chain analysis espouses three roles for marketing in a global competitive strategy.

The first relates to the configuration of marketing. It may be advantageous to concentrate some marketing activities in one or a few countries. A second role relates to the coordination of activities across countries to gain leverage say, of know how. A third critical role of marketing is its role in tapping opportunities for upstream advantage in the value chain.

More will be said about value chain analysis in later chapters. Generic approaches According to Porter 1 there are three generic approaches to outperforming others in an industry - overall cost option trading strategies with examples differentiated, differentiation and focus see figure 6. This is the case of television sets and many fruit products. If there is a large perceived difference created, then the firm has more price leeway. Focus strategies concentrate on serving a particular segment better than anyone else.

A good example of this is the Dutch flower auction or Gerber baby foods. The life cycle As indicated in chapter one, successful global strategists have also to be cognisant of the international life cycle. Successful strategies start with a firm base in one region or country, then expand as opportunities arise. These opportunities have to be explored alongside careful analysis of the life cycle stage option trading strategies with examples differentiated one or another country.

Failure to do so may mean that the opportunity has passed, whereas the firm may be option trading strategies with examples differentiated the impression it is still there.

Strategies for success Success can be achieved in industries by identifying growth segments within an overall market, enhancing quality and stressing operating efficiencies.

In fragmented industries success can be achieved by the creation of economies of scale. In the poultry and beef cattle industry, for example, this means feed lots and intensive rearing. Another way of option trading strategies with examples differentiated fragmentation is by "positioning" which must be consistent. The three types of positioning strategy are market leader, market challenger or market follower. In market leadership the firm must work at maintaining its position, having got there through, say, cost advantage or innovation, by being very responsive to market needs.