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Building Competition Using Business Models: A Case Study Analysis

  Sep 10, 2015
 

Should companies protect dominance through monopolies or should they give room for fair competition? The Alumni Breakfast learning session was a hub of ideas as attendees engaged thoroughly with the case study discussion facilitated by Professor Ramon Casadesus. Through a case study based on the US Sugar sweetener industry, Prof. Casadesus brought an attentiveattentive audience, through lively interactions with the case study as well as vibrant energy.

The case titled; “Bitter Competition: The Holland Sweetener Company versus NutraSweet” was segmented into various parts with each section highlighting an action and reaction feel for both companies, whilst giving room for the audience to do an analysis on the strategies adopted by the two companies.

Background

In late 1986, the Holland Sweetener Company (HSC), based in Maastricht, Netherlands, was preparing to enter the European and Canadian aspartame market, largely dominated by NutraSweet Company (NS). HSC, an upcoming company engages in a war with NS, which chooses to stifle competition through a price war brawl.

Analysis

“Many companies when caught in such encounters primarily settle upon a price war, rather than an accommodative competitive engagement. Whereas a price war may seem logical for the dominant company with deep pockets, it is highly likely that the company will succumb to weakening profits against the cost of production. On the other hand, an upcoming company may not be able to match lower prices against the cost of production and still obtain profits. An accommodative, normal competition ground is a safe place where losses can be contained other than during a price war,” Prof. Casadesus highlighted.

What is the outlining factor to consider when dealing with competition? “It is always important to think of the value created when it comes to establishing a competitive edge. A key factor is to considerably evaluate the degree of willingness to pay against the cost of production,” explained Prof Casadesus.

Another key element from the discussion was on how to deal with failing markets. At the end of the case study, Prof. Casadesus evaluated the case from the perspectives of the two companies, highlighting some of the good and bad strategies the two companies deployed.

From the analysis , it was clear that strong companies in the market savor victory against competition, based on; brand strength, winning production costs effective for high inputs and low outputs, strong networks and contracts and lastly, deep markets. As for upcoming companies tasting waters into new territories, it is always favorable to get “paid for playing.” This he explained by mentioning that a company may not have its strengths on profit gains or market penetration, but may manage to acquire strength through playing as a monopoly competitor.

Prof. Ramon Casadesus -Masanell is the Herman C. Krannert Professor of Business Administration at the Harvard Business School. He studies strategic interaction between organizations that operate different business models. He is also a member of the SBS Advisory Board.



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