Determining Competitive Position

7/27/2019 Determining Competitive Position

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What is our mission?What is our scope?What do we value?

ValuableCompetitive

Opportunities Capabilities

What are our strengths?Where might we have acompetitive advantage?

What does the market demand?

Who else, if anyone, offers thisvalue proposition?

How do wecreate and

sustainvalue?

mpetitivescope

withinindustry Broad

Narrow

Costleadership

Differen-tiation

FocusedNiche

Source ofcompetitive advantage

C

Cost Uniqueness


3/11

Profit = $2

Profit = $2Pro it = 1

Industry average Low-cost firm Differentiator

Cost = $5Cost = $4

Cost = $6

The extent to which a firm targets multiple

Industries may be segmented into individual

product markets

characteristics of the product line

product market segments within an industry.

. ., , , geographic market


4/11

mpetitivescope


Narrow

Costleadership

Differen-tiation

FocusedNiche


C

Cost Uniqueness

Keeping costs lower than those of competitors to

- - .

offer standardized products with broadly acceptable

product features at the lowest price.

Examples: Wal-Mart, McDonalds, Nucor, Charles Schwab

Strategic approaches:

- . ., -

Build market share to gain EOS (e.g., Anheuser-Busch)

Use low-cost inputs, offshoring (e.g. Wal-Mart, Dell)

Minimize overhead such as R&D, advertising (e.g., Dell)

State-of-the-art operations/continuous improvement (e.g., Nucor)


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Generating rents from higher consumer willingness-to-

. ,

high quality, service and/or prestige.

Examples: Target, Apple, Intel, BMW, Goldman Sachs


create brand through advertising (e.g., Nike)

develop innovative capability (e.g., Intel, Apple)

invest in human resources, R&D (e.g., Goldman)

Keeping costs lower than those of competitors in a

.

strategy by foreign firms and new ventures into advanced

markets.

Examples: Kia, generic drug manufacturers


deter rivalry by dividing market (e.g., budget airlines)

capture narrow economies of scale (e.g., generic drugs)


6/11

Generating rents from higher consumer willingness-to-

,

market.

Examples: Tiffanys, Porsche, boutique consultancies


gain knowledge and expertise (e.g., Juniper Networks)

build brand loyalty (e.g., Porsche)

mpetitivescope


Narrow

Costleadership

Differen-tiation

FocusedNiche


C

Cost Uniqueness


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The best of both worlds:

Examples: Toyota, Southwest Airlines


adopt total quality management or lean production techniques

invest heavily in R&D / innovation

Beware of getting stuck in the middle!

actor2

Firm F

Firm

AFirm

B

Firm D

14

Factor 1

Firm

EFirm C


8/11

= Number of Models

Sportiness

Toyota

Ford

Porsche

Mercedes

15

Average Vehicle Cost

Kia

What is our mission?What is our scope?What do we value?

Valuable

Competitive

Opportunities CapabilitiesWhat are our strengths?Where might we have acompetitive advantage?

What does the market demand?Who else, if anyone, offers this

value proposition?

How do wecreate and

sustainvalue?


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Second Corollary to the Fundamental Principle:If some competitive positions are more favorable than others,

we would expect firms to adopt those strategies.

IndustryStructure

-----------------

Does the

FirmCapabilities

------------------

How may our

CompetitiveDynamics

--------------

How are positions

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structure sheltercertain positions?

capabilities helpestablish and

defend a position?

likely to evolveover time?

BargainingPower of

Intensity ofRivalry

BargainingPower of

Threat ofEntry

Threat ofSubstitutes


10/11

CAPABILIITIES 1. _______ 2. _______ 3. _______ 4. _______

Processes

People

Alignment

Sustainability

The

Competitive

L ife C c le

Emergent

Phase

Mature

Phase

Disruption

GrowthPhase

Speed


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What favorable strategic opportunities exist?

How contested is a position? New markets, positions (Blue Ocean Strategy)

Existing markets and positions (Red Ocean Strategy)

Can we establish this competitive position? Do we have the capabilities to execute especially vis--vis rivals?

Can we create value in uni ue wa s versus established com etitors?x

Can we defend this position once established?

How sustainable is any competitive advantage we may have?

How is the industry likely to evolve?

Positions, like markets, are defined both by market.

Industries often have more than one rent-producingposition.

Rent-producing positions rely on favorable industrystructure and/or superior capabilities.

Firms can combine multiple positions, but need a

strategic logic for the combination.

The challenge of strategy is to capture these valuable,defensible competitive positions.

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Determining Competitive Position

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