Competitive Advantage & Competency - Ashok Kumar and Arulmozhi

8/9/2019 Competitive Advantage & Competency - Ashok Kumar and Arulmozhi

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BY,

ARULMOZHI.G (31509631007)

ASHOK KUMAR.S (31509631008)

Competitive Advantage &

Competency


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Competitive Advantage

y Competitive advantage is the means by which a firm

manages to keep making money and sustain its position

against its competitors

y Competitive advantage occurs when a organization acquires

or develops an attribute or combination of attributes that

allows it to outperform its competitors


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Once a new technology rolls over you, if youre

not part of the steam roller, youre part of the

road.

- Stewart Brand


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Michael PortersModel

y Michael Porter proposed the theory in 1990 on competitive

advantage

y

The Five Forces diagram captures the main idea of Porterstheory of competitive advantage

y Basis: Industry structure and positioning within the industry

y The ultimate aim of competitive strategy is to cope with and,

ideally, to change those rules in the firm's behavior

y The five forces determine industry profitability


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Porter's 5 Forces - Elements of Industry Structure

New Entrants

Buy er sSu ppliers

Su bstitute s

Ind ust ry

Competitors

Intensity

of Rivalry

Threat ofSubstitutes

Threat of

New E ntrants

Bargaining Power

of Suppliers

Bargaining Power

of Buyers

D eterm inantsof B uy er P ow er

B argaining L everage

Buyer concentration vs.

firm concentration

Buyer volume

Buyer switching costs

relative to firm

switching costs

Buyer information

Ability to backward

integrate

Substitute products

Pull-through

Price Sensitivity

Price/total purchases

Product differences

Brand identity

Impact on quality/

performance

Buyer profits

Decision makers

incentivesD eterm inantsof Su bstitution T hreat

Relative price performance of substitutes

Switching costs

Buyer propen sity to substitute

Rivalry D eterm inantsIndustry growth

Fixed (or storage) costs / value added

Intermittent overcapacity

Product differences

Brand identity

Switching costs

Concentration and balance

Informational complexity

Diversity of compe titors

Corporate stakes

Exit barriers

E n tr y B arriersEconomies of scale

Proprietary product differences

Brand identity

Switching costs

Capital requirements

Access to distribution

Absolute cost advantages

Proprietary learning curve

Access to necessary inputs

Proprietary low-cost product design

Government policy

Expected retaliation

D eterm inantsof Supplier Pow er

Differentiation of inputs

Switching costs of suppliers and firms in the industry

Presence of substitute inputs

Supplier concentration

Importance of volume to supplier

Cost relative to total purchases in the indu stry

Impact of inputs on cost or differentiation

Threat of forward integration relative to threat of

backward integration by firms in the industry


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Creation of Competitive Advantage

y Innovation - perceiving or discovering new and better ways

to compete in an industry

y Innovations shift competitive advantage

y Significant advantages to early movers

y Typical causes of innovations that shift competitive

advantage


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Implementation of Competitive Advantage

y Level of strategy implementation

y Conceiving new ways to conduct activities

Fit

Value chain

Activity mapping


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Value Chain

y Systematic way of examining all the activities

y Differentiation and behavior of costs

y Scrutinizes each of the activities of the firm

y Potential source of advantage

y Firm fits into the overall value system of suppliers,

channels and buyers.


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ActivityMapping

y Explains different strategies and positions can be

implemented

y

Positioning choices

y Essence of implementing strategy in activities

y Combining activities into a consistent fit

Variety-based positioning

Needs-based positioning

Access-based positioning


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Porters Diamond- Determining Factors of

National Advantage


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Strategic Intent

Business long-term, far-reaching goal

Accomplish in a 50 year timeframe

The main tenets of strategic intent planning are

Sense of Direction

Sense of Discovery

Sense of Destiny


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Three Step Process

1. Set the Strategic Intent

2. Set the Challenges

3. Empowerment of the Strategic Intent


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Porters Three Generic Strategies


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Critical Success Factor

y Business term for an element which is necessary for an

organization or project to achieve its mission

Example: Staff orientation , Continuous improvement

Five key sources of CSF

The industry

Competitive strategy

Environmental factors Temporal factors

Managerial position


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Critical Success FactorMethod

y Mission statement

y Develop 5-6 high level goals

y Develop hierarchy of goals and their success factors

y Lists of requirements, problems, and assumptions

y Leads to concrete requirements

y Analysis matrices

y Problems vs. Requirements matrixy Results of the Analysis


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Benchmarking

y Process of identifying "best practice"

y Understand and evaluate the current position

y Identify areas and means of performance improvement.


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Benchmarking


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Benchmarking Process

1) Understand in detail existing business processes

2) Analyse the business processes of others

3) Compare own business performance with that of

others analysed

4) Implement the steps necessary to close the

performance gap


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Types of Benchmarking

y Strategic Benchmarking

y Performance or Competitive Benchmarking

y Process Benchmarking

y Functional Benchmarking

y Internal Benchmarking

y External Benchmarking


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The 7 S Framework


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Conclusion

Sustainability of Competitive Advantage

Three conditions

Hierarchy of source (durability and imitability)

Number of distinct sources

Constant improvement and upgrading


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Competitive Advantage & Competency - Ashok Kumar and Arulmozhi

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