The document discusses strategies for achieving competitive advantage. It introduces Porter's value chain model which views a firm as a collection of primary and support activities that add value. The value chain can be used to identify processes that add or reduce value for customers. Developing strategies may involve planning better ways to meet customer demands, identifying value-adding processes, and looking beyond the firm's boundaries to its supply chain. Maintaining a competitive advantage requires being efficient, aware of competition, innovating technology, and recognizing that advantages are temporary.

1. Strategies in Action
“Even if you’re on the right
track, you’ll get run over if
you just sit there.”
- Will Rogers
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2. Fundamentals of Competitive Strategy
Superior Long-Run Performance
The central goal
Attractive Industry Structure Competitive Advantage
High returns for the average Outperform the average industry
participant participant
Superior Competitive Operational
Position Effectiveness
Do different things than rivals Do the same things as rivals
but better
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3. 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
Strategies for Competitive Advantage –
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4. Common pitfalls
Strategists should avoid –
Managing by Extrapolation
Managing by Crisis
Managing by Subjectivism
Managing by Hope
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5. Strength of Competition -Five Forces Model
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6. Effective Cost Leaders can remain profitable even when
the Five Forces appear unattractive
Can mitigate Supplier Power by: Can frighten off New Entrants due to the
Low cost position makes them better Threat of need to:
*
able to absorb cost increases New * Enter at Large Scale to be Cost
Competitive
* More likely to make very large
Entrants
* Take time to move down the
purchases which reduces chance of “Learning Curve”
supplier power
Bargaining Rivalry Among Bargaining
Power of Competing Firms in Power of
Suppliers Industry Buyers
Well positioned relative to
Substitutes in order to: Can mitigate Buyer Power by:
* Make investments to create substitutes Driving prices far below
Can buy patents developed by potential
Threat of competitors which may cause
* exit and shift power back to
substitutes Substitute
firm
* Lower prices to maintain value position Products
Ref.: Porter, 1985
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7. Applying 5 forces model to Coke & Pepsi
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8. Michael Porter’s Generic Strategies
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9. Risks of Generic Competitive Strategies
Risks of Cost Leadership Risks of Differentiation Risks of Focus
Cost leadership is not Differentiation is not sustained: The focus strategy is imitated:
sustained: • Competitors imitate. The target segment becomes
• Competitors imitate. • Bases for differentiation structurally unattractive:
• Technology changes. become less important to • Structure erodes.
• Other bases for cost buyers. • Demand disappears.
leadership erode. Cost proximity is lost. Broadly targeted competitors
Proximity in differentiation is Differentiation focusers achieve overwhelm the segment:
lost. even greater differentiation in • The segment’s
Cost focusers achieve even segments. differences from other
lower cost in segments. segments narrow.
• The advantages of a
broad line increase.
New focusers sub-segment the
industry.
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10. Business Level Strategy
The resources and capabilities that have been determined to
Core
be a source of competitive advantage for a firm over its rivals.
Competency
An integrated and coordinated set of actions taken to exploit
Strategy core competencies and gain a competitive advantage.
Actions taken to provide value to customers
Business Level and gain a competitive advantage by exploiting
Strategy
core competencies in specific, individual
product markets.
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11. Value Chain Analysis
Firm Infrastructure
Support
Human Resource Management
Activities
Technological Development
Procurement
Service
Outbound
Operations
Marketing
Logistics
Logistics
& Sales
Inbound
Primary Activities Ref.: Porter, 1985
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12. Value Creating Activities common to a
Cost Leadership Business
Simplified Planning Relatively Few
Cost Effective Practices to Reduce Management Layers to
MIS Systems Planning Costs Reduce Overhead
Activities
Support
Consistent Policies to Effective Training Programs to
Reduce Turnover Costs Improve Worker Efficiency and
Effectiveness
Easy-to-Use Manufacturing Investments in Technology in order to
Technologies Reduce Costs Associated with
Manufacturing Processes
Systems and Procedures to find the Frequent Evaluation Processes to
Lowest Cost Products to Purchase Raw Monitor Suppliers’ Performances
Materials
Highly Efficient Efficient Plant Delivery Schedule Small, Highly Effective Product
Systems to Link Scale to Minimize that Reduces Trained Sales Force Installations to
Suppliers’ Products Manufacturing Costs Reduce Frequency
with the Firm’s Costs and Severity
Production Selection of Low Products Priced to of Recalls
Processes Cost Transport Generate Sales
Timing of Asset Carriers Volume
Purchases
Located in Close Policy Choice of Efficient Order Sizes National Scale
Proximity with Plant Technology Advertising
Suppliers
Organizational Interrelationships
Learning with Sister Units
Ref.: Porter, 1985
Primary Activities
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13. Three Key Questions
1 How can an activity be performed
differently or even eliminated?
2 How can a group of linked value activities be
regrouped or reordered?
3 How might coalitions with other firms
lower or eliminate costs?
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14. TOWS Matrix
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15. 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.
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16. Porter’s Competitive Strategies
Competitive Strategy:
Low cost?
Differentiation?
Compete head to head in large market?
Focus on niche?
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17. Michael Porter’s Generic Competitive Strategies
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18. 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
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19. Porter’s Competitive Strategies
Competitive Advantage:
Determined by Competitive Scope
Breadth of the company’s target market
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20. 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
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21. Porter’s Competitive Strategies
Differentiation:
Broad mass market
Unique product or service
Charge premiums
Lower customer sensitivity to price
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22. 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
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23. 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
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24. Porter’s Competitive Strategies
Stuck in the middle:
No competitive advantage
Below-average performance
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25. Competitive Strategy
Industry Structure:
Fragmented Industry
Many small and medium-sized local companies compete for small
shares of total market
Focus strategies predominate
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26. Competitive Strategy
Industry Structure:
Consolidated industry
Mature industry dominated by a few large companies
Cost Leadership or Differentiation predominate
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27. Dimensions of Quality
Dimensions • Performance
• Features
• Reliability
Quality
• Conformance
• Durability
• Serviceability
• Aesthetics
• Perceived Quality
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28. 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
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29. Competitive Strategy
Strategic rollup:
Differ from Conventional M&A’s
Large number of firms
Owner-operated firms
Goal to reinvent entire industry
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30. 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
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31. 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
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32. Competitive Tactics
Market Location Tactics:
Offensive Tactics
Frontal assault
Flanking maneuver
Bypass attack
Encirclement
Guerrilla warfare
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33. Competitive Tactics
Market Location Tactics:
Defensive Tactics
Raise structural barriers
Increase expected retaliation
Lower the inducement for attack
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34. Cooperative Strategies
Cooperative Strategies:
Collusion
Active cooperation of firms to reduce output and raise prices
Explicit
Tacit
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35. Cooperative Strategies
Cooperative Strategies:
Strategic Alliance:
Partnership of two or more corporations or business units
to achieve strategically significant objectives that are
mutually beneficial.
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36. Cooperative Strategies
Obtain technology
Access to markets
Strategic
Alliance Reduce financial risk
Reduce political risk
Achieve competitive
advantage
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37. Continuum of Strategic Alliances
Mutual Service Joint Venture Value-Chain
Consortia Licensing Arrangement Partnership
Weak and Distant Strong and Close
Source: Suggested by R. M. Kanter, “Collaborative Advantage: The Art of Alliances,” Harvard Business Review (July-August 1994), pp.
96–108.
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38. Introduction
• 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.
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39. Developing A Strategy For The Internet
Age
• Business process - a standardized set of activities that
The Value Chain
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.
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40. The Value Chain model
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41. 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.
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42. Developing A Strategy For The Internet
Age
The Value Chain
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43. Developing A Strategy For The Internet
Age
The Value Chain
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44. Developing A Strategy For The Internet
Age
• Just-in-time - an approach that produces or delivers a product or service just at
Looking Beyond The Four Walls Of The Company
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.
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45. 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.
Strategies for Competitive Advantage –
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