Question

hapter 4 (2). Identify and discuss real examples of companies with a competitive advantage based on customer lock-in as opposed to product innovation. Which do you expect to sustain a high ROIC for a longer time?

Chapter 5 (1). Discuss the three generic sources of a company’s growth, their relative importance for its growth, and what this means for a company’s strategy.

Answer 1

Answer 4(2)

SAP software solution is a company that provided financial software for companies in order to make their quarterly and monthly reporting easier. NBC Universal bought the software in 2013 and hired SAP experts to incorporate the software into their business and train the NBC Universal employees. This is a typical example of a company which hascompetitive advantages based on customer lock-in. Indeed, once the software has been put in place into the company, it costs millions of dollars to switch to another software, and it is more costly to train another time the employees to use the new software. From the experience I had working there and learning about the software, it took 3 years for it to be at full capacity. Therefore, even if a new innovative product is released, NBC Universal will not switch to this new product because it will be more costly. I expect thatthe competitive advantage related to customer lock in will sustain a high ROIC for a long time because it gives the company the monopole for years before the company will switch to another provider.

Answer 5(2)

. The three generic sources of company’s growth are the portfolio momentum, market share performance and merger and acquisitions. Portfolio momentum is an organic growth when a company benefits from an overall expansion in the market portfolio. Market share performance is the company gaining or losing share in a market and it is also an organic growth. Merge and acquisition is an inorganic growth when a company buys or sells revenue via acquisitions. Studies have shown that companies’ growth is mainly coming from portfolio momentum and merge and acquisitions. One of the strategies toincrease growth would be to develop a new product so innovative that it will give the company a competitive advantage. Another strategy would be to persuade customers to buy more of the existing product or to attract new customers  2. For which type of company is additional growth likely to create more value: a high-ROIC company in a mature market or a low-ROIC company in a fast-growing market? Give reasons for your answer.