creatingandsustainingcompetitiveadvantages.pptVIP

Creating and Sustaining Competitive Advantages Porter’s “What Is Strategy?” Operational effectiveness is not strategy: Operational effectiveness means performing similar activities better than rivals. It is necessary, but not sufficient, for competitive advantage. Strategic positioning means performing different activities from rivals’ or performing similar activities in different ways: Variety-based positioning (producing a subset of products/services) Needs-based positioning (serving needs of particular group of customers) Access-based positioning (using different ways to reach customers) Strategy involves trade-offs, choosing what not to do. Types of Competitive Advantage and Sustainability Three generic strategies to overcome the five forces and achieve competitive advantage Overall cost leadership Low-cost-position relative to a firm’s peers Manage relationships throughout the entire value chain Differentiation Create products and/or services that are unique and valued Non-price attributes for which customers will pay a premium Focus strategy Narrow product lines, buyer segments, or targeted geographic markets Attain advantages either through differentiation or cost leadership Three Generic Strategies Creating Value Through Human Capital, Social Capital, and Technology Performance Overall Cost Leadership Integrated tactics Aggressive construction of efficient-scale facilities Vigorous pursuit of cost reductions from experience Tight cost and overhead control Avoidance of marginal customer accounts Cost minimization in all activities in the firm’s value chain, such as RD, service, sales force, and advertising Value-Chain Activities Overall Cost Leadership (Cont.) A firm following an overall cost leadership position Must attain parity on the basis of differentiation relative to competitors Parity on the basis of differentiation Permits a cost leader to translate cost advantages directly into higher profits than competitors Allows firm to earn above-average prof