Competitive Advantage 2

8/3/2019 Competitive Advantage 2

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CompetitiveCompetitive Advantage 2Advantage 2

Prof. Rushen Chahal


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Learning OutcomesLearning Outcomes

y Understand how core competence and distinctivecapability lead to competitive advantage

y Understand how the value chain links corecompetences and Porters generic strategy

y Identify growth options (Ansoffs Growth Matrix)

y Identify where core competences and strategies canbe used (Ansoffs Growth Matrix)


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Schools of Thought on CompetitiveSchools of Thought on Competitive

AdvantageAdvantagey Competitive positioning (Porter)

y Resource-based (Prahalad & Hamel)

y L

earning and Knowledge based


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ResourceResource--based School of Thoughtbased School of Thought

(Inside Out)(Inside Out)y Based on work of Prahalad and Hamel

Development and exploitation of core competences

Competitive advantage, regardless of industry


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KnowledgeKnowledge--based School ofbased School of

ThoughtThought

Creation and development of new knowledge

Competitive advantage


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Frameworks for Sustainable CompetitiveFrameworks for Sustainable Competitive

AdvantageAdvantage

y Knowledge-based strategy

y Generic strategy

y

Hybrid strategyy Core competence/distinctive

capability/resource based strategy


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KnowledgeKnowledge--based Strategybased Strategy

Superior Knowledge

(compared to competitors)

Core Competences

Competitive Advantage


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Knowledge (2 Types)Knowledge (2 Types)

y Explicit knowledge knowledge whosemeaning is clearly stated, the details ofwhich can be recorded and stored

Examples: human resource audit, financialanalysis, market research

y Tacit knowledge unstated, based onindividual knowledge and experience, and

is difficult to record and store (but is alsodifficult to imitate)


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Knowledge and CoreKnowledge and Core

CompetenceCompetencey Core competences can come from Knowledge of customers and their needs

Knowledge of technology and how to use it

distinctively

Knowledge of products and processes

Knowledge of the business environment

Knowledge of competitors Knowledge of countries and culture


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ResourceResource--based School ofbased School of

Thought (Inside Out)Thought (Inside Out)y Based on work of Prahalad and Hamel

Development and exploitation of core competences

Competitive advantage, regardless of industry


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Prahalad and HamelPrahalad and Hamel

y Core competence = collective learning of

the organization, in particular how to co-

ordinate different production skills and

integrate multiple streams of technology


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Prahalad and Hamel: 3 TestsPrahalad and Hamel: 3 Tests

y 3 tests to identify and develop core

competences. A core competence

should:

Give a business the ability to enterandsuccessfully compete in several markets

Add greater perceivedvalue to the

businesss products than that perceived incompetitors products

Be difficult for competitors to imitate


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Kay: Distinctive CapabilityKay: Distinctive Capability

Distinctive capability

Competitive Advantage


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Kay: Distinctive CapabilityKay: Distinctive Capability

y Distinctive capabilities are unique

characteristics of a business and its

products, which result from:

Architecture

Reputation

Innovation

Strategic Assets


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ArchitectureArchitecture

y Unique network of internal and external

relationships = superior performance

y Relationships with suppliers, distributors

or customers that competitorsdo not

have OR the based on the organization

of the valuechain


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ReputationReputation

y Reputation means overall character or

quality as seen by others

y The source of reputation can be quality,

characteristics, design, service, features,

etc.


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InnovationInnovation

y Innovation means a new method, idea or

device

y For a business, innovation relates to

research,design,developmentand

marketing of new products AND

y Improvement of value-adding activities


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Strategic AssetsStrategic Assets

y Strategic assets are assets an organization

has which restrictcompetition and

that lead to competitive advantage

y Examples: natural monopoly, patents,

copyrights


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Core competence, distinctive capability andCore competence, distinctive capability and

competitive advantagecompetitive advantage

y Building new core competences or taking

advantage of existing ones MUST

consider:

Customer perceptions

Uniqueness

Continuous improvement

Collaboration Organizational knowledge


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How can the core competence approach and theHow can the core competence approach and the

competitive positioning approach be used together?competitive positioning approach be used together?

y The link between the two approaches =

valuechain

y Example: a cost leadership strategy may

depend on developing core competences

in value chain activities of procurement,

operations, inbound and outbound

logistics and the links of these value chainactivities


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Where to exploit core competences andWhere to exploit core competences and

strategiesstrategies

y Decision on where to compete is based

on two concepts:

(1) Strategic direction where to

employ strategies and use core competences

(2) Method whatway the strategies

and core competences will be used


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Strategic Direction: Ansoff s Growth MatrixStrategic Direction: Ansoff s Growth Matrix

y Ansoffs Matrix identifies 4 alternatives

where core competences and generic

strategies can be used:

Market penetration

Market development

Product development

Diversification


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Ansoff Growth MatrixAnsoff Growth Matrix

Market

Penetration

Product

Development

MarketDevelopment

Diversification

Existing

New

Markets

Existing NewProducts


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Market PenetrationMarket Penetration

y Market penetration increase market

share in existing markets, ie, selling

existing products to existing customers

y Based on improving existing core

competences OR

y Competence building


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Market DevelopmentMarket Development

y Market development entering new

markets and segments with existing

products

y The product is the same, but the audience

is different

y Based on competence leveraging OR



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Product DevelopmentProduct Development

y Product development developing new

products to serve existing markets, ie.,

develop new products for our existing

customers

y Based on improving existing core

competences OR



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DiversificationDiversification

y Diversification developing new products for newmarkets

y Can be relateddiversification or unrelateddiversification

y Related diversification new products and newmarkets, where the markets and/or the products aresimilar to the organizations existingproducts/markets

y Unrelated diversification completely new productsand new markets

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Competitive Advantage 2

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