Chapter 4 Group 3: Coleman Crook, Jessica Crumpton, Ashton
Davis, Sarah Ellens, and Kevin levesque
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Objectives Integrating competitive analysis Looking at dynamic
relationships between competitive advantage and competitive
process. Understand characteristics of a market and identify
opportunities for challenges
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Singapore Airlines
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Prides itself on being the most awarded airline and having a
reputation for providing passengers with high-quality experience.
Strategy is based on two main components- its planes and its
people. People: Offers excellent training and experience Planes:
More fuel efficient and require less repairs Encouraged to find
ways to reducing waste and bonuss are used to incentivize cost
cutting behavior.
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The Emergence of Competitive Advantage When two or more firms
compete within the same market, one firm posesses a competitive
advantage over its rivals whin it earns (or has the potential to
earn) a persistently higher rate of profit Toyota- mass produced
cars SAP- ERP Software Southwest- affordable flights
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External Sources of change Can create an advantage of a
disadvantage depending on magnitude of change and extent of firms
strategic differences Industry Environment Tobacco VS Toy
industry
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Competitive Advantage from responsiveness to change The
competitive advantage that arises from external change also depends
on firms ability to respond to change Opportunities for change-
Entrepreneurship Abilities Predict change Reaction time (
time-based competition)
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Case 4.1 Singapore Airlines Gaining or losing competitive
advantage as a consequence of external change Airbus 380
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Competitive Strategies from innovation: new game strategies
Changes that create competitive advantage can be created internally
through innovation Strategic Innovation: value for customers
through new products, experiences of mode of product delivery *Key
source of competitive advantage, including new business models
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Examples Nucor Steel Southwest Nike Apple
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Shaping innovation strategies New Industries- Kim and
Mauborgne, creating new markets is the purest form of blue ocean
strategy (uncontested market space) New customer segments- Apple,
VCRs, Wii New sources of competitive advantage- (Blue Ocean) Dells
ordering system, Cirque du Solei
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Sustaining competitive advantage Ability of competitors to
challenge Imitation Innovation Barriers Isolating mechanisms
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Process of Imitation Identification Identify that the firm
possesses competitive advantage Incentive Believe that they may
earn superior returns Diagnosis Diagnose features of rivals
strategy Resource acquisition Must have ability to acquire
resources and capabilities necessary
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Barrier: Obscure Superiority Mask high performance Private
company Avoid disclosing financial performance
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Deterrence and Pre-Emption Persuade rivals that imitation will
be unprofitable Pre-emption Proliferation of product varieties
Large investments in production capacity ahead of growth Patent
proliferation- for technology based opportunities
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Pre-Emption Continued Two flaws must be present Small market
relative to efficient scale of production First-mover advantage
preferential access to information and resources
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Diagnosing competitive advantage Identification of basis of
rivals success Causal ambiguity Multidimensional competitive
advantage Uncertain imitability Caused by causal ambiguity
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Acquiring resources and capabilities Time it takes to acquire
resources determines time able to sustain competitive advantage
Imitation may take place quickly if limited resources are
required
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Cost Advantage same product/lower price 1. Cost leader
Differentiation Advantage customer pays a higher price for
differentiation. 1. Uniqueness Types of Competitive Advantage Cost
vs. Differentiation
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Cost Leadership Strategy efficient plants, overhead control,
outsourcing Requirements access to capital, frequent reports, job
specialization, incentives for quantitative performance
Differentiation Strategy focus on advertising, design, service,
quality Requirements marketing abilities, cross-functional
coordination, incentives linked to qualitative performance
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Cost Drivers: Economies of scale through specialization
Economies of Learning increase in skills Production Techniques
innovation Product Design standardization Input Costs bargaining
power, location Capacity Utilization flexible adjustments Residual
Efficiency overall management Points out inefficiencies and which
adjustments could be made
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Value Chain Analyses: 1. Breakdown the firm 2. Establish
importance associated with costs major sources 3. Compare costs by
activity compared to competitors 4. Identify costs drivers 5.
Indentify Linkages 6. Identify cost saving opportunities
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Stages of value chain analysis for differentiation advantage 1.
Construct a value chain for the firm and the customer. - Consider
firms further downstream in value chain. 2. Identify the drivers of
uniqueness in each activity. - Variables & Actions to achieve
uniqueness.
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Stages of value chain analysis for differentiation advantage 3.
Select the most promising differentiation variables for the firm. -
Greatest potential to differentiate - Linkages among activities -
Sustainability of uniqueness 4. Locate linkages between the value
chain of the firm and that of the buyer. - Why is the customer
buying your product?
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Rise and Fall of Starbucks Howard Shultz 1982-2000 Rejoined in
2008 Keys to failure 70% increase in coffee shops McDonalds
Pressure Over expansion Keys to success Employee development Focus
on in home products Community feel
