summary of lessons: 2 presentation by: courtney karcasinas, adam hall, robert brinkmann, justin...
TRANSCRIPT
SUMMARY OF LESSONS: 2Presentation By:
Courtney Karcasinas, Adam Hall, Robert Brinkmann, Justin Weden, & Stephen Gonzalez
Objectives
1.Understand the term “Competitive Advantage”
2. Predict potential for competition to wear away competitive advantage
3. Recognize how resource conditions create imperfections in the competitive process that offer opportunities for competitive advantage
4.Distinguish the two primary types: cost advantage and differentiation advantage
5.Use value chain framework to analyse potential sources of cost and differentiation advantage to recommend strategies for enhancing competitiveness
6. Appreciate the pitfalls of being ‘stuck in the middle’ and the challenge of achieving effective differentiation and low cost
1. Understand the term “Competitive Advantage”
When two or more firms compete within the
same market, one firm possesses a competitive
advantage over its rivals when it earns (or has the
potential to earn) a persistently higher rate of profit.
nderstand the term “Competitive Advantage”
In the long run competition wears away
differences in profitability between firms but eternal
and internal change can both create opportunities
for advantage and destroy them.
2. Predict potential for competition to wear away competitive advantage
Firms owning resources or having
capabilities that are in some way unique and offer
the firms some protection against imitation by
rivals.
3. Recognize how resource conditions create imperfections in the
competitive process that offer opportunities for competitive advantage
Competitive Advantage
Differentiation Advantage
Cost Advantage
Similar Product
at lower cost
Price Premiumfrom unique product
4. Distinguish the two primary types: cost advantage and differentiation advantage
1) Break down the firm into separate activities.
2) Establish the relative importance of different
activities in the total cost of the product.
3) Compare costs by activity.
4) Identify cost drivers.
5) Identify linkages.
6) Identify opportunities for reducing costs.
5. Use value chain framework to analyse potential sources of cost and
differentiation advantage to recommend strategies for enhancing competitiveness
Cost leadership and differentiation are
mutually exclusive strategies and firms that are
‘stuck in the middle’ are almost guaranteed low
profitability.
The most successful forms are often those
who have managed to differentiate themselves in a
highly cost-effective way.
6. Appreciate the pitfalls of being ‘stuck in the middle’ and the
challenge of achieving effective differentiation and low cost
Industry Life Cycle
ILC driving factors Demand Growth Production Knowledge
Demand Growth
Introduction Sales are often small
Growth Rapid market penetration
Maturity Stage Increased market saturation
Decline Stage Superior products are available from new
industries
Product Knowledge
Beginning Advances in product technology Consumers usually know little about
product Course of ILC
Customers become better informed Market expands Judge products better and make informed
decisions
Strategy at Various Stages of ILC Introduction
Product innovation and marketing Growth
Increase production efficiently and effectively Maturity
Cost efficiency, usually through mass production and lower input prices
Decline Find protected market niches, innovate, or exit
at appropriate time
Public and Not-for-profit Sectors Public
Ownership vested in government
Funding from government
Serve public interest
Not-for-profit Use excess funds for
organizational goals Usually in areas
such as education, health care, social services, arts and culture, and religion
Placed in special category for tax, regulatory, and legal purposes
Public and Not-for-profit Features
Multiple goals Different constraints than private sectors Market force absence Monopoly power Decreased flexibility Increased accountability Decreased Predictability
Types of Organizations
Stakeholder Analysis
Identify list of potential stakeholders Rank stakeholders by importance and
influence Find criteria each stakeholder will use to
judge performance See how organization is doing from
stakeholders’ perspective Identify how to satisfy each stakeholder Identify and record long term issues with
stakeholders, both individually and as a group
Scenario Analysis
Define purpose of analysis Decide on time horizon Identify key trends Identify key uncertainties Create scenarios and check for consistency Identify indicators that might signify which
scenario is unfolding Assess strategic implications of scenarios
Innovation Process The core aim of Boeing is to:
“ focus on the execution today and into the future in developing, producing and marketing commercial jet aircraft and providing related support services, principally to the commercial airline industry worldwide”
Invention: Creation of new product Innovation: the creation of new products and
processes through the development of new knowledge or from new combinations of existing knowledge.
The Jet Engine
Frank Witte first patented the engine in 1930.
In 1957, the first commercial jetliner, the De Havilland Comet, took flight.
Two years later, the Boeing 707 was introduced.
Boeing’s Value
Profitability of Innovation: Customers Value
Advance Aviation Performance Program: Provides 24/7 customer service support all
around the world Provide the best technical support to the
customers Delivers spare parts and equipment if urgently
needed
Four Factors to Competitive Advantage
Property Rights Tacitness and Complexity of the
technology Lead Time Complementary Resources
Property Rights
Intellectual Property: Patents Copyright, Trademarks Trade secrets
Patents: make the information public and only valid for 17 years
Tacitness and Complexity
Tacitness: In the absence of legal protection, the extent to which an innovation can be imitated by a competitor depends on how the innovation can be comprehended and replicated
Complexity: Boeing 787 Dreamliner
Boeing 787 Dreamliner
Able to carry passengers with non-stop point-to-point flights between secondary airports
Lead Time
Amount of time it will take followers to catch up Took 2 years to create the 707
Complementary Resources
Resources needed to finance, produce and market the innovation.
Boeing’s Resources
Airport Technology: planning and engineering
Boeing Capital Corporation: Airplane Financing
Commercial Aviation Services: Customer support, flight operations, fleets, maintenance, and material
management
Fuel Conservation Services: Increases fuel efficiency
Training Flight Services: Flight crew training activities
Strategies
Managing Risks: Market uncertainty 787 Dreamliner created to recover the
market shrink and compete with Airbus Began to lose market share after initial
success Delays in delivering products to customers
resulted in 120% increase in cost
Creating the Conditions for Innovation
People: Over $170,000 Facilities: 70 countries with 22,000
suppliers Information: Jet Engine Time: Founded in 1916
- Design organizational processes that capture, direct, and exploit individuals’ drive for success and commitment to their innovations.
4 Steps of Visualizing Strategy
Boeing 787
Before Boeing 787, the 767 was in line with competition.
Strategy canvas for Boeing 787 Included criteria such as:
Purchase Price Seating Capacity Maintenance Costs
Boeing 787 Four Actions
Eliminate
•Maintenance costs
Raise
•Passenger friendly environment•New aircraft (Boeing 787)
Reduce
•Purchase price
Create
•Fuel efficiency•Seating Capacity
Pioneer, Migrator, Settler Map
Overcoming Obstacles
Strategy should be the big picture and not solely numbers driven
Strategy canvases and the PMS map are good places to start
Details and numbers will fall into place.
First- Tier Noncustomers
“Soon to be” Noncustomers Minimal use of the market offering
Focus on similarities between first-tier customers to minimize chance of them leaving market
Second- Tier Noncustomers
“Refusing” Noncustomers Do not use or can’t afford the offering
Needs are met by something else, or are not met at all
Provide an untapped demand for the market
Third-Tier Noncustomers
Farthest away from an industry’s existing customers/cliental
“Unexplored” noncustomers Have not been targeted or thought of as
potential customers since their needs are thought to belong to another market.
Go for the Biggest Catchment Companies should focus on the tier that
represents the biggest catchment at the time.
Get the Strategic Sequence Right Buyer Utility
Is there a compelling reason for the mass of people to buy? Price
Is your offering price to attract the mass of the buyers so that they have a compelling ability to pay for your offering?
Cost Can you produce your offering at the target cost and still
earn a healthy profit margin? Adoption
What are the adoption hurdles among retailers or partners?
Ex: Netflix “Watching Instantly”
Buyer Utility
Is there a compelling reason for the mass of people to buy?
The Six Utility Levers
Price
Cost
Adoption
New ideas can be seen as threatening to the company.
Three main stakeholders may not accept new ideas, they are: Employees Partners General Public