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OUTLINE
The emergence of competitive advantage Sustaining competitive advantage Competitive advantage in different market settings Types of competitive advantage: cost and differentiation
External sources of change e.g.: Changing customer demand Changing prices Technological change
Characteristics of innovatory strategies: Associated with new entrants to an industry (e.g. Nucor in
steel, IKEA in furniture, Home Depot in DIY, Dell in PCs, American Apparel in casual clothing)
Reconfiguring the value chain e.g.-- Nikes system for manufacturing and distributing shoes totally different from traditional shoe manufacturer Southwest Airlines simplification of the normal airline value chain Zaras system of design, manufacture, and distribution
ISOLATING MECHANISM - Obscure superior performance - Deterrence--signal aggressive intentions to imitators - Pre-emption--exploit all available investment opportunities - Rely upon multiple sources of competitive advantage to create causal ambiguity
Diagnosis
Resource acquisition
- Base competitive advantage upon resources and capabilities that are immobile and difficult to replicate
Competitive Advantage in Different Industry Settings: Trading Markets and Production Markets
SOURCE OF IMPERFECTION OF COMPETITION None (efficient markets) Imperfect information Transactions costs Systematic behavioral trends Overshooting OPPORTUNITY FOR COMPETITIVE ADVANTAGE None Insider trading Cost minimization Superior diagnosis (e.g. chart analysis) Contrarianism Identify potential barriers to imitation (e.g. deterrence, preemption, causal ambiguity, resource immobility, etc.) & base strategy upon them. Difficult to influence or exploit.
MARKET TYPE
TRADING MARKETS
SOURCE OF COMPETITIVE ADVANTAGE Low cost Differentiation Industry-wide COMPETITIVE SCOPE Single Segment FOCUS COST LEADERSHIP DIFFERENTIATION
DIFFERENTIATION