strategic management concepts and cases. building and sustaining competitive advantage
TRANSCRIPT
Strategic Management Concepts and Cases
• Building and Sustaining Competitive Advantage
CompetitorsCompetitors
Competitive rivalryCompetitive rivalry
Competitive behaviorCompetitive behavior
Competitor Competitor AnalysisAnalysis
Resource Similarity
Market Commonality
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Do firms compete with each Do firms compete with each other in multiple markets?other in multiple markets?Do firms compete with each Do firms compete with each other in multiple markets?other in multiple markets?
Market Commonality
Market Commonality
Competitor Competitor AnalysisAnalysis
Resource Similarity
Market Commonality
Market Commonality
Multipoint competition tends to Multipoint competition tends to reduce competitive interactions, but reduce competitive interactions, but increases the likelihood of response increases the likelihood of response where interaction occurswhere interaction occurs
For example, airlines price flights For example, airlines price flights similarly but respond quickly when similarly but respond quickly when competitors introduce promotional competitors introduce promotional pricesprices
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Competitor Competitor AnalysisAnalysis
Resource SimilarityResource Similarity
Do competitors possess similar Do competitors possess similar types or amounts of types or amounts of resources?resources?
Market Commonality
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Competitor Competitor AnalysisAnalysis
Resource SimilarityResource Similarity
Market Commonality
Firms are less inclined to attack a Firms are less inclined to attack a firm that is likely to retaliatefirm that is likely to retaliate
Firms with dissimilar resources Firms with dissimilar resources are more likely to attackare more likely to attack
Firms with similar resources are Firms with similar resources are more likely to be aware of each more likely to be aware of each other’s competitive movesother’s competitive moves
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Relative SizeSpeed
InnovationQuality
Ability for Ability for Action and Action and ResponseResponse
OutcomesOutcomesDrivers of Drivers of
Competitive Competitive BehaviorBehaviorAwarenessMotivationCapability
Competitor Competitor AnalysisAnalysisMarket
Commonality
ResourceSimilarity
Interfirm Rivalry:Interfirm Rivalry:Attack & ResponseAttack & Response
Likelihood of AttackLikelihood of AttackFirst Mover Incentives
Likelihood of ResponseLikelihood of ResponseType of Competitive
Action
Dependence on theMarket
Resource Availability
Actor’s Reputation
CompetitiveCompetitive
Slow, Standardor Fast Cycle
Market TypesMarket Types
CompetitiveCompetitive
SustainedOutcomesOutcomes
CompetitiveAdvantageTemporaryAdvantageEvolutionaryEvolutionaryOutcomesOutcomes
Entrepreneurial
or Market-PowerGrowth-Oriented
Actions
FeedbackFeedback
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Interfirm Rivalry:Interfirm Rivalry:Attack & ResponseAttack & Response
Likelihood of AttackLikelihood of Attack
First Mover IncentivesLikelihood of ResponseLikelihood of Response
Type of CompetitiveAction
Dependence on theMarket
Resource Availability
Actor’s Reputation
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Likelihood of AttackLikelihood of Attack
First Mover IncentivesFirst Mover IncentivesFirst Mover advantage First Mover advantage can be substantialcan be substantial
First MoverFirst Mover
Firms that take an initial competitive actionFirms that take an initial competitive action
Generally possess the resources and capabilities that enable them to be pioneers in new products, new markets or new technologies
Generally possess the resources and capabilities that enable them to be pioneers in new products, new markets or new technologies
Can earn above average profits until competitors respondCan earn above average profits until competitors respond
Gain customer loyalty, helping to create a barrier to entry by competitorsGain customer loyalty, helping to create a barrier to entry by competitors
Advantage depends upon difficulty of imitationAdvantage depends upon difficulty of imitation
Second MoverSecond Mover
Firms that respond to a First Mover’s actionsFirms that respond to a First Mover’s actions
Second Movers frequently imitate First MoversSecond Movers frequently imitate First Movers
Speed of response often dictates successSpeed of response often dictates success
Should evaluate customers’ response before movingShould evaluate customers’ response before moving
“Fast” Second Movers can capture some of initial customers and develop some brand loyalty“Fast” Second Movers can capture some of initial customers and develop some brand loyalty
Avoid some of the risks associated with First MoveAvoid some of the risks associated with First Move
Must possess necessary capabilities to imitateMust possess necessary capabilities to imitate
TacticalTacticalActionsActionsTacticalTacticalActionsActions
Major AcquisitionMajor AcquisitionExampleExample
Types of Competitive ActionsTypes of Competitive ActionsTypes of Competitive ActionsTypes of Competitive Actions
Strategic Strategic ActionsActionsStrategic Strategic ActionsActions
Price cutPrice cutExampleExample
Significant commitments of specific and distinctive organizational resourcesSignificant commitments of specific and distinctive organizational resources
Difficult to implementDifficult to implement
Difficult to reverseDifficult to reverse
Relatively easy to implementRelatively easy to implementRelatively easy to implementRelatively easy to implement
Relatively easy to reverseRelatively easy to reverseRelatively easy to reverseRelatively easy to reverse
Undertaken to “fine tune” strategyUndertaken to “fine tune” strategyUndertaken to “fine tune” strategyUndertaken to “fine tune” strategy
Gauging the Likelihood of ResponseGauging the Likelihood of Response
Actor’s ReputationActor’s ReputationMarket leaders are more likely to be copiedMarket leaders are more likely to be copiedMarket leaders are more likely to be copiedMarket leaders are more likely to be copied
““Risk taking” firms are less likely to be copiedRisk taking” firms are less likely to be copied““Risk taking” firms are less likely to be copiedRisk taking” firms are less likely to be copied
““Price Predators” are less likely to be copied Price Predators” are less likely to be copied ““Price Predators” are less likely to be copied Price Predators” are less likely to be copied
Type of Competitive Action -Tactical or StrategicType of Competitive Action -Tactical or Strategic
Easier to respond toEasier to respond to
Require fewer resources to mount a responseRequire fewer resources to mount a response
Market DependenceMarket Dependence
Competitor ResourcesCompetitor ResourcesSmaller firms are more likely to respond to tactical Smaller firms are more likely to respond to tactical actionsactionsSmaller firms are more likely to respond to tactical Smaller firms are more likely to respond to tactical actionsactions
Limited resources may lead to alternatives such as Limited resources may lead to alternatives such as Strategic AlliancesStrategic AlliancesLimited resources may lead to alternatives such as Limited resources may lead to alternatives such as Strategic AlliancesStrategic Alliances
Gauging the Likelihood of ResponseGauging the Likelihood of Response
Firms that are more dependent on a single industry are more likely to respond than are diversified firmsFirms that are more dependent on a single industry are more likely to respond than are diversified firms
Industry dependent firms will likely respond to either strategic or tactical actionsIndustry dependent firms will likely respond to either strategic or tactical actions
Some Firms Maintain Competitive Advantage Some Firms Maintain Competitive Advantage in Fast-Cycle Markets by Seizing the Initiativein Fast-Cycle Markets by Seizing the Initiative
Disrupting the Status QuoDisrupting the Status QuoIdentify new opportuntites to serve the customer by Identify new opportuntites to serve the customer by shifting the rules of competition through speed and varietyshifting the rules of competition through speed and variety
Creating Temporary AdvantageCreating Temporary AdvantageUse superior knowledge of the customer, technology and the Use superior knowledge of the customer, technology and the future to enhance customer orientation and empower future to enhance customer orientation and empower workersworkersSeizing the InitiativeSeizing the InitiativeMove aggressively into new areas of competition to create Move aggressively into new areas of competition to create new advantage and undermine a competitor’s old advantagenew advantage and undermine a competitor’s old advantage
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44 Sustaining the MomentumSustaining the MomentumTake several actions in a row in order to seize the initiative Take several actions in a row in order to seize the initiative and create momentum to develop new advantagesand create momentum to develop new advantages
Strategies may be deter-Strategies may be deter-mined by the life cycle of mined by the life cycle of the industrythe industry
Younger firms and Younger firms and emerging industries are emerging industries are generally characterized by generally characterized by entrepreneurial actionsentrepreneurial actions
Growth-oriented and Growth-oriented and Market-power strategies Market-power strategies dominate established or dominate established or mature industriesmature industries
Sustained Competitive
OutcomesOutcomes
Competitive Market TypesCompetitive Market TypesSlow, Standard or Fast Cycle
Competitive OutcomesCompetitive Outcomes
Advantage
Temporary Advantage
Evolutionary ActionsGrowth-Oriented Actions Market-Power Actions
Evolutionary ActionsGrowth-Oriented Actions Market-Power Actions
Evolutionary OutcomesEvolutionary Outcomes
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Relative SizeSpeed
InnovationQuality
Ability for Ability for Action and Action and ResponseResponse
OutcomesOutcomesDrivers of Drivers of
Competitive Competitive BehaviorBehaviorAwarenessMotivationCapability
Competitor Competitor AnalysisAnalysisMarket
Commonality
ResourceSimilarity
Interfirm Rivalry:Interfirm Rivalry:Attack & ResponseAttack & Response
Likelihood of AttackLikelihood of AttackFirst Mover Incentives
Likelihood of ResponseLikelihood of ResponseType of Competitive
Action
Dependence on theMarket
Resource Availability
Actor’s Reputation
CompetitiveCompetitive
Slow, Standardor Fast Cycle
Market TypesMarket Types
CompetitiveCompetitive
SustainedOutcomesOutcomes
CompetitiveAdvantageTemporaryAdvantageEvolutionaryEvolutionaryOutcomesOutcomes
Entrepreneurial
or Market-PowerGrowth-Oriented
Actions
FeedbackFeedback
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
An Action-Based Model of the An Action-Based Model of the Industry Life CycleIndustry Life Cycle
Key TaskKey Task
Exploiting Open Exploiting Open Niches (Blind Spots) Niches (Blind Spots)
and Competitive and Competitive UncertaintyUncertainty
Entrepreneurial Entrepreneurial ActionsActions
Key TaskKey Task
Growth-OrientedGrowth-OrientedActionsActions
Exploiting Factors Exploiting Factors of Productionof Production
Key TaskKey Task
Market-PowerMarket-PowerActionsActions
Exploiting Market Exploiting Market PositionPosition
Firm Resource Firm Resource &&
Market StrengthMarket Strength
Emerging StageEmerging Stage Growth StageGrowth Stage Mature StageMature Stage
TimeTime