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BENEFIT
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COMPETITIVE ADVANTAGE
In the Context of Strategic Management

CLAUDIOLEOPOLDOSUMAGAYSAYTAN
MANAG

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OBJ

PITFALL
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SUCCE

References
Fred R. David, Strategic Management: Concepts and Cases
Philip Kotler and Gary Armstrong, Principles of Marketing
M.E. Porter, Competitive Advantage, New York: Free Press, 1985.
R.M. Grant, Contemporary Strategy Analysis, Blackwell
Publishers, 2000.
Other Sources (Internet):
https://www.psychologytoday.com/blog/the-intuitivecompass/201108/what-is-intuition-and-how-do-we-use-it

http://sciencenordic.com/intuition-and-analytical-skills-mattermost-crisis

TOPICS
Competitive Advantage in the Context of
Strategic Management
Integrating analysis and intuition in Strategic
Management.
Benefits of Good Strategic Management
Pitfalls in Strategic Planning

OBJECTIVES
At the end of the report, the students should be able to:

Describethe
Discuss
Explain
how
the
need
a firm
benefits
formay
integrating
achieve
of good
analysis
competitive
strategic
andadvantage.
intuition
management
in strategic
and
management.
understand
the pitfalls of strategic planning.

STRATEGIC MANAGEMENT

Y
R
O
T
S
A
U
O
Y
L
L
E
T
E
M
LET

Once there were two company presidents


who competed in the same industry. These
two presidents decided to go on camping
trip to discuss a possible merger. They hiked
deep into the woods. Suddenly, they came
upon a grizzly bear that rose up on its hind
legs and snarled. Instantly, the first president
took off his knapsack and got out a pair of
jogging shoes. The second president said
Hey, you cant outrun that bear. The first
president responded, Maybe I cant outrun
that bear, but I surely can outrun you!

STRATEGIC MANAGEMENT

Defin
ition

It is the art and science of formulating,


implementing and evaluating CROSSFUNCTIONAL DECISIONS that enable
an organization to achieve its objectives.

STRATEGIC MANAGEMENT
It focuses on the following:
Integrating Management
Marketing
Finance/Accounting
Production/Operations
Research and Development
Information Systems
To a

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v
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Cont

COMPETITIVE ADVANTAGE

a basis for the firms long term success?


a basis for value creation?

?
e
l
b
a
n
i
a
t
s
u
s
Can it be

n
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Cont

COMPETITIVE ADVANTAGE
When two or more firms compete
within the same market, one firms
possesses a competitive advantage over
its rivals when it earns a persistently
higher rate of profit (or has the potential
to earn a persistently higher rate of
profit)
R. M. Grant, 2000

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o
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t
a
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Cont

COMPETITIVE ADVANTAGE

Competitive
Competitive
advantage
advantage

ct
u
d
pro st
r
a
il
co
Sim wer
o
at l
Hig
he
for
rp
un
ric
iqu
e
ep
rod
uc
t

Cost
Costadvantage
advantage

Differentiation
Differentiationadvantage
advantage

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Cont

COMPETITIVE STRATEGIES (PORTER)

Types of competitive advantage

Market

Low cost
Industry-wide

Niche

Differentiation

Cost leadership

Focus with
low cost

Differentiation

Focus with
differentiation

n
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Cont

FEATURES OF COMPETITIVE STRATEGIES

Differentiation

Cost Leadership

Efficient scale
Standardization
Design for low
production cost
Control of overheads
and R&D

Quality
Innovation
Design
Credibility
Brand name
Reputation
Environmental posture

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Cont

SUSTAINABLE
COMPETITIVE ADVANTAGE ?

What is meant by sustainable competitive


advantage?
Durable
Valuable to the firm
Exploiting weaknesses and neutralizing threats
Unique
Difficult for competitors to imitate
Not easily substitutable

How can COMPETITIVE ADVANTAGE be sustainable?

The firm must seek competitive advantage


in combining resources & capabilities
Develop resources and capabilities, which are

rare, valuable, non-tradable,


Make those resulting competences

sustainable by precluding imitation or


substitution by competitors

The firm must offer competitive products

INTUITION AND
ANALYSIS

INTUITION AND
ANALYSIS
ON?

INTUITI

Intuition is a process that gives us the


ability to know something directly
without analytic reasoning, bridging
the gap between the conscious and
non-conscious parts of our mind, and
also between instinct and reason.
.

Source: https://www.psychologytoday.com/blog/theintuitive-compass/201108/what-is-intuition-and-how-dowe-use-it

INTUITION AND
ANALYSIS
?
N
O
I
T
I
INTU

ABOUT

Based on past experiences, judgment and feelings,


most people recognize that intuition is essential to
making good strategic decisions.
.

Intuition is particularly useful for making decision in


situations of great uncertainty or little precedent.
It is also helpful when highly interrelated variables
exist or when it is necessary to choose from several
plausible alternatives.

INTUITION AND
?
ANALYSIS
N
O
I
T
I
INTU

ABOUT

Some manager and owners of businesses profess to


have extraordinary abilities for using intuition alone in
devising brilliant strategies.
.

FOR EXAMPLE:

Will Durant, who organized GM, was described by


Alfred Sloan as a man who would proceed on a
course of action guided solely, as far as I could tell, by
some intuitive flash of brilliance. He never felt obliged
to make an engineering hunt for the facts. Yet at times,
he was astoundingly correct in his judgment.

INTUITION AND
?
ANALYSIS
N
O
I
T
I
INTU

ABOUT

Albert Einstein acknowledged the importance


of intuition when he said ,I believe in intuition
and inspiration. At times I feel certain that I am
right while not knowing the reason. Imagination
is more important than knowledge, because
knowledge is limited, whereas imagination
embraces the entire world
.

INTUITION AND
Decision making
situations where intuitive approach
ANALYSIS
can help most include the following.
Expedient decision making and rapid response are
required. The circumstances leave you no time to go
through complete rational analysis.
Fast paced change. The factors on which you base your
analysis change rapidly.
The problem is poorly structured.
The factors and rules that you need to take into account
are hard to articulate in an unambiguous way.
You have to deal with ambiguous, incomplete, or
conflicting information.
There is no precedent.
.

When do you need intu


ition?

INTUITION AND
HOW ABO
ANALYSIS
UT

ANALYSIS
?

Making decisions in a thorough, systematic


manner. Spending time reviewing all the details
and making sure all decisions comply with
formal guidelines and requirements. For the
novice and the INEXPERIENCED, analysis is a
necessary tool in decision-making.
.

Source: http://sciencenordic.com/intuition-andanalytical-skills-matter-most-crisis

INTUITION AND
HOW ABO
ANALYSIS
UT

ANALYSIS
?

Peter Drucker,1974 says, I believe


in intuition only if you discipline it.
Hunch artists, who make diagnosis
but dont check it out with the facts,
are the ones in medicine who kill
people, and in management kill
businesses.
.

INTUITION AND
HOW ABO
ANALYSIS
UT

ANALYSIS
?

Bruce Henderson, 1979 The accelerating rate of


change today is producing a business world in which
customary managerial habits in organizations are
increasingly inadequate. Experience alone was an
adequate guide when changes could be made in small
increments. But intuitive and experience-based
management philosophies are grossly inadequate
when decisions are strategic and have major,
irreversible consequences.
.

INTUITION AND
ANALYSIS

Those who normally prefer combining


intuitive decisions with analysis made the
best decisions in the crisis situations,
Source: Bjrn T. Bakken: Intuition and analysis in
decision making. On the relationships between
cognitive style, cognitive processing, decision
behaviour, and task performance in a simulated
crisis management context, Series of Dissertation
9/2013. BI Norwegian Business School.
.

WHO MAD

E THE BES

T DECISIO

NS?

INTUITION AND
ANALYSIS
In a sense, the strategic management process is
an attempt both to duplicate what goes on in the
mind of a brilliant, intuitive person who knows the
business and to couple it with analysis
Source: Fred R. David, Strategic Management:
Concepts and Cases
.

WHO MAD

E THE BES

T DECISIO

NS?

Benefits of Good Strategic


Management
Research indicates that organizations using strategic management
concepts are more profitable and successful than those that do not.

Businesses using strategic-management concepts show significant


improvement in sales, profitability and productivity compared to
firms without systematic planning activities.
.

Firms with planning systems more closely resembling strategicmanagement theory generally exhibit superior long term financial
performance relative to their industry.

?
S
IT
F
E
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B
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IA
FINANC

Benefits of Good Strategic


Management
NON FINAN
CIAL BENE
FITS
It allows for identification, prioritization and
exploitation of opportunities.
It provides an objective view of management
problems.
It represents a framework for improved
coordination and control of activities.
It minimizes the effects of adverse conditions
and changes.

Benefits of Good Strategic


Management
NON FINAN
CIAL BENE
FITS
It allows more effective allocation of time and
resources to identify opportunities.
It allows fewer resources and less time to be
devoted to correcting erroneous or ad hoc
decisions.
It creates a framework for internal
communication among personnel.
It helps integrate the behaviour of individuals
into a total effort.

Benefits of Good Strategic


Management
NON FINAN
CIAL BENE
FITS

It provides
responsibilities.

basis

for

clarifying

individual

It encourages forward thinking.


.

It provides a cooperative, integrated and enthusiastic


approach to tackling problems and opportunities.
It encourages a favourable attitude toward change.
It gives a degree of discipline and formality to the
management of a business.

PITFALLS IN STRATEGIC
PLANNING
Some pitfalls to watch for and avoid in strategic
planning are these:

Using strategic planning to gain control over decisions and resources

PIT
FAL
L S?

PITFALLS IN STRATEGIC
PLANNING

Top manager making many intuitive decisions that conflict with the formal plan.

PIT
FAL
LS

PITFALLS IN STRATEGIC
PLANNING

Failing to involve key employees in all phases of planning.

PIT
FAL
LS

THANK YOU!