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8/3/2019 Competitive Advantage 2
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CompetitiveCompetitive Advantage 2Advantage 2
Prof. Rushen Chahal
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Learning OutcomesLearning Outcomes
y Understand how core competence and distinctivecapability lead to competitive advantage
y Understand how the value chain links corecompetences and Porters generic strategy
y Identify growth options (Ansoffs Growth Matrix)
y Identify where core competences and strategies canbe used (Ansoffs Growth Matrix)
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Schools of Thought on CompetitiveSchools of Thought on Competitive
AdvantageAdvantagey Competitive positioning (Porter)
y Resource-based (Prahalad & Hamel)
y L
earning and Knowledge based
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ResourceResource--based School of Thoughtbased School of Thought
(Inside Out)(Inside Out)y Based on work of Prahalad and Hamel
Development and exploitation of core competences
Competitive advantage, regardless of industry
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KnowledgeKnowledge--based School ofbased School of
ThoughtThought
Creation and development of new knowledge
Competitive advantage
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Frameworks for Sustainable CompetitiveFrameworks for Sustainable Competitive
AdvantageAdvantage
y Knowledge-based strategy
y Generic strategy
y
Hybrid strategyy Core competence/distinctive
capability/resource based strategy
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KnowledgeKnowledge--based Strategybased Strategy
Superior Knowledge
(compared to competitors)
Core Competences
Competitive Advantage
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Knowledge (2 Types)Knowledge (2 Types)
y Explicit knowledge knowledge whosemeaning is clearly stated, the details ofwhich can be recorded and stored
Examples: human resource audit, financialanalysis, market research
y Tacit knowledge unstated, based onindividual knowledge and experience, and
is difficult to record and store (but is alsodifficult to imitate)
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Knowledge and CoreKnowledge and Core
CompetenceCompetencey Core competences can come from Knowledge of customers and their needs
Knowledge of technology and how to use it
distinctively
Knowledge of products and processes
Knowledge of the business environment
Knowledge of competitors Knowledge of countries and culture
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ResourceResource--based School ofbased School of
Thought (Inside Out)Thought (Inside Out)y Based on work of Prahalad and Hamel
Development and exploitation of core competences
Competitive advantage, regardless of industry
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Prahalad and HamelPrahalad and Hamel
y Core competence = collective learning of
the organization, in particular how to co-
ordinate different production skills and
integrate multiple streams of technology
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Prahalad and Hamel: 3 TestsPrahalad and Hamel: 3 Tests
y 3 tests to identify and develop core
competences. A core competence
should:
Give a business the ability to enterandsuccessfully compete in several markets
Add greater perceivedvalue to the
businesss products than that perceived incompetitors products
Be difficult for competitors to imitate
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Kay: Distinctive CapabilityKay: Distinctive Capability
Distinctive capability
Competitive Advantage
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Kay: Distinctive CapabilityKay: Distinctive Capability
y Distinctive capabilities are unique
characteristics of a business and its
products, which result from:
Architecture
Reputation
Innovation
Strategic Assets
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ArchitectureArchitecture
y Unique network of internal and external
relationships = superior performance
y Relationships with suppliers, distributors
or customers that competitorsdo not
have OR the based on the organization
of the valuechain
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ReputationReputation
y Reputation means overall character or
quality as seen by others
y The source of reputation can be quality,
characteristics, design, service, features,
etc.
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InnovationInnovation
y Innovation means a new method, idea or
device
y For a business, innovation relates to
research,design,developmentand
marketing of new products AND
y Improvement of value-adding activities
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Strategic AssetsStrategic Assets
y Strategic assets are assets an organization
has which restrictcompetition and
that lead to competitive advantage
y Examples: natural monopoly, patents,
copyrights
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Core competence, distinctive capability andCore competence, distinctive capability and
competitive advantagecompetitive advantage
y Building new core competences or taking
advantage of existing ones MUST
consider:
Customer perceptions
Uniqueness
Continuous improvement
Collaboration Organizational knowledge
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How can the core competence approach and theHow can the core competence approach and the
competitive positioning approach be used together?competitive positioning approach be used together?
y The link between the two approaches =
valuechain
y Example: a cost leadership strategy may
depend on developing core competences
in value chain activities of procurement,
operations, inbound and outbound
logistics and the links of these value chainactivities
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Where to exploit core competences andWhere to exploit core competences and
strategiesstrategies
y Decision on where to compete is based
on two concepts:
(1) Strategic direction where to
employ strategies and use core competences
(2) Method whatway the strategies
and core competences will be used
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Strategic Direction: Ansoff s Growth MatrixStrategic Direction: Ansoff s Growth Matrix
y Ansoffs Matrix identifies 4 alternatives
where core competences and generic
strategies can be used:
Market penetration
Market development
Product development
Diversification
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Ansoff Growth MatrixAnsoff Growth Matrix
Market
Penetration
Product
Development
MarketDevelopment
Diversification
Existing
New
Markets
Existing NewProducts
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Market PenetrationMarket Penetration
y Market penetration increase market
share in existing markets, ie, selling
existing products to existing customers
y Based on improving existing core
competences OR
y Competence building
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Market DevelopmentMarket Development
y Market development entering new
markets and segments with existing
products
y The product is the same, but the audience
is different
y Based on competence leveraging OR
y Competence building
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Product DevelopmentProduct Development
y Product development developing new
products to serve existing markets, ie.,
develop new products for our existing
customers
y Based on improving existing core
competences OR
y Competence building
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DiversificationDiversification
y Diversification developing new products for newmarkets
y Can be relateddiversification or unrelateddiversification
y Related diversification new products and newmarkets, where the markets and/or the products aresimilar to the organizations existingproducts/markets
y Unrelated diversification completely new productsand new markets
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