Methanex’s competitive strategic position and competitive scope have to date concentrated on focused cost leadership of being the world’s lowest delivered cost of methanol within the various regions it served. Methanex utilizes a singular corporate strategy, undiversified and focused solely on production, storage, and distribution of methanol, which has allowed it to become the leader within its industry, not only within production of methanol but also with setting global prices. Methanex took a leadership stance within the industry when it started publishing its Methanex Non-Discounted Reference Prince (MNDRP), which was quickly adopted by the industry as the general benchmark for methanol pricing.
Methanex has differentiated its business
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in several ways from its competitors, which have provided competitive advantages to their business. To analyze competitive advantage, an internal analysis of Methanex was performed, evaluating their many Resources, Capabilities, and Competencies (Exhibit #3), and from these key factors VIRO analyses (Exhibit #4) were performed to assess whether any provided competitive advantages within the industry. The VIRO analyses revealed that Methanex’s capability of providing international distribution of methanol and other chemicals provided a sustained competitive advantage, as it allowed Methanex to provide otherwise uncontrollable stability to their supply of the methanol industry. This competitive advantage has allowed Methanex to differentiate themselves from competitors within the industry as they are able to favorably position themselves as reliably, on-time providers of methanol to their customers. The fit and consistency among these activities in relation to their primary business focus also provides value as a complement to their primary service. Another differentiating factor for Methanex is its investment within methanol storage facilities across the world, which allows them to bring stability to pricing of methanol during times of fluctuation and also guarantee supplies to their customers in times of high demand or reduced availability of raw materials. These investments and complementary services have allowed Methanex to build value drivers in customer services as a reliable, consistent, and quality provider within the industry. Although this capability has been a differentiator from competitors, the VIRO analysis exposed that these facilities served as a competitive parity due to ease of replication by competitors, and therefore would not provide a sustained competitive advantage within the industry. Yet another advantage for Methanex is their focus on technology development within their facilities.
Methanex has a considerably smaller number of staff working at its production plants due to technological investments made to computerize and mechanize their facilities. This resulted in reduced staffing costs within facilities, providing a cost driver advantage that allows Methanex to spread fixed costs further and forward lower costs to their customers, retaining their position as a cost leader. After analyzing with the VIRO framework, once again this resource was determined to be a competitive parity due to easy replication from competitors since there was no protection of the technology and mechanization systems utilized.
The internal SWOT analysis also revealed some potential areas for Methanex to grow within the future, particularly in providing methanol to high-growth potential markets like the energy industry. In order to stabilize business within these growing sectors, Methanex should implement long-term contracts whenever possible with these energy producers in order to avoid spot price buys and to better predict future demand for
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methanol. Overall, both the external and internal analysis only revealed one source of sustained competitive advantage for Methanex in their transportation services, however the many uncontrollable competitive, economic, and political threats to the industry remain high, and so it is highly recommended that Methanex reevaluate their current competitive position within the market and seek potential new capabilities that may diversify or secure their business. 5 Risks Associated with Methanex’s Competitive Strategy There are risks associated with Methanex’s competitive strategy, primarily that their lack of diversification within their business and sole focus on production of Methanol makes them highly vulnerable to uncontrollable political, governmental, and regulatory issues that could effect the supply of key natural resources or the general pricing of methanol.
Many of Methanex’s competitors diversify their offerings, including methanol as just one offering in their diverse portfolio of chemical production, which provides them with protection from fluctuations in the pricing of methanol and raw materials needed to produce it. Many general chemical competitors also only enter the methanol production market once pricing reaches comparative levels to that of a barrel of oil, which can cause an oversupply in the market and drive prices down.
Methanex’s sole focus being the cost-leader within the methanol industry also puts them in a dangerous position. If a competitor discovers a less-costly or more efficient method of producing methanol via innovations in technology, process management techniques, or due to partnerships and joint ventures with suppliers (vertical integration), Methanex would lose their key competitive differentiator within the market and would have to reevaluate their entire competitive strategy.
6 Methanex’s Undiversified Corporate
Strategy Methanex’s undiversified corporate strategy has provided a disadvantage, as they are incredibly reliant upon uncontrollable factors that impact the spot price of methanol. While Methanex is currently the world leader in providing methanol to customers, they have missed other opportunities to utilize their existing facilities and operations to produce complimentary products to that could also be sold to their core customers. While Methanex utilizes long-term contracts with many of its suppliers to avoid pricing and supply issues, this is not always a viable option. By diversifying their offerings within the chemical industry, Methanex could expand their portfolio to additional chemical products that utilize the same factories, transportation and storage facilities, and provides customers with a compliment offering to their primary methanol product. An example of a complementary chemical Methanex could explore producing would be dimethyl ether (DME), which is being utilized as a fuel substitute for propane in many different nations and had been proven as non-toxic and not harmful to the environment. China currently had a large demand for DME in its use for household heating, and also made up over 59% of the current demand for methanol. Entering this market and setting up facilities within this location could provide a large competitive advantage for Methanex. Another option for Methanex to diversify offerings would be to move upstream on the industry value chain and look to partner, acquire, or enter a joint venture with raw material producers of natural gas or coal. Backward vertical integration further into the value chain would allow Methanex more control over the unpredictable natural resources that are essential to the production of methanol, which would mitigate much of the risk within their current industry. Controlling supplies could also further their current competitive strategy by guaranteeing supplies of methanol to customers, and could also prove quite lucrative when selling off to other manufacturers when prices rise. Methanex could utilize its transportation and logistics core competencies in both scenarios above, either to transport DME directly to customers or to ship raw materials like natural gas to either their own facilities, that of other methanol producers, or others that also utilize natural gas.
UST Inc. is a smokeless tobacco company with a long tradition and a recognizable brand name. A strong brand name can have lots of associations with high quality, revenues, soundness, growth, etc. But, this is one of the characteristics that can be like two edged sward. On one side, company with long tradition is expected to to operate in a stable and prosperous way as it always did, but on the other side, company itself can get too self confident and fail to see the newcomers and other threats. UST has ignored newcomers, and now they all have a growing market shares, while only UST Inc. total share, consequently, decreases. Smaller players are expanding their market share primarily by cutting prices, something that UST ignored. UST Inc. decided to fight competition not by decreasing prices, but with overstretching it product lines. However, this might not be the best solution. As the main player in the market, they had the better position to take on and win in the price war. If UST Inc. had been able to take this step, competitors probably would not be able to follow the price decrease imposed by the UST Inc and at least some of them would be shut down. So as one of the biggest drawbacks of UST's policy can be slow reaction to new market conditions and worse of all when they react the reaction is inappropriate.
Currently, the most important factor in the rise of gas prices is the increasing cost of crude oil. Unfortunately, the United States has three percent of the world’s oil reserves. (Horsley) In 2009, the United States was third in crude oil production as well as the world’s largest petroleum consumer. (e. I. Administration) Such consumption required and still requires the United States to import petroleum/crude oil from other countries.
The problem today is the gas companies make too much on their products. Shell's profits jumped enormously in only three months. The Company announced an 80% jump in earnings for the last three months, to $3.25 billion (Shell Posts Record Profits). Ethanol would allow these profits to go straight to
This report comprises of the explanation of two different companies working in different market fields, the two companies I’ve chosen are Primark and Samsung I am going to write about the influence of the 4vs which are the volume of output, variation in demand for output, visibility of production, and variety of output. I am also going to look at the performance objectives in each of the companies. Example, for a given year and how they are able to reach their objectives, and also the effect on the cost efficiency of the operations.
The beverage industry is highly competitive and presents many alternative products to satisfy a need from within. The principal areas of competition are in pricing, packaging, product innovation, the development of new products and flavours as well as promotional and marketing strategies. Companies can be grouped into two categories: global operations such as PepsiCo, Coca-Cola Company, Monster Beverage Corp. and Red Bull and regional operations such as Ro...
Samsung’s cost advantage is clearly visible from the comparison of costs (and their elements) that were borne by the company and its competitors in 2003 (Tab. 3): Samsung’s overall cost was 24 per cent lower than the weighted average cost of the other four producers; two most significant elements of the cost structure, i.e. raw materials and labour, were 36 and 27 per cent lower respectively. When expressed by means of a relation of average selling price to costs (“productivity” of cost elements), the differences are even more visible (comp. Tab. 4 ): overall superiority of Samsung over its competitors exceeded 51 per cent!
The market is dominated by a few large suppliers rather than a fragmented source of supply. There are no substitutes for the particular input. The suppliers customers are fragmented, so their bargaining power is low. The switching costs from one supplier to another are high. There is the possibility of the supplier integrating forwards in order to obtain higher prices and margins.
There were fierce competitions among the producers that have scale and scope of operations which were similar to each other. For instance, the Pepsi Co. and Coca Cola companies have developed the strategy and infrastructure, which are hard for the local sellers to complete with them. However, there were still many producers including new entrants that try to access the market and compete seriously with low price and differentiation- strategies among rival...
...pital resources like distribution vehicles and storage warehouses should be outsourced to help reduce the high cost of operation which in turn can lead to reduction of its products price. The company should concentrate on product development and evolution and delegate distribution roles to outsourced firms. Such initiatives have worked well in the new Indian market and should be implemented in other areas.
Since more than 40 years, Toyota Company was thinking how to develop the traditional process costing system and the production system. Some of the companies believe that the increasing of the production is a big profit, while Toyota proved the opposite. The more you increase the products out of the need of the market, the more losses you are going to gain. This kin...
The task of this assignment is to complete a competitive analysis of two of the largest competitors in the industry of chosen study. This researcher’s chosen field is the Car Wash industry. Unlike many industries, the Car Wash industry does not have dominant players or franchise names that rule across the country. Unlike other automobile related industries such as oil change (Rapid Oil Change), tires and batteries (Goodyear), and auto parts retailers (NAPA), where these types of name players may have thousands of locations throughout the country, there are no big name players in the Car Wash industry. Although there are companies that own and operate multiple car wash facilities, most of these multi-location owners operate multiple locations throughout a metropolitan or regional area and their overall location totals are nominal. Since there is a lack of dominant competitors to analyze, this researcher will focus on an analysis between the two main categories of car wash ownership: full service vs. unattended operations.
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The second way is to achieve low direct and indirect operating costs is gained by offering high volumes of standard products and offering basic no-frills products. Production costs are kept low by using less parts and using standard components. Limiting the number of models produced to ensure larger producti...
For example: with the increase of the number of products produced, the cost of operating a machine also increase. Second we have batch level costs which is associated with batches; producing a multiple units of the same product that are processed together is called a batch. The third type is product level costs which arise from any activity in order to support the production of products. The fourth and the last type is facility level costs, this costs cannot be determined with a particular unit, product or batch; this costs are fixed with respect to batches, products and number of units produced. A single measure of volume is used for allocating costs to each service or product in traditional method for example: direct material cost, machine hours, direct labor cost and direct labor hours. A cost driver is an activity that generate costs, it can be generated by two types of costs the first is a particular machine 's running costs where the costs is driven by production volume as machine hours; the second is quality inspection costs where the cost is driven by the number of times the relevant activity occurs as the number of
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