Lecture 1 - Competitive advantage Flashcards
Why do orgs need strategy?
- To help them organise, compete, communicate, succeed
- Helps achieve desired org goals/tasks/targets
What factors help make strategy successful?
- Consistent and long-term goals
- Understanding the competitive environment
- Objective appraisal of resources
- Effective implementation
What is competitive advantage?
A sustainable and difficult to replicate advantage that an org has over competition, that allows them to have more value in the eyes of customers
Why do organisations compete?
- Survival
- Profitability
- Growth
- Expectations (stakeholders/ shareholders)
- legal (codified/contractual)
- Social norms and values
- Strategy steps: How do you identify the current strategy?
- What is the blueprint for success?
- What markets does the firm or organisation serve?
- How does it differentiate itself?
- Goals/ Mission/ values
- Strategy steps: how do you appraise performance?
- Sustainable competitive advantage: repeatedly outperforming rivals long-term
- Profit or loss, share price, dividends
- Other financial data
- Market share
- Strategy steps: How do you diagnose performance?
- identify factors what positively and negatively impact performance
- financial diagnostics
- industry analysis
- Resources and capabilities
- Strategy steps: How do you perform an industry analysis?
- What are current competitive dynamics
- Is the firm located favourably in the market
- Does the firm fit in its external environment
- Are there points of misalignment
- How dynamic is the industry
- How likely is change
- Strategy steps: How do you analyse resources and capabilties?
- Does the firm have resources and capabilities to effectively compete
- Does the firm need to acquire new resources and capabilities to compete
- Does it have surplus resources
- Are capabilities effectively deployed
- Strategy steps: how do you formulate strategy?
- What can we do about identified issues
- What actions should the firm take
- Appraise different strategic options
- Critically evaluate these options for sustainability
- Not always highly specific
- Strategic steps: what is the final step of strategy?
Implement the chosen strategy
How does an organisation identify sources of competitive strategy?
- Is there a competitive advantage in its industry position
- Can competitive advantages be gained from own advantages
- Are competitive advantages gained from one source
What are external sources of competitive advantages?
- Changing consumer demand
- Technological change
- Depends on resources and capabilities
What are some sources of internal competitive advntages?
- Innovation (new products, markets, segments)
- Value chains
- Unique resources and capabilities
Business models: What is value creation?
Addressing specific customer needs and problems
Business models: What is value configuration?
Configuration of resources and activities that produce this value
Business models: What is value capture?
Explains how revenue streams and cost structures allow orgs and stakeholders to gain share of value created
What is competitive strategy?
How the company achieves competitive advantages
What are some generic competitive strategies?
- Cost leadership
- product differentiation
What are Porter’s generic strategies?
- Source of competitive advantage
- Competitive scope
- Cost leadership vs focus
- Differentiation
What are some other competitive strategies?
- Operational excellence
- Product leadership
- Customer intimacy
Competitive strategies: What is operational excellence?
- Meet buyer’s need for reliability and low cost
- Value chain = standardised products, lean production and distribution
Competitive strategies: What is product leadership?
- Meet buyer’s need for special features or advanced performance
- Value chain = emphasise innovation, differentiation, collaboration between marketing & R&D
Competitive strategies: What is customer intimacy?
- Meet buyer’s need for tailored solution to problems
- Value chain = client-specific, flexibility, empowerment of employees close to customers (feedback)
What are dual/hybrid competitive advantages?
Having multiple competitive advantages in your strategy?
When can dual competitive advantages be useful?
- Firms offering high quality products expanding market share can use economies of scale and learning
- Learning economies may be more important for high quality production than for low quality
- High quality producers may be more efficient producers
How can competitive advantages be sustained?
- Make capabilities and resources difficult to imitate
- Deterrence (e.g. patents, legal action)
- Per-emption of investment opportunities
What is the resource-based view (RBV)?
- Reasoning for org success
~20% Industry effects
~ 30-45% Firm effects
~ 30-50% other effects (corporate parent/ year effects/ unexplained)
