Chapter 3 - Competitive Advantage

Question 1

level of competition influences:

Answer 1

customer level choices
degree of competition drives price, promotion, new product development
firms profitability
likelihood of market collusion

Question 2

sustainable competitive advantages

Answer 2

desirable feature

challenge to reach

monitor and maintain advantage

Question 3

Porter’s 3 generic competition strategies:

Answer 3

Cost - same quality at lower price
Differentiation - innovative
Focus - operate in small part of a market

Question 4

Porter’s 3 requirements to establish competitive strategy:

Answer 4

SW (internal)
OT (external)
assessment of the environment

Question 5

Bowman’s strategic clock

Answer 5

x axis: price
y axis: customer value

1. low price, low value: bargain
2. low price: cost leadership
3. Hybrid (low price, high value): moderate differentiation build customer base
4. Differentiation (high value, mid price): lower margins might drive higher volume
5. Focused differentiation (high, high): uniqueness and exclusivity
6. Increased price of standard product (risky): skimming
7. Monopoly pricing (high, low): limited customer choice
8. Unsustainable (mid P, low V): low value will disappear

6,7,8: are unsustainable in competitive markets

Question 6

Positioning view

Answer 6

Adapt the company to fit the environment (outside-in)

seeking advantage trough: customer, competitors, stakeholders position (ie market share, differentiated product, low cost)

Con: ignoring competition, changing environment, easier to change the environment than the company

Question 7

Resource based view (RBV)

Answer 7

inside-out approach

Barney (4 criteria):
valuable
rare
imperfect imitable
substitutable

Question 8

Strategic stretch to leverage core-competency has 3 characteristics

Answer 8

potential to access wide variety of markets
increases perceived customer benefits
hard for competitors to imitate

Question 9

RBV issues and pro’s

Answer 9

Relies on prediction of the future
Inside view only on what the company is good at

Strategic mgmt should focus on developing core competencies
Greater likelihood of implementation
Avoid losing sight of own competence

Question 10

Resources and Competencies

Audit

Answer 10

Audit

RESOURCES (basic or unique)
Physical or Operational Resources
Human Resources
Financial Resources
Intangibles

COMPETENCIES
Threshold Competences 
(avoids competitive disadvantage; aging Core Comp.)
Core Competencies
(attains competitive advantage)

Question 11

Kay - capabilities from 4 sources and capabilities

Answer 11

Internal architecture - employees
External architecture - suppliers and customers
Network architecture - group of collaborating firms

deliver capabilities:

• reputation:
• innovation:
• strategic assets:

Question 12

Stalk - 4 capabilities driving competition providing 5 dimensions

Answer 12

CAPABILITIES

• business processes build strategy not products or markets
• transform processes into capabilities providing superior value to the customer
• capabilities require cross functional investments
• CEO is the champion of the strategy

DIMENSIONS

• Speed
• Consistency
• Acuity (Sensorische Aufnahmeschärfe)
• Agility
• Innovativeness

Question 13

Resources and Competencies

Porters value chain model

Answer 13

PRIMARY ACTIVITIES

• inbound logistics
• Operations
• outbound logistics
• sales and marketing
• services (activities at Point of Sale, ie return policy)

SUPPORT ACTIVITIES

• Infrastructure
• Technology and Development
• Human resources
• Procurement