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The Nature and Sources of Competitive Advantage Foundations of Strategy PowerPoint Presentation
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The Nature and Sources of Competitive Advantage Foundations of Strategy

The Nature and Sources of Competitive Advantage Foundations of Strategy

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The Nature and Sources of Competitive Advantage Foundations of Strategy

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  1. The Nature and Sources of Competitive AdvantageFoundations of Strategy John Beddington Scott Bearden Patrick Lewis Lauren Frick Trevor McDonald

  2. 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

  3. 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

  4. 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

  5. Strategy and Cost Advantage • Cost Drivers: • Economies of scale • Economies of learning • Production techniques • Product design • Input costs • Capacity Utilization • Residual efficiency

  6. 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

  7. 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

  8. 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

  9. Takeaways • 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