Identify barriers to imitation (e.g. deterrence, preemption, causal ambiguity, resource immobility,barriers to resource replication) & base strategy upon them. Difficult to infl[r]
(1)The Nature and Sources of Competitive Advantage
The Nature and Sources of Competitive Advantage
• The emergence of competitive advantage • Sustaining competitive advantage
• Competitive advantage in different market
settings
• Types of competitive advantage: cost and
differentiation
(2)How does competitive advantage emerge?
External sources of change e.g.:
•Changing customer demand •Changing prices
•Technological change
Internal sources of change
Resource heterogeneity among firms means
differential impact
Some firms faster and more effective in exploiting change
Some firms
have greater creative and innovative
capability
(3)Competitive Advantage from Internally-Generated Change: Strategic Innovation Competitive Advantage from Internally-Generated Change: Strategic Innovation
Characteristics of innovatory strategies:
– Associated with new entrants to an industry (e.g Nucor in steel, IKEA in furniture, Enron in energy, Home Depot in DIY, Dell in PCs)
– Reconcile conflicting performance goals (e.g Toyota’s lean production system combines low cost, high quality, and flexibility Richardson Sheffield in kitchen knives is low cost, innovative and customer responsive.)
– Reconfiguring the value chain
e.g. -• Nike’s system for manufacturing and distributing shoes totally
different from traditional shoe manufacturer
(4)REQUIREMENT FOR IMITATION
Identification - Obscure superior performance - Deterrence signal aggressive Incentives for imitation intentions to imitators
- Pre-emption exploit all available investment opportunities
- Rely upon multiple sources of Diagnosis competitive advantage to create
“causal ambiguity”
- Base competitive advantage upon Resource acquisition resources and capabilities that are
immobile and difficult to replicate
ISOLATING MECHANISM
(5)Competitive Advantage in Different Market Settings
Competitive Advantage in Different Market Settings
SOURCE OF IMPERFECTION OF COMPETITION
MARKET TYPE OPPORTUNITY FOR
COMPETITIVE ADVANTAGE
TRADING MARKETS
•None (efficient markets)
•Imperfect information availability •Transactions costs
•Systematic behavioral trends •Overshooting
None
Insider trading Cost minimization Superior diagnosis (e.g chart analysis) Contrarianism
PRODUCTION MARKETS
•Barriers to imitation
•Barriers to innovation
Identify barriers to imitation (e.g deterrence, preemption, causal ambiguity, resource immobility,barriers to resource replication) & base strategy upon them.
(6)TRADING MARKETS
•None (efficient markets)
•Imperfect information availability •Transactions costs
•Systematic behavioral trends •Overshooting
None
Insider trading Cost minimization Superior diagnosis (e.g chart analysis) Contrarianism
PRODUCTION MARKETS
•Barriers to imitation
•Barriers to innovation
Identify barriers to imitation (e.g deterrence, preemption, causal ambiguity, resource immobility,barriers to resource replication) & base strategy upon them.
Difficult to influence or exploit.
MARKET TYPE SOURCE OF IMPERFECTION OF COMPETITION OPPORTUNITY FOR COMPETITIVE ADVANTAGE
(7)Sources of Competitive Advantage Sources of Competitive Advantage
COST ADVANTAGE
COST ADVANTAGE
DIFFERENTIATION ADVANTAGE
DIFFERENTIATION ADVANTAGE
COMPETITIVE ADVANTAGE
COMPETITIVE ADVANTAGE
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