BFBM(4-2016) Competitive advantage
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Transcript of BFBM(4-2016) Competitive advantage
Competitive Advantage
Prof.Dr.Aung Tun Thet
Competitive Advantage
Prof.Dr.Aung Tun Thet
Competitive Advantage
• Being different• Choosing to perform activities differently• Perform different activities than rivals • Deliver unique value
Diamond Model
Firm Strategy, Structure and
Rivalry
DemandConditions
FactorConditions
Related andSupporting Industries
Chance
Government
4 Building Blocks of Competitive Advantage
• Low Cost• Differentiati
on
Competitive Advantage
Superior Quality
SuperiorCustomer
Responsiveness
SuperiorInnovation
SuperiorEfficiency
5 Forces That Shape Industry Competition
RivalryAmongExisting
Competitors
Threat ofNew Entrants
Threat ofSubstitute Products
Bargaining Power of
Suppliers
Bargaining Power of
Buyers
Competitive Advantage
Firm
Competitors
New Market Entrants
Suppliers Customers
SubstituteProducts
Competitive Advantage
Cost AdvantageDifferentiation
Advantage
(Similar products at lower price) (Price premium from unique product)
Generic StrategiesCompetitive Advantage
Low Cost Higher Cost
Competitive Scope
Broad
Narrow
Cost Focus
Cost Leadership Differentiation
Differentiation
Focus
Sustainable Competitive Advantage
19th Century
• “If a man make a better mouse-trap than his neighbour, • the world will make a beaten path to his door.”
21st Century
• Manage for uniqueness• Develop distinctive competence• Create competitive advantage
Three competitive hot spots
1. Product innovation: Competitors secure detailed information on 70% of all new products within year of development; Patenting do not deter imitation; Imitation costs 1/3rd less than innovation and 1/3rd quicker
2. Production: New processes harder to protect; 60% to 90% of all “learning” diffuse to competitors
3. Marketing: Rivals react by adjusting marketing mix
Sustainable Competitive Advantage
• Two key questions: 1. Which advantages sustainable?2. Why?
Sustainable Competitive Advantage
• Three categories1. Size in targeted market2. Superior access to resources or customers3. Restrictions on competitors’ options
1. Benefits of Size
Size Advantage
• Markets finite• Competitors resign themselves to remaining
smaller• Fear if they matched leader’s size• Supply exceed demand to make market
unprofitable for everyone
Size Advantage
• Commitment to being large - making durable, irreversible investments• Exploit opportunities• Preempt competitors• “First-movers”
Size Advantage
• Three bases: 1. Scale2. Experience3. Scope
Scale economies
• National, regional, or local level• Not confined to manufacturing• Wal-Mart
Experience effects
• Size over time• Not at particular point in time• Irreversible, market-specific investment
Scope Economies
• Milacron - largest U.S. machine tool manufacturer• R&D • Sales and service networks• Robotics• Activities coordinated • Contributions from one business to success of another• Hard to implement
2. Access Advantages
Preferred Access
• Resources or customers • Sustainable advantage independent of size
Preferred Access
• Two conditions: • Secured under better terms than competitors • Enforceable over long run
Enforceability
• Ownership• Binding contracts• Self-enforcing mechanisms
Know-how
• Cumulative investments in R&D• Hidden - what rivals don’t see• Kept secret to yield advantage
Inputs
• Supply bounded • Strictly limited supply
Markets
• Mirror image of preferred access to inputs• Self-enforcing mechanisms - reputation,
relationships, switching costs, and product complementarities• Sensitive to customer preferences
3. Exercising Options
Sustainability of Advantage
• Not on size or access• Competitors’ options differ fundamental• Inability to imitate
Sustainability of Advantage
• Rivals frozen into current positions:• Public policy • Defense• Response lags
Guidelines for Strategy
• 1. Managers cannot ignore contestable advantages• 2. Distinction between contestable and
sustainable advantages matter of degree• 3. Not all industries offer equal opportunities to
sustain advantage• 4. Blessed with competitors with restricted menu
of options or preempt them
Guidelines for Strategy
• Two things1. Commitment to competing particular way 2. Flexibility to compete effectively in other ways
People Are Competitive Advantage
Best way to get out in front
• High tech development• Access to financial assets• R & D• …..
Best way to get out in front
• Increasingly ineffective • Technologies merge• Regulations relaxed • Powerful strategic alliances
Savvy fast-growing companies
• Achieve competitive advantage through own people and organizational capabilities• Create value:• Differ from competitors’ approaches• Not easily copied
Competitors
• Obtain capital and technology• Match creative pricing strategies• Difficult to recreate culture, value system, operating principles, leadership style and management philosophy • People foundation of organizational capability
Organizational Capability
• Anticipate and adapt to changing customer needs and marketplace forces• Through people, culture, internal structures, policies and practices
Analogy
• Tree• Flowers, leaves and fruit - value it delivers• Roots represent organizational capability
Organizational Capability
• Hidden below surface• Contributes to success• Cannot be easily copied• Premier competitive advantage
Organizational Capability
• Intellectual capital• Minds and hearts of people – not buildings, tools,
financial capital • Differentiate and grow business – beat
competition
FINANCIAL REWARDSRapid Growth
Profits
CUSTOMER BENEFITSCustomer focused decision making
Customer satisfactionInnovative products
OPERATIONAL PERSPECTIVESroduct development
Quick to marketORGANIZATIONAL
CAPABILITYInnovative HR
practicesTeam culture
Effective Communication
Common ways of working
Employer of choice
Culture for Excellence
Employee Involvement• Authority .
Information/Communication • Company Knowledge . Recognition/Rewards• Individual Knowledge . Rewards/Performance
COMPETITIVE ADVANTAGE• Employee Morale• Turnover• Customer Satisfaction• Financial Performance
Quality of Work/Life• Balance• Work Load• Diversity• Job Security• Resources
Service Quality • Top
ManagementCommitment• Quality
emphasis• Improvement/Innovation• Teamwork
LEADERSHIPBUSINESS PRACTICES
Employee Involvement
• Make decisions and contribute (Authority)• Understand business and how organization
operates (Company Knowledge)• Learning and development opportunities (Individual Knowledge)
Employee Involvement
• Open and ongoing communication between management and employees (Information & Communication)• Recognition and rewards for contributions
(Recognition & Rewards)• Link between rewards and performance (Rewards-Performance Link)
Quality of Work Life
• Employees receive both personal and work-related support• Employees:• Balance work and personal demands effectively (Balance)• Challenging but reasonable work loads (Work Load)
Quality of Work Life
• Treated fairly regardless of demographic differences - gender and race (Diversity)• Reasonable level of job security (Job Security)• Tools, materials and equipment to perform jobs
effectively (Resources)
Thank You!