1 Strategy Competitive Advantage Competitive Advantage. Always relative not absolute – compare to...
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* StrategyCompetitive AdvantageCompetitive Advantage.Always relative not absolute compare to benchmarkSustainable competitive advantage maintain over a long period of timeMust be based on strategic choices (cannot do everything). Example: JetBlue Airline David Neeleman Morris Air e-ticket bought by SW Air in 1993. Founded JetBlue 1998 Low cost and differentiation strategy tried.Strategy is not: A grandiose statement such as: (we will be number 1). Managers must meet competitive challenge. Blockbuster vs. Netflix. Organizational performance is determined by :Industry effects caused by the structure of the industryFirm effects caused by the actions of management
* StrategyCompetitive AdvantageStakeholders and competitive advantage.Identify what are the interest, opportunities and threats, social issues and concerns for:Internal employees, stockholders, managersExternal customers, suppliers, partners, community, governmentAnalyze, Formulate, and Implement (AFI) framework. SWOT analysis, Level of strategy ( Business, Corporate, Global ). Implement organizational design.Black-Swan events. The impact of a highly improbable event (Nicholas Taleb).
*Competitive Forces Shape Strategy
How Competitive Forces Shape Strategy: By being aware of competitive forces, an organization can position itself to be less vulnerable to attack (Michael E. Porter, 1979)
*Competitive Forces Shape Strategy
Porters 5 Forces Model
Threat of NewEntrants
Bargaining Industry Bargaining Power of Competitive Power of Suppliers Rivalry Customers Threat of Substitutes
*Strategic Planning ModelCritical Success Factor: Strategic Innovation
Environmental ExecutionAnalysis Formulation Implementation& ControlS trengths MissionBudgetsMonitorW eaknesses ObjectivesProgramsFeedbackO pportunities STRATEGYProceduresT hreats Organizational Structure Policy Guidelines Feedback
*Life Cycle and Competitive Advantage
Introduction Growth Maturity DeclineR&D Improve product Focus on Cost ControlTech change Econ of scale Standardize Reduce capacityAttention to Process improve Efficiency Cut products quality Distribution Costs cutsDesign change Value added Few changesProcess change Forecasting Optimal capacity
Creating a Sustainable Competitive Advantage (David A. Aaker, 1989)Stage of the Product Life Cycle, Business Strategy, and Business Performance (Anderson & Zeithaml, 1984)
*Automobile Industry: Growth to Maturity (1932-2006)I. Depression to WWIIII. Post WWIIIII. 1970s The Oil Embargo and Competitive Rules ChangeIV. Today The Rules are Still Changing
* In Maturity, focus on standardization, efficiency and costs** Grow by capturing existing market share*
U.S. Motor Vehicle Sales (Millions of units)Year 1986 2000 2001 2002 2003 2004 2005 2006Units 16.1 17.1 17.5 17.2 16.9 17.3 17.4 17.0
Source: Wards Automotive Reports
*Automobile Industry: 1913-1932 (Growth Phase I)
* In Introduction, focus is on R&D, technical and design changes, attention to quality, and process changes*
Source: U.S. Automobile Production Figure-Wikipedia
Automotive Industry Clustersin AlabamaLegendConcentration of Automotive SuppliersSuppliers by Zip Code1234 - 67 - 112059655920658510There are more than 383 Automotive Companies and Suppliers in Alabama.
The Locomotive IndustryThe Big Three 1825-1956 American Locomotive (ALCO)Baldwin LocomotiveLima Locomotive
1939 General Motors Electro-Motive Division took lead in diesel-electric locomotives
Why? Growth MarketStrength (R&D, developmental capital, aggressive marketing)
Opportunity (Railroads wanted more diesel- electric locomotives)
WWII Opportunity offered by historyDemand not determined by general market forces
1950sEnd of Steam
*Strategic Planning Locomotive Industry
Technology MaturesMaturity Focus on standardization, efficiency and costsStrength- Efficiency through standardizationOpportunity- Growth of container freightToday Big Two (EMD and GE)
*StrategyCompetitive AdvantageDifferentiation (RCA used its R&D strength and its organizational structure to market successfully Color TV) Transformation: From ordinary to revolutionary
*RCA Strategic Advantage Differentiation
* StrategyCompetitive AdvantageLow Cost (Southwest Airlines strives to recruit and train the best personnel available, create innovative flight schedules, stress strong customer support, and provide high pay for employees)Transformation: From in-state service to national to?
*Competitive AdvantageSouthwest Low Cost
* StrategyCompetitive Advantage
Innovation/Response (FedEx uses a hub-and-spoke system to rapidly respond to request for package shipments worldwide) Transformation: From national letter carrier to global cargo carrier
*Strategic AdvantageFedEx - Response
*StrategyCompetitive AdvantageDiversification (Boeing reacts to the maturing airframe market)Transformation: From an airplane builder to a high-tech product and service provider
*Strategic AdvantageBoeing Delta Rocket