The document discusses competitive advantage and how organizations can achieve it. It defines competitive advantage as performing activities differently or delivering unique value compared to rivals. It discusses Michael Porter's diamond model and the four building blocks of competitive advantage - low cost, differentiation, quality, and customer responsiveness. Finally, it argues that an organization's people and culture are the ultimate source of competitive advantage, as they are difficult for competitors to replicate.

1. Competitive Advantage
Prof.Dr.Aung Tun Thet

2. Competitive Advantage
Prof.Dr.Aung Tun Thet

8. Competitive Advantage
• Being different
• Choosing to perform activities differently
• Perform different activities than rivals
• Deliver unique value

9. Diamond Model
Firm Strategy,
Structure and
Rivalry
Demand
Conditions
Factor
Conditions
Related and
Supporting
Industries
Chance
Government

10. 4 Building Blocks of Competitive Advantage
• Low Cost
• Differentiation
Competitive
Advantage
Superior Quality
Superior
Customer
Responsiveness
Superior
Innovation
Superior
Efficiency

11. 5 Forces That Shape Industry Competition
Rivalry
Among
Existing
Competitors
Threat of
New Entrants
Threat of
Substitute Products
Bargaining Power of
Suppliers
Bargaining Power of
Buyers

12. Competitive Advantage
Firm Competitors
New Market
Entrants
Suppliers
Customers
Substitute
Products

13. Competitive Advantage
Cost Advantage
Differentiation
Advantage
(Similar products at lower price) (Price premium from unique product)

14. Generic Strategies
Competitive Advantage
Low Cost Higher Cost
Competitive
Scope
Broad
Narrow
Cost Focus
Cost
Leadership
Differentiation
Differentiation
Focus

15. Sustainable Competitive
Advantage

17. 19th Century
• “If a man make a better mouse-trap than his neighbour,
• the world will make a beaten path to his door.”

18. 21st Century
• Manage for uniqueness
• Develop distinctive competence
• Create competitive advantage

19. Three competitive hot spots
1. Product innovation: Competitors secure detailed
information on 70% of all new products within year of
development; Patenting do not deter imitation;
Imitation costs 1/3rd less than innovation and 1/3rd
quicker
2. Production: New processes harder to protect; 60% to
90% of all “learning” diffuse to competitors
3. Marketing: Rivals react by adjusting marketing mix

20. Sustainable Competitive Advantage
• Two key questions:
1. Which advantages sustainable?
2. Why?

21. Sustainable Competitive Advantage
• Three categories
1. Size in targeted market
2. Superior access to resources or customers
3. Restrictions on competitors’ options

22. 1. Benefits of Size

23. Size Advantage
• Markets finite
• Competitors resign themselves to remaining smaller
• Fear if they matched leader’s size
• Supply exceed demand to make market unprofitable for
everyone

24. Size Advantage
• Commitment to being large - making durable,
irreversible investments
• Exploit opportunities
• Preempt competitors
• “First-movers”

25. Size Advantage
• Three bases:
1. Scale
2. Experience
3. Scope

26. Scale economies
• National, regional, or local level
• Not confined to manufacturing
• Wal-Mart

27. Experience effects
• Size over time
• Not at particular point in time
• Irreversible, market-specific investment

28. Scope Economies
• Milacron - largest U.S. machine tool manufacturer
• R&D
• Sales and service networks
• Robotics
• Activities coordinated
• Contributions from one business to success of another
• Hard to implement

29. 2. Access Advantages

30. Preferred Access
• Resources or customers
• Sustainable advantage independent of size

31. Preferred Access
• Two conditions:
• Secured under better terms than competitors
• Enforceable over long run

32. Enforceability
• Ownership
• Binding contracts
• Self-enforcing mechanisms

33. Know-how
• Cumulative investments in R&D
• Hidden - what rivals don’t see
• Kept secret to yield advantage

34. Inputs
• Supply bounded
• Strictly limited supply

35. Markets
• Mirror image of preferred access to inputs
• Self-enforcing mechanisms - reputation, relationships,
switching costs, and product complementarities
• Sensitive to customer preferences

36. 3. Exercising Options

37. Sustainability of Advantage
• Not on size or access
• Competitors’ options differ fundamental
• Inability to imitate

38. Sustainability of Advantage
• Rivals frozen into current positions:
• Public policy
• Defense
• Response lags

39. Guidelines for Strategy
• 1. Managers cannot ignore contestable advantages
• 2. Distinction between contestable and sustainable
advantages matter of degree
• 3. Not all industries offer equal opportunities to sustain
advantage
• 4. Blessed with competitors with restricted menu of
options or preempt them

40. Guidelines for Strategy
• Two things
1. Commitment to competing particular way
2. Flexibility to compete effectively in other ways

41. People Are Competitive
Advantage

43. Best way to get out in front
• High tech development
• Access to financial assets
• R & D
• …..

44. Best way to get out in front
• Increasingly ineffective
• Technologies merge
• Regulations relaxed
• Powerful strategic alliances

45. Savvy fast-growing companies
• Achieve competitive advantage through own people and
organizational capabilities
• Create value:
• Differ from competitors’ approaches
• Not easily copied

46. Competitors
• Obtain capital and technology
• Match creative pricing strategies
• Difficult to recreate culture, value system, operating
principles, leadership style and management
philosophy
• People foundation of organizational capability

47. Organizational Capability
• Anticipate and adapt to changing customer needs and
marketplace forces
• Through people, culture, internal structures, policies
and practices

48. Analogy
• Tree
• Flowers, leaves and fruit - value it delivers
• Roots represent organizational capability

49. Organizational Capability
• Hidden below surface
• Contributes to success
• Cannot be easily copied
• Premier competitive advantage

50. Organizational Capability
• Intellectual capital
• Minds and hearts of people – not buildings, tools,
financial capital
• Differentiate and grow business – beat competition

51. FINANCIAL REWARDS
Rapid Growth
Profits
CUSTOMER BENEFITS
Customer focused decision
making
Customer satisfaction
Innovative products
OPERATIONAL PERSPECTIVES
roduct development
Quick to market
ORGANIZATIONAL
CAPABILITY
Innovative HR practices
Team culture
Effective Communication
Common ways of working
Employer of choice

52. Culture for Excellence

53. Employee Involvement
• Authority . Information/Communication
• Company Knowledge . Recognition/Rewards
• Individual Knowledge . Rewards/Performance
COMPETITIVE ADVANTAGE
• Employee Morale
• Turnover
• Customer Satisfaction
• Financial Performance
Quality of Work/
Life
• Balance
• Work Load
• Diversity
• Job Security
• Resources
Service Quality
• Top
Management
Commitment
• Quality
emphasis
• Improvement/
Innovation
• Teamwork

54. Employee Involvement
• Make decisions and contribute (Authority)
• Understand business and how organization operates
(Company Knowledge)
• Learning and development opportunities (Individual
Knowledge)

55. Employee Involvement
• Open and ongoing communication between management
and employees (Information & Communication)
• Recognition and rewards for contributions (Recognition
& Rewards)
• Link between rewards and performance (Rewards-
Performance Link)

56. Quality of Work Life
• Employees receive both personal and work-related
support
• Employees:
• Balance work and personal demands effectively
(Balance)
• Challenging but reasonable work loads (Work Load)

57. Quality of Work Life
• Treated fairly regardless of demographic differences -
gender and race (Diversity)
• Reasonable level of job security (Job Security)
• Tools, materials and equipment to perform jobs
effectively (Resources)

60. Thank You!