The nature and sources of competitive advantage foundations of strategy
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The Nature and Sources of Competitive Advantage Foundations of Strategy. John Beddington Scott Bearden Patrick Lewis Lauren Frick Trevor McDonald. The Emergence of Competitive Advantage.

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The Nature and Sources of Competitive Advantage Foundations of Strategy

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The Nature and Sources of Competitive AdvantageFoundations of Strategy

John Beddington

Scott Bearden

Patrick Lewis

Lauren Frick

Trevor McDonald

The Emergence of Competitive Advantage

  • Competitive Advantage: when two or more firms compete within the same market, one firm posses a competitive advantage over its rivals when it earns a persistently higher rate of profit

  • Creating a competitive advantage

    • External sources of change: change must have differential effects on companies because of their different resources and capabilities or strategic positioning

    • Internal sources of change: some firms have greater creative and innovative capability

    • Responsiveness to change: firms must respond rapidly to changes to maximize profits or opportunity

    • From innovation:

      • New industries

      • New customer segments

      • New sources of competitive advantage

Sustaining Competitive Advantage

  • Obscuring Superior Performance: mask success so that other firms can’t identify success until it’s too late

  • Deterrence of competition:

    • Proliferation

    • Large investments in production capacity

    • Patents

  • Diagnosing competitive advantage

    • Causal ambiguity and uncertain imitability

  • Acquiring resources and capabilities

    • First mover advantage

Types of Competitive Advantage: Cost and Differentiation

  • Cost: Similar product at a lower cost

    • Wal-Mart

  • Differentiation: Price premium from unique product

    • Luxury car companies

Strategy and Cost Advantage

  • Cost Drivers:

    • Economies of scale

    • Economies of learning

    • Production techniques

    • Product design

    • Input costs

    • Capacity Utilization

    • Residual efficiency

The Principal Stages of Value Chain Analysis for Cost Advantage

  • 1) Break down the firm into separate activities

  • 2) Establish the relative importance of different activities in the total cost of the product

  • 3) Compare costs by activity

  • 4) Identify cost drivers

  • 5) Identify linkages

  • 6) Identify opportunities for reducing costs

Principal Stages of Value Chain Analysis for Differentiation Advantage

  • 1) Construct a value chain for the firm and the customer

  • 2) Identify the drivers of uniqueness in each activity

  • 3) Select the most promising differentiation variables for the firm

  • 4) Locate linkages between the value chain of the firm and that of the buyer

Amazon and Competitive Advantage

  • Amazon gained competitive advantage by implementing value-added services

    • Best-seller lists

    • Reviews of books

    • Customized recommendations based on past purchases

  • Created new customer segment with same products (books) by appealing to technology era customers

    • Able to purchase books online


  • Competitive advantage

  • Recognize how resources can offer opportunities for competitive advantage

  • Distinguish between cost advantage and differentiation advantage

  • Value chain analysis for cost and differentiation advantage opportunities

  • Understand the dangers of being ‘stuck in the middle’ of the competition

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