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in relation to
competitive advantages
Mission
Objectives
Internal Analysis
Objectives
Strategic Choice
Strategy Implementation
Competitive Advantage
Internal Analysis
Mission
Cost advantage
Competitive advantage
Differentiation advantage
Industry-wide
Cost leadership
Differentiation
Market
Niche
Focus with low cost
Differentiation
Differentiation
Differentiation
Quality Innovation Design Credibility Brand name Reputation Environmental posture Customer service Integrated services
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What is the basis for competitive advantage? The five forces determine
Industry structure
positioning within the
industry
forces Porter's focus on industry structure is a powerful means of analyzing competitive advantage in itself
industry profitability, and some industries may be more attractive than others The five forces framework highlights what is important, and directs managers towards those aspects most important to longterm advantage. 11
Resources
* Tangible * Intangible
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complementary or supplementary or reinforce each other) Product Making- Reflects core competencies , special capabilities , superior product design Product Marketing Reflects Marketing mix application, Positioning, offering bundle of benefits and values to the customers Firms create competitive advantage by perceiving or discovering new and better ways to compete in an industry and bringing them to market, which is ultimately an act of innovation. Innovations shift competitive advantage when rivals either fail to perceive the new way of competing or are unwilling or unable to respond
help us think about how activities build competitive advantage. Structure Control Need factors contributing to Comp Adv How to compete Business assets and skills (Basis)
Internal
Often called the resource view, contends that firms are heterogeneous bundles of resources and capabilities and firms with superior resources and capabilities enjoy competitive advantage over other firms. This advantage makes it relatively easier to achieve consistently higher levels of performance.
External
Also called the positional view, contends that variations in a firms competitive advantage and performance are primarily a function of industry attractiveness. Companies should therefore either (1) position themselves to compete in attractive industries or (2) adopt strategies that will make their current industries more attractive.
Dynamic
Suggests that in dynamic, rapidly changing markets, a firms current market position is not an accurate prediction of future performance. Instead, we look at the past for clues about how the firm arrived at its current position and to future trends both internal and external in an effort to predict the future landscape
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Unique
Difficult for competitors to imitate Not easily substitutable
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DQE
Strategic assets
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Delivery time
Creditability
Delivery time
Creditability
Product Service
Design Marketing Customer service
Product Service
Design Marketing Customer service
Customized product
Reputation Innovative product
Customized product
Reputation Innovative product
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Market-based View Firm as a unit in a market. Distinct position in market underpins competitive advantage. Detailed knowledge of market and competitive conditions critical. Strategy based competitive analysis and appropriate value creation.
coordination and cooperation. Rents: a surplus of revenue over cost. Strategic assets / Core competencies: resources and capabilities that can earn rents.
Core Competence
Core Competences
Collective knowledge of how to coordinate skills and technologies
Prahalad & Hamel (1990)
Distinctive Capabilities
Business processes connected to customer needs
Stalk, Evans & Shulman (1992)
= Strategic Assets
Capacity to deploy resources to effect a desired end
Amit & Shoemaker (1993)
market positions are the firms most important sources of competitive advantage and should drive its selection of strategies.
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When other firms either cannot obtain them or must obtain them at a much higher cost.
Rare
Organized
to be Exploited
Possessed by few, if any, current and potential competitors. The firm must be organized appropriately to obtain full benefits of the resources in order to realize a competitive advantage.
Capabilities
Design & production skills yielding reliable products Product & design quality Prod. & component miniaturization Innovative technology Development of sophisticated elevator control solutions Rapid transformation of technology into new products and processes
Examples
Komatsu Gap, Inc. Sony Caterpillar Otis Elevator Chaparral Steel
Manufacturing
Capabilities
Teams of Resources
Identifying Intangibles
Intellectual property rights of patents, trademarks,
copyright and registered designs Trade secrets Contracts and licenses Databases Information in the public domain Personal and organizational networks The know-how of employees, advisers, suppliers and distributors The reputation of products and of the company The culture of the organization
Hypercompetition
A situation of intense and continually increasing levels of competition in todays business environ
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Competitive advantage defines the marketbased view the positioning of the firm in terms of competitors
Core competence defines the resource-based
view the underlying capability that is the distinguishing characteristic of the organization.
to processes, resource leverage and intangibles. Resources are linked to competitive advantage through key success factors.
References
S. Marthur, How firms compete? The Journal of
competitiveness: Are there mutual advantages for SMEs?, in J. Oswald & F. Tilley, Competitive Advantage in SMEs: Organising for innovation and change, Wiley, 2003. K. Weigelt &C. Camerer, (1988), Reputation and Corporate Strategy: A review of recent theory and applications, Strategic Management Journal, 9
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