Developing A Competitive Strategy

1. Developing a Competitive Strategy
By: Anil Gupta
Kelby Schwender
Dr. Plummer
BA 422W - Strategic Business Planning

2. What Is Your Competitive Advantage?

3. Competitive
advantage is always
relative
● Competitive advantage is whether your business
is better, faster, and/or cheaper than your
competitors
● Competitive advantage is a relative concept and
it is always market-specific
Sum up
Assuming that your company is not a monopoly, which
is rarely if ever the case,how well you do depends not
on how good your products and services are in absolute
terms, but whether they are better and/or less expensive
for the customer in relative terms. Further, you need to
make sure that your relative advantages is ongoing,
sustainable and not transitory.

4. Competing through
disruption
● There are three strategies that newcomers or
existing players can do to disrupt the current
dynamics of an industry
1. Decide who your target customers will be
2. Define what products and services your
business will offer
3. Design your businesses value chain
through which you will create and deliver
these products and services

5. Competitive
advantage is never
permanent
● A successful companies biggest mistake is
becoming dumb, fat, and happy.
● One disruption in a business can pose a potential
threat towards a businesses competitive
advantage
● Businesses must be proactive and pursue growth
“Change is the only constant out there; one should never
become complacent”

6. The two faces of
competitive
advantage
● There are two phases when it comes to competitive
advantage
1. Onstage
2. Backstage
● “Onstage competitive advantage (or disadvantage)
refers to the perceptions of target customers about
how your goods and services compare with those of
competitors along the criteria that are important to
them in making their buying decisions. Onestage
competitive analysis must always be the starting
point in figuring out what competitive advantage you
do or do not enjoy”
● “Backstage competitive advantage (or disadvantage)
refers to how your resources, capabilities, and
relationships compare with those of competitors.
Backstage advantages are what enable the company
to create and sustain onstage advantages.”
● Know and understand your businesses onstage and
backstage competitive advantages and disadvantages

7. Sources of Onstage Advantage

8. Understanding
industry dynamics
● Turning a shoulder to an industries dynamics is
absolutely foolish
● There is a two layered system or approach that
businesses can take when analyzing the emerging
dynamics of their industry (systematic manner)
○ Layer 1 focuses on the industries ecosystem
that immediately surrounds the company
■ There are four parts to an industries
ecosystem: suppliers, customers,
complementors, and competitors
○ Layer 2 focuses on the broader
socioeconomic, political, and technology
contexts which all industries are embedded
● A business must follow, analyze, and understand
how dynamics in their company evolve and how
they may affect the immediate business

9. Managing
complementors
● A businesses complementors are strategically
important
○ They are your businesses allies
○ They are economic competitors
○ There is a risk that a complementor may
expand into the arena that your businesses
is in and become your direct competition
● It is very important that businesses manage and
maintain their relationships with complementors;
have open communication (daily)
● It is a good idea to nurture the complementors
because their effectiveness and efficiency plays
in an important role in the increasing customer
value and enlarging the size of the potential,
overall market

10. Deep customer
alignment
● Customer alignment is matching what your
business sells and delivers with what the
customer really wants and needs.
● If a business can figure out how to achieve
deeper customer alignment without creating a
big increase in the price customers have to pay
then it can create a bigger onstage competitive
advantage for the business
● With deep customer alignment a business is
tailoring to the customer(s) specific needs and
wants

11. Focus on the entire
purchase-and-
consumption cycle
● When your company has a greater number of
points in the entire purchase and consumption
cycle it creates a competitive advantage in the
company and it makes it harder for a customer to
switch from your business to a competitor's
○ Great number of points in the cycle,
competitive advantage, and loyal
customers help defend and expand your
businesses market share and it also
reduces the commoditization of your
business

12. Sources of Backstage Advantage

13. Superior value-chain
architecture
● Competitive advantage that comes from a
superior value-chain architecture generally
provides a “knockout punch” to the competitors
● It is important that businesses map out and
understand their entire value chain of the
company -- “how raw material and raw talent get
converted into valuable products and services”

14. Relationship
advantage
● Relationship advantages are important to not just
customers but also other competitors in the
ecosystem
● Relationship advantages is deep rooted in
customer alignment

15. Competing through
innovation
● Innovation alludes to the creation of a
technology, a product, a service, a process, or
even an entire business model that is new and
potentially superior
● The opportunities in innovation lie in almost
anything and everything that a business does
● Businesses gain a “first-mover” advantage from
innovation
● A businesses top leaders should provide people
the requisite freedom and the resources to
experiment; experimentation leads to innovation
● A businesses top leaders should put a system in
place where potentially valuable innovations are
supported, recognized, and scaled up

16. Scale and scope
advantages
● Scale and scope are essentially different but
related concepts
○ Scale expansion = growth in size
○ Scope expansion = diversification in terms
of product lines as well as geographically
● Scaling up is possible without scope expansion
● Scale and scope advantages can look like (this
may vary for each business):
○ “Almost anything can be purchased from
the company”
○ “A broad product scope permits a business
to defend itself against niche players who
may otherwise become big in one product
line or one country and then use that as a
base to attack the business”
○ “Bigger scale enables a company to lower
the per-transaction cost of those activities
which are subject to large economies of
scale”

17. Finding your alpha
● A business is a bundle of resources and capabilities
● For a business to sustain and strengthen their
competitive advantage, the business must follow five
strategic guidelines:
1. “Outsource all activities that rely on gamma
resources and capabilities unless there is a
very strong reason why they should still be
carried out internally”
2. “Consider outsourcing those activities also
that rely on beta resources and capabilities
unless there is a strong reason for continuing
to do them internally”
3. “Act with determination to strengthen your
alphas”
4. “Develop a strategy to expand the size of your
aloha bucket”
5. “Leverage your alphas to diversify into new
market opportunities”
● A business top leaders should analyze their
company, consider diversifying, and understand
what their alphas, betas, and gammas are