CREATING SUSTAINABLE

COMPETITIVE ADVANTAGE

Presented by :Presented by :ARIEF DARYANTOARIEF DARYANTO

Director, Graduate Program of Management and Director, Graduate Program of Management and Business IPB Business IPB

(MB-IPB)(MB-IPB)

Current Position : Director, Graduate Program of Management and Business, Bogor Agricultural University Senior Lecturer, Department of Economics, Faculty of Economics and Management IPB

Education Background : Ir. (IPB) DipAgEc (UNE Australia) MEc & PhD (UNE Australia)

Research Interest: Agribusiness Competitiveness Analysis, Industrial Organization, Sustainable Business

Development and Strategic Management.

Organization : Vice Chairman, Perhimpunan Ekonomi Pertanian (PERHEPI) Chairman, Asosiasi Program Magister Manajemen Indonesia (APMMI) General Secretary, Himpunan Alumni IPB (HA-IPB) Advisory Board & Senior Jugde, Malcolm Baldrige Criteria for Performance Excellence Supervisory Board, Indonesia Institute for Corporate Directorship (IICD) Executive Committee, Asian Forum on Business Education

Trends and forces of changes in the 21st century The meaning of world class company The meaning and types of competitive advantage How competitive advantage may be created? The basis of sustainable competitive advantage How some approaches enhance the creation of sustainable

competitive advantage?

Presentation Outline

Trends

Forces of Change in Organizations

Resistance to Change

in Organizations

What Is World-class Company?

World Class Industries (Lesson Learned From Australia)

Source: the Allen Consulting Group (2006)

World Class Company

World class firms are those that survive and prosper in an increasingly open global economy.

For some firms, this means competing succesfully with the firms of other countries in export and domestic markets.

In non-traded sectors, ‘world class’ firms contribute to the competiytiveness of other sectors that use their goods and services.

A Systems Model of Change

5 Dimensions of Corporate Health

Finance Network Market Organization Operations

5 Dimensions of Corporate Health

13

World Class vs Conventional Manufacturing Operation

World ClassManufacturing Operation

ConventionalManufacturing Operation

Globally CompetitiveProducts & Services

Locally CompetitiveProducts & Services

World ClassManufacturing Performance

AverageManufacturing Performance

What makesThe Difference ?

Product &Performance

14

World Class vs Conventional

Quality Technology Consistency Delivery / Availability

Product

Performance

Low Cost Efficient

Reliable

• Better• Cheaper• Faster

Strategies Pursued by World Class Companies (Lesson Learned From Australia)

WHAT IS COMPETITIVE ADVANTAGE? (1)

… a basis for the firm’s long term success? … a basis for value creation?

Do we really know where it resides? Can it be sustainable?

WHAT IS COMPETITIVE ADVANTAGE? (2)

“When two or more firms compete within the same market, one firms possesses a competitive advantage over its rivals when it earns a persistently higher rate of profit (or has the potential to earn a persistently higher rate of profit)”

R. M. Grant, 2000

Cost advantageCost advantage

Differentiation advantageDifferentiation advantage

Competitiveadvantage

Competitiveadvantage

Similar product

at lower cost

Higher price

for unique product

THE MAIN TYPES OF COMPETITIVE ADVANTAGE

Types of competitive advantageTypes of competitive advantage

Low cost Differentiation

Cost leadership DifferentiationIndustry-wide

Niche Focus with low cost

Focus with differentiation

MarketMarket

COMPETITIVE STRATEGIES BY PORTER

COMPETITIVE STRATEGIES EXTENDING PORTER

Types of competitive advantageTypes of competitive advantage

Low cost Differentiation

Cost Leadership DifferentiationIndustry-wide

Niche”Focus with low cost

Focus with differentiation

MarketMarketHybrid Strategy

“In-between” there might be a successful strategy (Value for Money)

Hybrid strategies can be more effective

FEATURES OF COMPETITIVE STRATEGIES

Cost LeadershipCost Leadership Efficient scale Standardization Design for low

production cost Control of overheads

and R&D Avoid marginal

customers

DifferentiationDifferentiation Quality Innovation Design Credibility Brand name Reputation Environmental

posture Customer service Integrated services

SUSTAINABLE COMPETITIVE ADVANTAGE

What is meant by sustainable competitive advantage? Durable Valuable to the firm

Exploiting weaknesses and neutralizing threats Unique Difficult for competitors to imitate Not easily substitutable

MAY COMPETITIVE ADVANTAGE BE SUSTAINABLE?

Increased competition leads to decrease of differences in competitive advantage

Standardization/ mass production of unique features: What can be left for differentiation?

Unique features of differentiation become prerequisites for survival

Dynamism & complexity of the environment

HOW CAN COMPETITIVE ADVANTAGE BE SUSTAINABLE?

The firm must seek competitive advantage in combining resources & capabilities Develop resources and capabilities, which

are rare, valuable, non-tradable, Make those resulting competences

sustainable by precluding imitation or substitution by competitors

The firm must offer competitive products

SUSTAINABLE COMPETITIVE ADVANTAGE…BASED ON CAPABILITIES

Innovation

Reputation

Architecture of relationships

Strategic assets

SCA

COMPETITIVE ADVANTAGE “MAP”

Operational performance

Source: “Competitiveness: Strategies of the best UK companies”, Winning DTI-CBI

Customized product

Quality

Low cost

Delivery time

Creditability

Product Service

Design

Marketing

Customer service

Customized product

Innovative product

Prerequisites Elements of differentiation

Quality

Low cost

Oper. performance

Delivery time

Creditability

Product Service

Design

Marketing

Customer service

Innovative product

Reputation Reputation

SUSTAINABLE COMPETITIVE ADVANTAGE …REFLECTED ON PRODUCT

Quality and quality of customer service Design Innovative product Customized product with integrated services Environmental friendly

REFERENCES

R.M. Grant, Contemporary Strategy Analysis, Blackwell Publishers, 2000.

M.E. Porter, Competitive Advantage, New York: Free Press, 1985.

J. Kay, Foundations of Corporate Success, Oxford University Press, 1995.

G. Johnson, K. Scholes & R. Whittington, Exploring Corporate Strategy, Prentice Hall, 7th eds, 2005

C. Prahalad & G. Hamel, “The core competences of the corporation”, Harvard Business Review, vol. 28, n.3, may-june, 1990.

REFERENCES

S. Marthur, “How firms compete?” The Journal of General Management, vol.14, no 1, autumn 1988.

F. Tilley, P. Hooper & L. Walley, “Sustainability and competitiveness: Are there mutual advantages for SMEs?”, in J. Oswald & F. Tilley, Competitive Advantage in SMEs: Organising for innovation and change, Wiley, 2003.

K. Weigelt &C. Camerer, (1988), “Reputation and Corporate Strategy: A review of recent theory and applications”, Strategic Management Journal, 9

THANK YOUTHANK YOU

adaryant@mb.ipb.ac.idadaryant@mb.ipb.ac.id