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Build Sustainable Competitive Advantage Through Distinctive Competencies
1.
Business Strategy Session
- 3 Internal Analysis: Distinctive Competencies, Competitive Advantage & Profitability Oct 14th 2016 Author: Anik Saha © Anik Saha
2.
Agenda Roots of Competitive
Advantages Build Strategy to gain Competitive Advantages Value Creation and Sustainability Fundamental Principles of Competitive Advantages Analyzing Performance of Strategic success Building Sustainable Competitive Advantage Preventing Failures 2 © Anik Saha
3.
3 Roots of Competitive
Advantage Distinctive Competitiveness, Competitive advantage, Value Creation, Profitability Sustained Competitive Advantage (SCA) : Ability to Generate Profitability above Average in Related Industry over Long Period Resources Capabilities Competencies © Anik Saha
4.
4 Resources Brand/ ReputationEmployees Equipment Capital Land,
Building Knowledge, Skills Intellectual Properties Tangible Resources Intangible Resources Drives Operational Efficiency and Reduce Cost Key Resources build ‘Barriers of Imitation’, SCA and drive Profitability © Anik Saha
5.
5 Capabilities Efficient Processes, Skills
to Leverage Resources to Productive Use Org Structure Processes Control Systems Talent Acq. & Maint. Corporate Culture High Employee Productivity, Lower Opex and Create Strong Market Demand © Anik Saha
6.
6 Build Strategy to
Leverage Resource, Capabilities to Gain SCA Resource Distinctive Competencies Capabilities Strategies Competitive Adv. Grow Profitability Build Build Shape Distinctive Competencies & Strategies gets reciprocally developed to drive SCA © Anik Saha
7.
7 Value Creation &
Profitability $ Cf Vf Va Pa Incentive to customer = Vf – Pf Value Generated to customer = Vf – CfPf Value in Use VIU= (Vf – Va) – (Pf – Pa) At VIU = 0, Pf = VIU Price = Pa + (Vf – Va) Profit Generated = Pf – Cf At VIU Price, VIU = 0 and Both Options Generate Same Incentive to Customer Option 1: As Benefit Grows, Economies of Scale Reduces Cost Vf = Benefit Pf = Price C = Cost Option2: Maximize Vf by Investment, Innovation or Efficiency The Objective : Maximize Higher Value Generation (Vf – Cf) Than Competition © Anik Saha
8.
8 Value Creation Through
Cost Efficiency R&D Production Customer ServiceMtkg & Sales Reduce Cost Structure Or Increase Perceived Benefits LogisticsOrg. Infrastructure Information Systems HR • Enhance Feature/ Functionality • Elegance of Design • Efficient Production Operations • Creation of goods or service delivery • Brand Positioning helps improved perceived benefits • Excellent Post sales support improves perceived benefits on lower downtime • Org. structure, control systems, Org. culture, leadership drive productivity • Tracking Inventory, Sales, Pricing, Processes increases Productivity • Mix of right skills • Enablement Increases Productivity • Motivation, compensations • Efficient material mgmt reduces inventory cost • Stock & sell model or Assembly at site © Anik Saha
9.
9 Fundamental Principles of
Competitive Advantage Innovations Efficiency Superior Quality Customer Responsiveness • Productivity Improvement drives better returns • Operations, Processes, skills included • Physical & Functional attributes delivering higher benefits over competition • Positioning in Perceptual Map or Quality Map (reliability vs. excellence) helps increasing perceived benefits • Creating benefits through CSAT Example SLA: 99.9997% • Technological Innovations to showcase least downtime • Proactive alerts • In services, reduce time taken to deliver each customer; better queue mgmt • Innovation in both Product/ Processes • Prod Innovation drives realization of more benefits • Process innovation drives lower Opex © Anik Saha
10.
10 Examples of Perceptual
Map *www.entreprenure.com *www.learnmarketing.net *https://lucythebusybee.wordpress.com/tag/perceptual-map/ *https://strategicthinker.wordpress.com/perceptual-map/ © copyrights: Anik Saha
11.
11 Business Models, Value
Chain & Generic Distinctive Competencies SCA, Profitability Business Model Distinctive Competencies Strategies Business Model Leverages Competencies, Creates Value Chain with Strategic Planning towards Goal and Delivers SCA through Quality, Efficiency, Cost Effectiveness © Anik Saha
12.
12 Example of Business
Model © Anik Saha
13.
13 Analyzing Competitive Advantage
& Profitability Profitable than Competition? Strategies able to Deliver Result? Cost structure in Control? Resources Utilization Maximized? Measure Business Performance with Financials ROIC ROS Capital Turnover COGS/ Sales SG&A/Sales R&D/Sales WC/Sales PPE/Sales © Anik Saha
14.
14 Sustainability of Competitive
Advantage Barriers to Imitation Capability of Competitors Industry Dynamics • Durability of Competitive advantage diminishes as competition imitates • Longer time to imitate, less vulnerable competitive advantage • Barriers to imitation determines time • Tangible & Intangible resources easy to imitate except brand value • Patent immunity diminishes with workarounds • Capabilities like decision making, processes, cross-functional integration tough to imitate • Commitment to existing business model or strategy determines adaptability to new shifts • Execution of Change management crucial to adaptability • Low absorptive capacity limits large enterprises to imitate innovative, efficient players • Competitive Adv. short-lived by faster pace of innovation, constantly changing industry dynamics • Difficult to sustain competitive adv with Commodity based low end solutions • Continuous investments to build new barriers helps to sustain advantage for certain periods © Anik Saha
15.
15 Avoiding Failures for
SCA Organizational/ Business inertia prevents exploring Market shifts Slow pace of decision making culture prevents faster response to business demands Existing distribution of decision making hierarchy/ authority slows execution Prior Strategic commitments, resource investments slows Icarus Paradox : Obsession to Strength stops response to market shifts © Anik Saha
16.
16 Steps to Prevent
Failures Continuous check to Principles of Competitive Advantage Continuous Learning, Market sensing, Skill development Follow best industry practices and benchmark Overcome Inertia Be present at right time & place with right resources © Anik Saha
17.
17 Acknowledgement Strategic Management by
Charles W. L. Hill/ Gareth R. Jones, Published by CENGAGE Learning © Anik Saha