Strategy
Competitive Advantage
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Competitive Advantage.
Always relative not absolute – compare to benchmark
Sustainable competitive advantage – maintain over a long period of time
Must be based on strategic choices (cannot do everything). Example:
JetBlue Airline – David Neeleman ‘Morris Air e-ticket’ bought by SW Air
in 1993. Founded JetBlue 1998 – Low cost and differentiation strategy
tried.
Strategy is not: A grandiose statement such as: (we will be number 1).
Managers must meet competitive challenge. Blockbuster vs. Netflix.
Organizational performance is determined by :
Industry effects – caused by the structure of the industry
Firm effects – caused by the actions of management
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Strategy
Competitive Advantage
• Stakeholders and competitive advantage.
• Identify what are the interest, opportunities and threats, social
issues and concerns for:
• Internal – employees, stockholders, managers
• External – customers, suppliers, partners, community,
government
• Analyze, Formulate, and Implement (AFI) framework.
SWOT analysis, Level of strategy ( Business, Corporate,
Global ). Implement organizational design.
• Black-Swan events. The impact of a highly improbable event
(Nicholas Taleb).
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Competitive Forces Shape
Strategy
How Competitive Forces Shape Strategy:
“By being aware of competitive forces, an
organization can position itself to be less
vulnerable to attack” (Michael E. Porter,
1979)
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Competitive Forces Shape
Strategy
Porter’s 5 Forces Model
Threat of New
Entrants
Bargaining
Power of
Suppliers
Industry
Competitive
Rivalry
Bargaining
Power of
Customers
Threat of
Substitutes
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Strategic Planning Model
Critical Success Factor:
Strategic Innovation
Environmental
Analysis
S trengths
W eaknesses
O pportunities
T hreats
Formulation
Mission
Objectives
STRATEGY
Organizational
Structure
Policy Guidelines
Implementation
Budgets
Programs
Procedures
Execution
& Control
Monitor
Feedback
Feedback
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Life Cycle and Competitive
Advantage
Introduction
R&D
Tech change
Attention to
quality
Design change
Process change
Growth
Improve product
Econ of scale
Process improve
Distribution
Value added
Forecasting
Maturity
Decline
Focus on
Cost Control
Standardize
Reduce capacity
Efficiency
Cut products
Costs cuts
Few changes
Optimal capacity
Creating a Sustainable Competitive Advantage (David A. Aaker, 1989)
Stage of the Product Life Cycle, Business Strategy, and Business Performance
(Anderson & Zeithaml, 1984)
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Automobile Industry:
Growth to Maturity
(1932-2006)
I.
II.
III.
IV.
Depression to WWII
Post WWII
1970s – The Oil Embargo and Competitive Rules Change
Today – The Rules are Still Changing
* In Maturity, focus on standardization, efficiency and costs*
* Grow by capturing existing market share*
U.S. Motor Vehicle Sales (Millions of units)
Year 1986 … 2000 2001
Units 16.1
17.1 17.5
2002
17.2
2003
16.9
2004
17.3
2005
17.4
2006
17.0
Source: Ward’s Automotive Reports
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Automobile Industry:
1913-1932
(Growth Phase I)
* In Introduction, focus is on R&D, technical and design changes, attention
to quality, and process changes*
2000000
1800000
1600000
Units Sold
1400000
1200000
Buick
1000000
Chevrolet
Ford
800000
600000
400000
200000
0
1913 1915 1917 1919 1921 1923 1925 1927 1929 1931
Source: U.S. Automobile Production Figure-Wikipedia
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59
Automotive Industry Clusters
65
20
in Alabama
There are more than 383 Automotive
Companies and Suppliers in Alabama.
59
20
85
Legend
Concentration of Automotive Suppliers
Suppliers by Zip Code
65
1
2
3
4-6
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Source: 2007 EDPA Automotive Database
7 - 11
Strategic Planning
The Locomotive Industry
The Big Three 1825-1956
American Locomotive (ALCO)
Baldwin Locomotive
Lima Locomotive
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Locomotive Industry
1939
General Motors Electro-Motive Division took lead
in diesel-electric locomotives
Why?
Growth Market
Strength (R&D, developmental capital,
aggressive marketing)
Opportunity (Railroads wanted more dieselelectric locomotives)
WWII
Opportunity offered by history
Demand not determined by general market forces
1950s
End of Steam
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Strategic Planning
Locomotive Industry
Technology Matures
Maturity – Focus on standardization, efficiency and costs
Strength- Efficiency through standardization
Opportunity- Growth of container freight
Today – Big Two (EMD and GE)
EMD
GE
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Strategy
Competitive Advantage
Differentiation (RCA used its R&D
strength and its organizational structure
to market successfully Color TV)
Transformation: From ordinary to
revolutionary
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RCA Strategic Advantage
Differentiation
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Strategy
Competitive Advantage
Low Cost (Southwest Airlines strives to
recruit and train the best personnel
available, create innovative flight
schedules, stress strong customer support,
and provide high pay for employees)
Transformation: From in-state service to
national to?
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Competitive Advantage
Southwest – Low Cost
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Strategy
Competitive Advantage
Innovation/Response (FedEx uses a
hub-and-spoke system to rapidly respond
to request for package shipments
worldwide)
Transformation: From national letter
carrier to global cargo carrier
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Strategic Advantage
FedEx - Response
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Strategy
Competitive Advantage
Diversification (Boeing reacts to the
maturing airframe market)
Transformation: From an airplane
builder to a high-tech product and service
provider
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Strategic Advantage
Boeing
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Strategic Advantage
Boeing – Delta Rocket
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