Lecture 1 - Competitive advantage

Question 1

Why do orgs need strategy?

Answer 1

• To help them organise, compete, communicate, succeed
• Helps achieve desired org goals/tasks/targets

Question 2

What factors help make strategy successful?

Answer 2

1. Consistent and long-term goals
2. Understanding the competitive environment
3. Objective appraisal of resources
4. Effective implementation

Question 3

What is competitive advantage?

Answer 3

A sustainable and difficult to replicate advantage that an org has over competition, that allows them to have more value in the eyes of customers

Question 4

Why do organisations compete?

Answer 4

• Survival
• Profitability
• Growth
• Expectations (stakeholders/ shareholders)
• legal (codified/contractual)
• Social norms and values

Question 5

1. Strategy steps: How do you identify the current strategy?

Answer 5

• What is the blueprint for success?
• What markets does the firm or organisation serve?
• How does it differentiate itself?
• Goals/ Mission/ values

Question 6

2. Strategy steps: how do you appraise performance?

Answer 6

• Sustainable competitive advantage: repeatedly outperforming rivals long-term
• Profit or loss, share price, dividends
• Other financial data
• Market share

Question 7

3. Strategy steps: How do you diagnose performance?

Answer 7

• identify factors what positively and negatively impact performance
• financial diagnostics
• industry analysis
• Resources and capabilities

Question 8

4. Strategy steps: How do you perform an industry analysis?

Answer 8

• What are current competitive dynamics
• Is the firm located favourably in the market
• Does the firm fit in its external environment
• Are there points of misalignment
• How dynamic is the industry
• How likely is change

Question 9

5. Strategy steps: How do you analyse resources and capabilties?

Answer 9

• Does the firm have resources and capabilities to effectively compete
• Does the firm need to acquire new resources and capabilities to compete
• Does it have surplus resources
• Are capabilities effectively deployed

Question 10

6. Strategy steps: how do you formulate strategy?

Answer 10

• What can we do about identified issues
• What actions should the firm take
• Appraise different strategic options
• Critically evaluate these options for sustainability
• Not always highly specific

Question 11

7. Strategic steps: what is the final step of strategy?

Answer 11

Implement the chosen strategy

Question 12

How does an organisation identify sources of competitive strategy?

Answer 12

1. Is there a competitive advantage in its industry position
2. Can competitive advantages be gained from own advantages
3. Are competitive advantages gained from one source

Question 13

What are external sources of competitive advantages?

Answer 13

• Changing consumer demand
• Technological change
• Depends on resources and capabilities

Question 14

What are some sources of internal competitive advntages?

Answer 14

• Innovation (new products, markets, segments)
• Value chains
• Unique resources and capabilities

Question 15

Business models: What is value creation?

Answer 15

Addressing specific customer needs and problems

Question 16

Business models: What is value configuration?

Answer 16

Configuration of resources and activities that produce this value

Question 17

Business models: What is value capture?

Answer 17

Explains how revenue streams and cost structures allow orgs and stakeholders to gain share of value created

Question 18

What is competitive strategy?

Answer 18

How the company achieves competitive advantages

Question 19

What are some generic competitive strategies?

Answer 19

• Cost leadership
• product differentiation

Question 20

What are Porter’s generic strategies?

Answer 20

• Source of competitive advantage
• Competitive scope
• Cost leadership vs focus
• Differentiation

Question 21

What are some other competitive strategies?

Answer 21

• Operational excellence
• Product leadership
• Customer intimacy

Question 22

Competitive strategies: What is operational excellence?

Answer 22

• Meet buyer’s need for reliability and low cost
• Value chain = standardised products, lean production and distribution

Question 23

Competitive strategies: What is product leadership?

Answer 23

• Meet buyer’s need for special features or advanced performance
• Value chain = emphasise innovation, differentiation, collaboration between marketing & R&D

Question 24

Competitive strategies: What is customer intimacy?

Answer 24

• Meet buyer’s need for tailored solution to problems
• Value chain = client-specific, flexibility, empowerment of employees close to customers (feedback)

Question 25

What are dual/hybrid competitive advantages?

Answer 25

Having multiple competitive advantages in your strategy?

Question 26

When can dual competitive advantages be useful?

Answer 26

- Firms offering high quality products expanding market share can use economies of scale and learning - Learning economies may be more important for high quality production than for low quality - High quality producers may be more efficient producers

Question 27

How can competitive advantages be sustained?

Answer 27

- Make capabilities and resources difficult to imitate - Deterrence (e.g. patents, legal action) - Per-emption of investment opportunities

Question 28

What is the resource-based view (RBV)?

Answer 28

- Reasoning for org success ~20% Industry effects ~ 30-45% Firm effects ~ 30-50% other effects (corporate parent/ year effects/ unexplained)