Strategies for competitive advantage

Collaboration is not an option. Everything is available to everyone. Your business needs strategies for competitive advantage. This presentation helps you to start thinking in the direction.

1. Strategies for Competitive Advantage –
Rajiv B Deo
1/135
Strategies in Action
“Even if you’re on the right
track, you’ll get run over if
you just sit there.”
- Will Rogers

2. Strategies for Competitive Advantage –
Rajiv B Deo
Fundamentals of Competitive Strategy
Superior Long-Run Performance
Attractive Industry Structure Competitive Advantage
Superior Competitive
Position
Operational
Effectiveness
Do different things than rivals
Do the same things as rivals
but better
The central goal
High returns for the average
participant
Outperform the average industry
participant

3. Strategies for Competitive Advantage –
Rajiv B Deo
Hierarchies of Strategy
Corporate Strategy: is concerned primarily with answering the question: What set of
businesses should we be in?
Scope and resource deployments among businesses
are the primary components of corporate level strategy. The major policy decisions are
financial structure and organizational structure.

Business Strategy: is concerned primarily with answering the question: How to compete
in a particular industry or product/market segment.
Distinctive competences
and competitive advantage are the most important components of business level strategy. The
major policy decisions are product/market segmentation and evolution.
Functional Area Strategy: At the functional area level, the principal focus of strategy is on the
maximization of resource productivity
Ref.: Hofer and Schendel, 1978

4. Strategies for Competitive Advantage –
Rajiv B Deo
4/135
Common pitfalls
Strategists should avoid –

Managing by Extrapolation
Managing by Crisis
Managing by Subjectivism
Managing by Hope

5. Strategies for Competitive Advantage –
Rajiv B Deo
Strength of Competition -Five Forces Model

6. Strategies for Competitive Advantage –
Rajiv B Deo
Effective Cost Leaders can remain profitable even when
the
Five Forces appear unattractive
Threat of
New
Entrants
Bargaining
Power of
Suppliers
Threat of
Substitute
Products
Can frighten off New Entrants due to the
need to:
Enter at Large Scale to be Cost
Competitive
*
Take time to move down the
“Learning Curve”
*
Well positioned relative to
Substitutes in order to:
Make investments to create substitutes *
Can buy patents developed by potential
substitutes
*
Lower prices to maintain value position *
Rivalry Among
Competing Firms in
Industry
Can mitigate Buyer Power by:
Bargaining
Power of
Buyers
Driving prices far below competitors which may cause exit and shift power back to firm
Can mitigate Supplier Power by:
Low cost position makes them better able to absorb cost increases
*
More likely to make very large purchases which reduces chance of supplier power
*
Ref.: Porter, 1985

7. Strategies for Competitive Advantage –
Rajiv B Deo
Applying 5 forces model to Coke & Pepsi

8. Strategies for Competitive Advantage –
Rajiv B Deo
8/135
Michael Porter’s Generic Strategies

9. Strategies for Competitive Advantage –
Rajiv B Deo
9/135
Risks of Generic Competitive Strategies
Risks of Cost Leadership
Cost leadership is not
sustained:
• Competitors imitate.
• Technology changes.
• Other bases for cost
leadership erode.
Proximity in differentiation is
lost.
Cost focusers achieve even
lower cost in segments.
Risks of Differentiation
Differentiation is not sustained:
• Competitors imitate.
• Bases for differentiation
become less important to
buyers.
Cost proximity is lost.
Differentiation focusers achieve
even greater differentiation in
segments.
Risks of Focus
The focus strategy is imitated:
The target segment becomes
structurally unattractive:
• Structure erodes.
• Demand disappears.
Broadly targeted competitors
overwhelm the segment:
• The segment’s
differences from other
segments narrow.
• The advantages of a
broad line increase.
New focusers sub- segment the
industry.

10. Strategies for Competitive Advantage –
Rajiv B Deo
Strategy
An integrated and coordinated set of actions taken to exploit
core competencies and gain a competitive advantage.
Business Level
Strategy
Actions taken to provide value to customers
and gain a competitive advantage by exploiting
core competencies in specific, individual
product markets.
Core
Competency
The resources and capabilities that have been determined to
be a source of competitive advantage for a firm over its rivals.
Business Level Strategy

11. Strategies for Competitive Advantage –
Rajiv B Deo
Value Chain Analysis
Support
Activities
Primary Activities
Technological Development
Human Resource Management
Firm Infrastructure
Procurement
Inbound
Logistics
Operations
Outbound
Logistics
Marketing
& Sales
Service
Ref.: Porter, 1985

12. Strategies for Competitive Advantage –
Rajiv B Deo
Value Creating Activities common to a
Cost Leadership Business
Primary Activities
Support
Activities
Cost Effective
MIS Systems
Relatively Few
Management Layers to
Reduce Overhead
Simplified Planning
Practices to Reduce
Planning Costs
Consistent Policies to
Reduce Turnover Costs
Effective Training Programs to
Improve Worker Efficiency and
Effectiveness
Highly Efficient
Systems to Link
Suppliers’ Products
with the Firm’s
Production
Processes
Timing of Asset
Purchases
Efficient Plant
Scale to Minimize
Manufacturing
Costs
Selection of Low
Cost Transport
Carriers
Delivery Schedule
that Reduces
Costs
National Scale
Advertising
Products Priced to
Generate Sales
Volume
Small, Highly
Trained Sales Force
Effective Product
Installations to
Reduce Frequency
and Severity
of Recalls
Easy-to-Use Manufacturing
Technologies
Investments in Technology in order to
Reduce Costs Associated with
Manufacturing Processes
Systems and Procedures to find the
Lowest Cost Products to Purchase Raw
Materials
Frequent Evaluation Processes to
Monitor Suppliers’ Performances
Located in Close
Proximity with
Suppliers
Policy Choice of
Plant Technology
Organizational
Learning
Efficient Order Sizes
Interrelationships
with Sister Units
Ref.: Porter, 1985

13. Strategies for Competitive Advantage –
Rajiv B Deo
Three Key Questions
2
How can a group of linked value activities be
regrouped or reordered?
3
How might coalitions with other firms lower or eliminate costs?
1
How can an activity be performed differently or even eliminated?

14. Strategies for Competitive Advantage –
Rajiv B Deo
14/135
TOWS Matrix

15. Strategies for Competitive Advantage –
Rajiv B Deo
15/135
Business Strategies
Business Strategy:

Focuses on improving the competitive position of a
company’s or business unit’s products or services
within the specific industry or market segment that the
firm serves.

16. Strategies for Competitive Advantage –
Rajiv B Deo
16/135
Porter’s Competitive Strategies
Competitive Strategy:
Low cost?
Differentiation?
Compete head to head in large market?
Focus on niche?

17. Strategies for Competitive Advantage –
Rajiv B Deo
Michael Porter’s Generic Competitive Strategies

18. Strategies for Competitive Advantage –
Rajiv B Deo
18/135
Porter’s Competitive Strategies
Generic Competitive Strategies:
Lower cost strategy
Design, produce, market more efficiently than competitors
Differentiation strategy
Unique and superior value in terms of product quality, features,
service

19. Strategies for Competitive Advantage –
Rajiv B Deo
19/135
Porter’s Competitive Strategies
Competitive Advantage:
Determined by Competitive Scope
Breadth of the company’s target market

20. Strategies for Competitive Advantage –
Rajiv B Deo
20/135
Porter’s Competitive Strategies
Cost Leadership:
Low-cost competitive strategy
Aimed at broad mass market
Aggressive construction of efficient-scale facilities
Cost reductions
Cost minimization

21. Strategies for Competitive Advantage –
Rajiv B Deo
21/135
Porter’s Competitive Strategies
Differentiation:
Broad mass market
Unique product or service
Charge premiums
Lower customer sensitivity to price

22. Strategies for Competitive Advantage –
Rajiv B Deo
22/135
Porter’s Competitive Strategies
Cost focus:
Low cost competitive strategy
Focus on particular buyer group or market
Niche focused
Seek cost advantage in target market

23. Strategies for Competitive Advantage –
Rajiv B Deo
23/135
Porter’s Competitive Strategies
Differentiation focus:
Focus on particular group or geographic market
Seek differentiation in targeted market segment
Serve special needs of narrow target market

24. Strategies for Competitive Advantage –
Rajiv B Deo
24/135
Porter’s Competitive Strategies
Stuck in the middle:
No competitive advantage
Below-average performance

25. Strategies for Competitive Advantage –
Rajiv B Deo
25/135
Competitive Strategy
Industry Structure:
Fragmented Industry
Many small and medium-sized local companies compete for small
shares of total market
Focus strategies predominate

26. Strategies for Competitive Advantage –
Rajiv B Deo
26/135
Competitive Strategy
Industry Structure:
Consolidated industry
Mature industry dominated by a few large companies
Cost Leadership or Differentiation predominate

27. Strategies for Competitive Advantage –
Rajiv B Deo
27/135
Dimensions of Quality
Quality
•Performance
•Features
•Reliability
•Conformance
•Durability
•Serviceability
•Aesthetics
•Perceived Quality
Dimensions

28. Strategies for Competitive Advantage –
Rajiv B Deo
28/135
Competitive Strategy
Strategic rollup:
Quickly consolidate fragmented industry
Money from venture capital
Entrepreneur acquires hundreds of owner-operated firms
Creates large firm with economies of scale

29. Strategies for Competitive Advantage –
Rajiv B Deo
29/135
Competitive Strategy
Strategic rollup:
Differ from Conventional M&A’s
Large number of firms
Owner-operated firms
Goal to reinvent entire industry

30. Strategies for Competitive Advantage –
Rajiv B Deo
30/135
Competitive Tactics
Tactic:
Specific operating plan detailing how a strategy is to be implemented in
terms of when and where it is to be put into action.
Timing tactics
Market location tactics

31. Strategies for Competitive Advantage –
Rajiv B Deo
31/135
Competitive Tactics
Timing Tactics:
First mover (pioneer)
Reputation as industry leader
High profits
Sets standards for subsequent products in the industry
Late mover
Able to imitate technological advances of others
Keeps R&D costs down
Keeps risks down

32. Strategies for Competitive Advantage –
Rajiv B Deo
32/135
Competitive Tactics
Market Location Tactics:
Offensive Tactics
Frontal assault
Flanking maneuver
Bypass attack
Encirclement
Guerrilla warfare

33. Strategies for Competitive Advantage –
Rajiv B Deo
33/135
Competitive Tactics
Market Location Tactics:
Defensive Tactics
Raise structural barriers
Increase expected retaliation
Lower the inducement for attack

34. Strategies for Competitive Advantage –
Rajiv B Deo
34/135
Cooperative Strategies
Cooperative Strategies:
Collusion
Active cooperation of firms to reduce output and raise prices
Explicit
Tacit

35. Strategies for Competitive Advantage –
Rajiv B Deo
35/135
Cooperative Strategies
Cooperative Strategies:
Strategic Alliance:
Partnership of two or more corporations or business units
to achieve strategically significant objectives that are
mutually beneficial.

36. Strategies for Competitive Advantage –
Rajiv B Deo
36/135
Cooperative Strategies
Strategic
Alliance
Access to markets
Achieve competitive
advantage
Obtain technology
Reduce financial risk
Reduce political risk

37. Strategies for Competitive Advantage –
Rajiv B Deo
37/135
Continuum of Strategic Alliances
Mutual Service
Consortia
Joint Venture
Licensing Arrangement
Weak and Distant
Value- Chain
Partnership
Strong and Close
Source: Suggested by R. M. Kanter, “Collaborative Advantage: The Art of Alliances,” Harvard Business Review (July-August 1994), pp.
96–108.

38. Strategies for Competitive Advantage –
Rajiv B Deo
•Competitive advantage – a company provides a product or service
in a way that customers value more than what the competition is able
to do.

•Application architect - information technology professional who can
design creative technology-based business solutions.
Introduction

39. Strategies for Competitive Advantage –
Rajiv B Deo
Developing A Strategy For The Internet
Age
The Value Chain
•Business process - a standardized set of activities that
accomplishes a specific task, such as processing a
customer’s order.

•Value chain - views the organization as a chain – or series –
of processes, each of which adds value to the product or
service for the customer.

40. Strategies for Competitive Advantage –
Rajiv B Deo
The Value Chain model

41. Strategies for Competitive Advantage –
Rajiv B Deo
Using Value Chain model to develop a Strategy
•Plan for a better way of meeting customer demands.
•Identifying processes that add value.
•Identifying processes that reduce value.

42. Strategies for Competitive Advantage –
Rajiv B Deo
Developing A Strategy For The Internet
Age
The Value Chain

43. Strategies for Competitive Advantage –
Rajiv B Deo
Developing A Strategy For The Internet
Age
The Value Chain

44. Strategies for Competitive Advantage –
Rajiv B Deo
Developing A Strategy For The Internet
Age
Looking Beyond The Four Walls Of The Company
•Just-in-time - an approach that produces or delivers a product or service just at
the time the customer wants it.

•Supply chain - consists of the paths reaching out to all of a company’s suppliers
of parts and services.

•Collaborative planning, forecasting, and replenishment (CPFR) - a concept
that encourages and facilitates collaborative processes between members of a
supply chain.

45. Strategies for Competitive Advantage –
Rajiv B Deo
Summing It Up

Important considerations you should keep in mind as you work
to bring an IT competitive advantage to your organization
include:
Be efficient and effective.
Competition is all around you.
Push the state- of-the-art.
IT competitive advantages are only temporary.