Generic Business Level Strategy (SBU)

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Competitive advantageCompetitive advantageGeneric business level strategy (SBU)Generic business level strategy (SBU)

The objective is to build COMPETITIVEThe objective is to build COMPETITIVEADVANTAGE PROFILEADVANTAGE PROFILE



Competitive AdvantageCompetitive Advantage

Competitive advantage comes fromCompetitive advantage comes from

performing better than competitors performing better than competitors

Sustainable competitive advantage comes fromSustainable competitive advantage comes from performing better than competitors for a long performing better than competitors for a long

timetime



Competitive advantage & coreCompetitive advantage & core

competencecompetence A competitive advantage is a position of superiority onA competitive advantage is a position of superiority on

the part of the firm in some function /factor/ activity/ inthe part of the firm in some function /factor/ activity/ inrelation to its competition. It is this superiority thatrelation to its competition. It is this superiority thatenables the firm to survive, grow and excel in aenables the firm to survive, grow and excel in a

competitive market.competitive market. The superiority can be in any function such asThe superiority can be in any function such as

manufacturing, marketing, finance, HRM, or amanufacturing, marketing, finance, HRM, or acombination. Intellectual property, knowledge, or anycombination. Intellectual property, knowledge, or anyfactor of production can give a competitive advantage.factor of production can give a competitive advantage.

Thus competitive advantage is a superior positionThus competitive advantage is a superior positionrelative to competition.relative to competition.



Com. Adv ( cont.)Com. Adv ( cont.)

CA is linked to strategy. both goes hand inCA is linked to strategy. both goes hand in

hand. C A is a vital component of strategy.hand. C A is a vital component of strategy.

For the strategy to work the firm should haveFor the strategy to work the firm should have

competitive advantage.competitive advantage.

CA is the back up of strategy. without relevantCA is the back up of strategy. without relevant

CA strategy will not succeed.CA strategy will not succeed.

Strategy can be used to create and excel CA.Strategy can be used to create and excel CA.



Com. Adv.( con )Com. Adv.( con )

Sources of CA :Sources of CA : MARKETINGMARKETING

FINANCEFINANCE

PRODUCTIONPRODUCTION R& DR& D

HR HR

THE CEO & LEADERSHIPTHE CEO & LEADERSHIP

LOCATION & Many more.LOCATION & Many more.



Strategy & Competitive AdvantageStrategy & Competitive Advantage

³ ³

³Successful business strategy is about ³Successful business strategy is about actively shaping actively shaping thethe game you play, not just playing the game you find.´ game you play, not just playing the game you find.´

(Brandenburger & Nalebuff)(Brandenburger & Nalebuff)

³Investing aggressively in creating sustainable competitive³Investing aggressively in creating sustainable competitiveadvantage is a company¶s single most dependable contributer advantage is a company¶s single most dependable contributer to aboveto above--averageaverage profitability profitability.´ .´ (Thompson & Strickland)(Thompson & Strickland)

³The essence of strategy lies in creating tomorrow¶s³The essence of strategy lies in creating tomorrow¶scompetitive advantagescompetitive advantages faster faster than competitorsthan competitorsmimic the ones you possess today.´ mimic the ones you possess today.´ (Hamel &(Hamel &

Prahalad) Prahalad)



CA & StrengthCA & Strength

Strength is different from CA.Strength is different from CA.

All strength are not CA.All strength are not CA.

All CA are strength.All CA are strength. A strength is a CA only if it can affect theA strength is a CA only if it can affect the

competition in an advantageous manner or competition in an advantageous manner or

bring in superiority in the market vis bring in superiority in the market vis-- aa-- visvisthe competitor. Otherwise it will remain asthe competitor. Otherwise it will remain as

astrength.astrength.



Building CABuilding CA

By strategyBy strategy

By SWOTBy SWOT

By bench markingBy bench marking-- internal, functional, comptt,internal, functional, comptt,

genericgeneric By value chain approach,By value chain approach,

By analysing value chain of self and competitor By analysing value chain of self and competitor

Corporate clout confers comptt advtg on SBUCorporate clout confers comptt advtg on SBUand SBU contribute to comptt advtg atand SBU contribute to comptt advtg atcorporate levelcorporate level

By adopting different strategic routesBy adopting different strategic routes



Strategy & CompetitiveStrategy & Competitive

AdvantageAdvantageCompetitive advantage is what allows a firmCompetitive advantage is what allows a firm

to gain an edge over its rivals in attractingto gain an edge over its rivals in attracting

customers and defending againstcustomers and defending against

competitive forces.competitive forces.

Key challenges of competitive advantage:Key challenges of competitive advantage:

1. build advantage1. build advantage

2. extend advantage2. extend advantage

3. organise for advantage3. organise for advantage

4. sustain and renew advantage4. sustain and renew advantage



Many routes to CompetitiveMany routes to Competitive

AdvantageAdvantage NPD NPD

QualityQuality

Superior customer serviceSuperior customer service

Achieving lower costsAchieving lower costs

Better geographic locationBetter geographic location

Technical expertiseTechnical expertise

Supply chain managementSupply chain management

Brand image / reputationBrand image / reputation



FIGURE 4.3

Generic Building Blocks of Generic Building Blocks of

Competitive AdvantageCompetitive Advantage



ANY COMPITIVEADVANTAGE FINALLYMANIFESTS

AS EITHER

1 A COSTADVANTAGE, or

2 A DIFFERENTIATION ADVANTAGE



FIGURE 4.4

The Impact of Quality on ProfitsThe Impact of Quality on Profits



FIGURE 4.7

Distinctive Competencies, Distinctive Competencies,

R eso

u

rces,and Capabilities

R eso

u

rces,and Capabilities

The roots of competitive advantage:The roots of competitive advantage:



Strategic R esources andStrategic R esources and

CapabilitiesCapabilitiesTangibleTangible

LandLand

BuildingsBuildings PlantPlant

EquipmentEquipment

IntangibleIntangible

Brand namesBrand names

ReputationReputation PatentsPatents

Technological or Technological or

marketing knowmarketing know--

howhow



Distinctive CompetenciesDistinctive Competencies

Skills in effectively coordinating and managingSkills in effectively coordinating and managing

resources for productive use.resources for productive use.

Unique resources and capabilities, or Unique resources and capabilities, or Common resources andCommon resources and

unique capabilities.unique capabilities.



FIGURE 4.8

Strategy and CompetitiveStrategy and Competitive

AdvantageAdvantageThe relationship between strategies andThe relationship between strategies and

resources and capabilities:resources and capabilities:



The Durability of CompetitiveThe Durability of Competitive

AdvantageAdvantageBarriers to imitationBarriers to imitation

Speed of imitation by competitors in reducing advantageSpeed of imitation by competitors in reducing advantage

Imitation by acquiring similar resourcesImitation by acquiring similar resources

Imitation of capabilities (more difficult)Imitation of capabilities (more difficult)

Limits on competitorsLimits on competitors

Prior strategic commitmentsPrior strategic commitments

Absorptive capacity for changeAbsorptive capacity for change

Industry dynamismIndustry dynamism The rapid innovationThe rapid innovation

shortens product life cycles.shortens product life cycles.



Why Do Companies Fail?Why Do Companies Fail?

What went wrong?What went wrong?

InertiaInertia

Prior strategicPrior strategiccommitmentscommitments

The Icarus paradoxThe Icarus paradox

Avoiding failure andAvoiding failure andsustaining competitivesustaining competitiveadvantage:advantage:

Focus on the buildingFocus on the building

blocks of competitive blocks of competitiveadvantage.advantage.

Institute continuousInstitute continuousimprovement andimprovement andlearning.learning.

Track best industrialTrack best industrial practice and use practice and use benchmarking. benchmarking.

Overcome inertia.Overcome inertia.

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Generic Business Level Strategy (SBU)