Chapter 4
Group 3: Coleman Crook, Jessica Crumpton,
Ashton Davis, Sarah Ellens, and Kevin levesque
Objectives
 Integrating competitive analysis
 Looking at dynamic relationships between competitive
advantage and competitive process.
 Understand characteristics of a market and identify
opportunities for challenges
Singapore Airlines
Singapore Airlines
 Prides itself on being the “most awarded airline” and having a
reputation for providing passengers with high-quality
experience.
 Strategy is based on two main components- its planes and its
people.
 People:
 Offers excellent training and experience
 Planes:
 More fuel efficient and require less repairs
 Encouraged to find ways to reducing waste and bonus’s are used
to incentivize cost cutting behavior.
The Emergence of Competitive
Advantage
 When two or more firms compete within the same market,
one firm posesses a competitive advantage over its rivals
whin it earns (or has the potential to earn) a persistently
higher rate of profit
 Toyota- mass produced cars
 SAP- ERP Software
 Southwest- affordable flights
External Sources of change
 Can create an advantage of a disadvantage depending on
magnitude of change and extent of firm’s strategic
differences
 Industry Environment
 Tobacco VS Toy industry
Competitive Advantage from
responsiveness to change
 The competitive advantage that arises from external change
also depends on firms’ ability to respond to change
 Opportunities for change- Entrepreneurship
 Abilities
 Predict change
 Reaction time ( time-based competition)
Case 4.1 Singapore Airlines
 Gaining or losing competitive advantage as a consequence of
external change
 Airbus 380
Competitive Strategies from innovation:
“new game” strategies
 Changes that create competitive advantage can be created
internally through innovation
 Strategic Innovation: value for customers through new
products, experiences of mode of product delivery
 *Key source of competitive advantage, including new
business models
Examples
 Nucor Steel
 Southwest
 Nike
 Apple
Shaping innovation strategies
 New Industries- Kim and Mauborgne, creating new markets
is the purest form of blue ocean strategy (uncontested
market space)
 New customer segments- Apple, VCRs, Wii
 New sources of competitive advantage- (Blue Ocean) Dell’s
ordering system, Cirque du Solei
Sustaining competitive advantage
 Ability of competitors to challenge
 Imitation
 Innovation
 Barriers
 Isolating mechanisms
Process of Imitation
 Identification
 Identify that the firm possesses competitive advantage
 Incentive
 Believe that they may earn superior returns
 Diagnosis
 Diagnose features of rival’s strategy
 Resource acquisition
 Must have ability to acquire resources and capabilities necessary
Barrier: Obscure Superiority
 “Mask” high performance
 Private company
 Avoid disclosing financial performance
Deterrence and Pre-Emption
 Persuade rivals that imitation will be unprofitable
 Pre-emption
 Proliferation of product varieties
 Large investments in production capacity ahead of growth
 Patent proliferation- for technology based opportunities
Pre-Emption Continued
 Two flaws must be present
 Small market relative to efficient scale of production
 First-mover advantage – preferential access to information and
resources
Diagnosing competitive advantage
 Identification of basis of rival’s success
 Causal ambiguity
 Multidimensional competitive advantage
 Uncertain imitability
 Caused by causal ambiguity
Acquiring resources and capabilities
 Time it takes to acquire resources determines time able to
sustain competitive advantage
 Imitation may take place quickly if limited resources are
required
Types of Competitive Advantage
Cost vs. Differentiation
•Cost Advantage – same product/lower price
1.
Cost leader
•Differentiation Advantage – customer pays a
higher price for differentiation.
1. Uniqueness
Cost Leadership
Strategy – efficient plants,
overhead control,
outsourcing
Differentiation
Strategy – focus on
advertising, design, service,
quality
Requirements – access to
capital, frequent reports,
job specialization,
incentives for quantitative
performance
Requirements – marketing
abilities, cross-functional
coordination, incentives
linked to qualitative
performance
Cost Drivers:
 Economies of scale – through specialization
 Economies of Learning – increase in skills
 Production Techniques – innovation
 Product Design – standardization
 Input Costs – bargaining power, location
 Capacity Utilization – flexible adjustments
 Residual Efficiency – overall management
Points out inefficiencies and which adjustments could be made
Value Chain Analyses:
1.
2.
3.
4.
5.
6.
Breakdown the firm
Establish importance associated with costs – major sources
Compare costs by activity – compared to competitors
Identify costs drivers
Indentify Linkages
Identify cost saving opportunities
Stages of value chain analysis for
differentiation advantage
Construct a value chain for the firm and the customer.
- Consider firms further downstream in
value
chain.
2. Identify the drivers of uniqueness in each activity.
1.
-Variables & Actions to achieve uniqueness.
Stages of value chain analysis for
differentiation advantage
Select the most promising differentiation variables for the
firm.
- Greatest potential to differentiate
- Linkages among activities
- Sustainability of uniqueness
4. Locate linkages between the value chain of the firm and
that of the buyer.
- Why is the customer buying your product?
3.
Rise and Fall of Starbucks
 Howard Shultz 1982-2000
 Rejoined in 2008
 Keys to failure
 70% increase in coffee shops
 McDonald’s Pressure
 Over expansion
 Keys to success
 Employee development
 Focus on in home products
 Community feel