Chapter 7 - The nature and sources of competitive advantage. This chapter presents the following content: The emergence of competitive advantage, sustaining competitive advantage, competitive advantage in different market settings, types of competitive advantage: cost and differentiation. | 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 OUTLINE 1 How does competitive advantage emerge? External sources of change .: 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 The Emergence of Competitive Advantage 2 Competitive Advantage from Internally-Generated Change: Strategic Innovation Characteristics of innovatory strategies: Associated with new entrants to an industry (. Nucor in steel, IKEA in furniture, Enron in energy, Home Depot in DIY, Dell in PCs) Reconcile conflicting performance goals (. 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 Nike’s system for manufacturing and distributing shoes totally different from traditional shoe manufacturer Southwest Airlines simplification of the normal airline value chain Zara’s system of design, manufacture, and distribution 3 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 Sustaining Competitive Advantage Against Imitation 4 Competitive Advantage in Different Market Settings SOURCE OF IMPERFECTION OF COMPETITION MARKET TYPE OPPORTUNITY FOR COMPETITIVE . | 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 OUTLINE 1 How does competitive advantage emerge? External sources of change .: 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 The Emergence of Competitive Advantage 2 Competitive Advantage from Internally-Generated Change: Strategic Innovation Characteristics of innovatory strategies: Associated with new entrants to an industry (. Nucor in steel, IKEA in furniture, Enron in energy, Home Depot in DIY, Dell in PCs) Reconcile conflicting performance goals (. Toyota’s lean production system combines low cost, high quality, and flexibility.
