Essay Sample on Company Profit Margins: Achieving Competitive Advantage

Introduction

The position of a given company in the market helps in determining whether it meets the expected profit margins or it operates within a healthy level. The essential basis of learning the profit margin of the company helps in achieving the right competitive advantage in the industry it serves. Differentiation and low cost are the significant competitive advantages a given organization can be able to acquire. When prices and competitive differentiation advantages of a given firm are combined with a set of defined activities in which a given organization seeks to achieve them, it potentially leads to a new set of generic strategies aiming at the average performance of an industry. The three main generic plans completed are, therefore, focus, differentiation and cost leadership. The main components of focus include differentiation focus and cost focus variants. The paper focuses on analyzing the PG&E company using a two by two generic strategy as well as establishing the company's competitive scope.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

To maintain its market status, power and Gas Electric company uses several strategies which support the overall company growth while maintaining competitiveness in electricity and gas supply industry. Using the porter's five force analysis model, the company has set as several strategies in place to withstand the external pressure exerted to the business while maintaining high market profit margin across its business's operations. The business strategy adopted by PG&E company ensures the various environmental sectors such as health industries, aviation, aerospace, transportation and electric lighting are properly balance for the company sustainability. For the company to maintain its competitive advantage, the company utilizes various segment strategies such as research and development, brand strength and new inventions (Gurel & Tat, 2017).

In cost leadership segment as defined I the matrix, PG&E company seeks to become the low-cost producer in the electricity and gas industry. In the transport sector, the company enjoys economies of scale in participating in road construction while maximizing its sells of fuel. The company also ensures preferential raw material access and proprietary technology through its advanced research in the industry. By segmenting its participation in various sectors as defined in its external environment, the company has been able to exploit the various cost advantage sources and achieving overall cost leadership.

PG&E company has well-established research and development strategy, which helps determine its brand position across a set of its buyers. Therefore, in competitive differentiation advantage, the company's uniqueness across several established dimensions which are readily known by buyers have been set. The company has substantial shares in the transport sector. Its participation in building a road connecting to Canada has resulted in a high trust level by its potential buyers which in return, increase the company's brand name.

In considering the generic focus scope, PG&E company has established a narrow competitive range within the industry. The company focuses on utilizing the new advanced technology trends to stay ahead of its competitors. The company uses a differentiated pricing strategy to maintain its competitive advantage. The customers are lured towards maintaining trust to the company while benefiting from a range of other services offered by the company (Bull et al. 2016). By adopting the new technology measures, the company has been able to fulfil it's In Cost focus since most customers find it convenient when using an online platform. Also, I differentiation focus, the company ensures it differs from its competitor by using big data analytics from online platforms to predict buyers' trend and maintain its market value. The company has been able to gain significant profit margins by balancing its production margins depending on customer behavior.

Competitive Scope

The bargaining power of the PG & E Company is a vital organ to the transactions of the company. It helps in the analysis of external factors to the company and the entire environments of the processes conducted. The Porters five forces analysis model is employed in the bargaining power to evaluate how external suppliers of the PG & E Company are represented and the impact they have on the general performance of the company. The bargaining power to the company's transactions should, therefore, be made a significant force, emphasizing on external factors under a set of a metric. The PG & E Company management should monitor and address the bargaining force based on the total population of suppliers, the substantial total supply to the company, and depending on the size of individual suppliers. The moderate community of suppliers and using an average number of own suppliers gives a reasonable bargaining force, while a substantial overall supply gives weak bargaining force.

Suppliers have a considerable number in the most PG & E Company branches. An example is that in the aviation industry, has moderate number and population of suppliers. The impact of the modest community of suppliers is that the company would need average bargaining power too. The effect of the bargaining power always increases to vast quantities because of high overall supply, like the need for power from the electric lighting industry.

While dealing with and analyzing the external factors, the size of independent suppliers is significant. The larger the number of independent suppliers to the PG & E Company, the more the bargaining power needed. Therefore, the external factor correlates with the bargaining power of the company. Using the Five Forces analysis matrix, the external elements are associated with the value of bargaining power made by the suppliers. It is thus advisable to the company's management board to consider the impact and force of the external factors as a strategic concern capable of affecting the processes conducted by the PG & E Company.

The threat initiated when the market makes an aspect of substitution is considered as a weak force. The substitution threat can be evident in all markets when companies are busy advocating for their products. The PG & E Company is also not left behind, as customers are dynamic and competition for gaining their trust is stiff. Porter's Five Forces analysis model analyzes the impact that could be felt by the company in events of substitution. The implications of substitutes on the PG & E Company could be interpreted to evaluate the strategic management of the transactions and the decision to be made concerning the issue.

The type of decision to be made against substitution depends on the switching costs, performance of the substitutes and the availability of the replacements. The total switching cost is a significant substitution force; the production of alternatives and the availability of substitutes is a weak substitution force. The switching price helps to determine the probability of the customers hopping from the PG & E Company to its alternatives. The issue has the highest contribution in deciding the substitution effort made by customers.

Checking the performance of the substitutes also assists in determining the ability of the replacements and how they can impact the market. An example is that alternatives to gas market have less impact on the market as compared to the power and electricity market. The scenario proves that there are fewer substitutes to be the PG & E Company.

Conclusion

There is an existing rivalry in the PG & E Company environment. To curb the issue, the company should enhance its capabilities, innovating and looking at all external factors that could deprive the company of the competitive advantage. Therefore, the company should aim at improving and enhancing all the external forces that attribute to competitive advantages.

References

Gurel, E., & Tat, M. (2017). SWOT analysis: a theoretical review. Journal of International Social Research, 10(51). http://sosyalarastirmalar.com/cilt10/sayi51_pdf/6iksisat_kamu_isletme/gurel_emet.pdf

Bull, J. W., Jobstvogt, N., Bohnke-Henrichs, A., Mascarenhas, A., Sites, N., Baulcomb, C., ... & Carter-Silk, E. (2016). Strengths, Weaknesses, Opportunities and Threats: A SWOT analysis of the ecosystem services framework. Ecosystem services, 17, 99-111. https://www.sciencedirect.com/science/article/pii/S2212041615300620