MI021/CS021 Computers in Management

Sept. 11, 2006

Technology & Competitive Advantage:Strategy, Industry Competitiveness, Resource

Creation, and Timing

www.gallaugher.com

Issues Covered:

• Basics of strategy & competitive advantage– Operational Effectiveness– Strategic Positioning– Characteristics of assets that may yield competitive

advantage• Industry/Competitive Analysis (5 forces)• Value Chain• Key Resources for Competitive Advantage

HyperCompetition

Profits from a new product or service

launch exploitation

counter-attack

Profits from a new product

or service

Time

Time

Sony’s Slide

Critical Concepts in Understanding Competitive Advantage

• Operational Effectiveness – performing the same tasks better than your rivals.

• Strategic Positioning – performing different tasks than your rivals, or performing the same tasks in a different way.

How Do We Know if Assets Yield Sustainable Advantage?

• Rareness– Is the asset in limited supply or difficult to acquire?

• Value– Does the asset yield value to the firm/customers?

• Imperfectly Imitable– Is the asset impossible to imitate?

• Non-Substitutable– Is the asset without comparable substitutes?

87% Decline in

InternationalDS-3

Pricing over the past two

years

Source: BandXChange

Key Resources for Competitive Advantage

– Imitation-resistant Value Chain Organization– Brand– Scale Economies– Network Effects– Data and Switching Costs– Distribution Channels– Alliances (with complementary firms & competitors)– Differentiation – product or service– Patents?

Value of service

Switching Costs

Incumbent Late Entering Rival

Value of service

Value Chain

Inboundlogistics Operations Outbound

logisticsMarketing& sales Service

Infrastructure: general mgmt, planning, finance, ISHRM: recruiting, hiring, training, and developmentTech. Development: R&DProcurement

ICA: Industry & Competitive Analysis(Porter’s Five Forces)

Potentialnew entrants

Threat of substituteproducts or services

Rivalry amongexisting competitors

Power ofsuppliers

Power ofbuyers