determining competitive position
TRANSCRIPT
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7/27/2019 Determining Competitive Position
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What is our mission?What is our scope?What do we value?
ValuableCompetitive
Opportunities Capabilities
What are our strengths?Where might we have acompetitive advantage?
What does the market demand?
Who else, if anyone, offers thisvalue proposition?
How do wecreate and
sustainvalue?
mpetitivescope
withinindustry Broad
Narrow
Costleadership
Differen-tiation
FocusedNiche
Source ofcompetitive advantage
C
Cost Uniqueness
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Profit = $2
Profit = $2Pro it = 1
Industry average Low-cost firm Differentiator
Cost = $5Cost = $4
Cost = $6
The extent to which a firm targets multiple
Industries may be segmented into individual
product markets
characteristics of the product line
product market segments within an industry.
. ., , , geographic market
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mpetitivescope
withinindustry Broad
Narrow
Costleadership
Differen-tiation
FocusedNiche
Source ofcompetitive advantage
C
Cost Uniqueness
Keeping costs lower than those of competitors to
- - .
offer standardized products with broadly acceptable
product features at the lowest price.
Examples: Wal-Mart, McDonalds, Nucor, Charles Schwab
Strategic approaches:
- . ., -
Build market share to gain EOS (e.g., Anheuser-Busch)
Use low-cost inputs, offshoring (e.g. Wal-Mart, Dell)
Minimize overhead such as R&D, advertising (e.g., Dell)
State-of-the-art operations/continuous improvement (e.g., Nucor)
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Generating rents from higher consumer willingness-to-
. ,
high quality, service and/or prestige.
Examples: Target, Apple, Intel, BMW, Goldman Sachs
Strategic approaches:
create brand through advertising (e.g., Nike)
develop innovative capability (e.g., Intel, Apple)
invest in human resources, R&D (e.g., Goldman)
Keeping costs lower than those of competitors in a
.
strategy by foreign firms and new ventures into advanced
markets.
Examples: Kia, generic drug manufacturers
Strategic approaches:
deter rivalry by dividing market (e.g., budget airlines)
capture narrow economies of scale (e.g., generic drugs)
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Generating rents from higher consumer willingness-to-
,
market.
Examples: Tiffanys, Porsche, boutique consultancies
Strategic approaches:
gain knowledge and expertise (e.g., Juniper Networks)
build brand loyalty (e.g., Porsche)
mpetitivescope
withinindustry Broad
Narrow
Costleadership
Differen-tiation
FocusedNiche
Source ofcompetitive advantage
C
Cost Uniqueness
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The best of both worlds:
Examples: Toyota, Southwest Airlines
Strategic approaches:
adopt total quality management or lean production techniques
invest heavily in R&D / innovation
Beware of getting stuck in the middle!
actor2
Firm F
Firm
AFirm
B
Firm D
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Factor 1
Firm
EFirm C
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= Number of Models
Sportiness
Toyota
Ford
Porsche
Mercedes
15
Average Vehicle Cost
Kia
What is our mission?What is our scope?What do we value?
Valuable
Competitive
Opportunities CapabilitiesWhat are our strengths?Where might we have acompetitive advantage?
What does the market demand?Who else, if anyone, offers this
value proposition?
How do wecreate and
sustainvalue?
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Second Corollary to the Fundamental Principle:If some competitive positions are more favorable than others,
we would expect firms to adopt those strategies.
IndustryStructure
-----------------
Does the
FirmCapabilities
------------------
How may our
CompetitiveDynamics
--------------
How are positions
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structure sheltercertain positions?
capabilities helpestablish and
defend a position?
likely to evolveover time?
BargainingPower of
Intensity ofRivalry
BargainingPower of
Threat ofEntry
Threat ofSubstitutes
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CAPABILIITIES 1. _______ 2. _______ 3. _______ 4. _______
Processes
People
Alignment
Sustainability
The
Competitive
L ife C c le
Emergent
Phase
Mature
Phase
Disruption
GrowthPhase
Speed
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What favorable strategic opportunities exist?
How contested is a position? New markets, positions (Blue Ocean Strategy)
Existing markets and positions (Red Ocean Strategy)
Can we establish this competitive position? Do we have the capabilities to execute especially vis--vis rivals?
Can we create value in uni ue wa s versus established com etitors?x
Can we defend this position once established?
How sustainable is any competitive advantage we may have?
How is the industry likely to evolve?
Positions, like markets, are defined both by market.
Industries often have more than one rent-producingposition.
Rent-producing positions rely on favorable industrystructure and/or superior capabilities.
Firms can combine multiple positions, but need a
strategic logic for the combination.
The challenge of strategy is to capture these valuable,defensible competitive positions.
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