Sustainability of Competitive advantage

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Sustainability of Competitive advantage

  1. 1.
  2. 2. <ul><li>Sustainability of a competitive advantage is a function of: </li></ul><ul><ul><li>the rate of core-competence obsolescence due to environmental changes, e.g., technology </li></ul></ul><ul><ul><li>the availability of substitutes for the core competence </li></ul></ul><ul><ul><li>the imitability of the core competence, e.g., diffusion of an innovation </li></ul></ul>
  3. 3. what firm might choose to do Opportunities and threats General Environment General Environment General Environment Sociocultural Global Technological Political/Legal Demographic Economic Industry Environment Competitor Environment
  4. 4. identify what they can do (over time) Unique resources, capabilities, and core competencies The Firm
  5. 5. Discovering Core Competencies <ul><li>Resources </li></ul><ul><li>Tangible </li></ul><ul><li>Intangible </li></ul>Capabilities Core Competencies Competitive Advantage Strategic Competitiveness Four Criteria of Sustainable Advantages <ul><li>Valuable </li></ul><ul><li>Rare </li></ul><ul><li>Costly to Imitate </li></ul><ul><li>No substitutable </li></ul>Value Chain Analysis <ul><li>Outsource </li></ul>
  6. 6. <ul><li>Tangible Resources </li></ul><ul><li>Financial </li></ul><ul><li>Physical </li></ul><ul><li>Human resources </li></ul><ul><li>Organizational </li></ul><ul><li>Intangible Resources </li></ul><ul><li>Technological </li></ul><ul><li>Innovation </li></ul><ul><li>Reputation </li></ul>Discovering Core Competencies <ul><li>Resources </li></ul><ul><li>Tangible </li></ul><ul><li>Intangible </li></ul>
  7. 7. Capabilities are what a firm does, and represent the firm’s capacity or ability to integrate individual firm resources to achieve a desired objective markets for capabilities are imperfect Discovering Core Competencies Capabilities
  8. 8. Core competencies are resources and capabilities that serve as a source of competitive advantage over rivals Core competencies distinguish a company competitively and make it distinctive Discovering Core Competencies Core Competencies
  9. 9. Valuable: Capabilities that help a firm neutralize threats or exploit opportunities Rare: Capabilities that are not possessed by many others Four Criteria of Sustainable Advantages <ul><li>Valuable </li></ul><ul><li>Rare </li></ul><ul><li>Costly to Imitate </li></ul><ul><li>Nonsubstitutable </li></ul>Discovering Core Competencies
  10. 10. <ul><li>Costly to imitate: capabilities that other firms cannot develop easily, usually due to </li></ul><ul><li>Unique historical conditions - e.g., founder, culture </li></ul><ul><li>Causal ambiguity - capabilities hidden </li></ul><ul><li>Social complexity - capabilities distributed </li></ul>Four Criteria of Sustainable Advantages <ul><li>Valuable </li></ul><ul><li>Rare </li></ul><ul><li>Costly to Imitate </li></ul><ul><li>Nonsubstitutable </li></ul>Discovering Core Competencies
  11. 11. <ul><li>Nonsubstitutable: capabilities that do not have strategic equivalents </li></ul><ul><li>Invisible to competitors </li></ul><ul><li>Firm specific knowledge </li></ul><ul><li>Trust-based working relationships between managers and nonmanagerial personnel </li></ul>Four Criteria of Sustainable Advantages <ul><li>Valuable </li></ul><ul><li>Rare </li></ul><ul><li>Costly to Imitate </li></ul><ul><li>Nonsubstitutable </li></ul>Discovering Core Competencies
  12. 12. The source of Does it satisfy the criteria of sustainable competitive advantage? Yes No <ul><li>Resources </li></ul><ul><li>Inputs to a firm’s </li></ul><ul><li>production process </li></ul><ul><li>Capability </li></ul><ul><li>A nonstrategic </li></ul><ul><li>team or resource </li></ul><ul><li>Core Competence </li></ul><ul><li>A strategic </li></ul><ul><li>capability </li></ul><ul><li>Capability </li></ul><ul><li>An integration of a </li></ul><ul><li>team of resources </li></ul>
  13. 13. Valuable? Rare? Costly to Imitate ? Nonsubstitutable Competitive Consequences Performance Implications No No No No Competitive Disadvantage Below Average Returns Yes No No Yes/ No Competitive Parity Average Returns Yes Yes No Yes/ No Temporary Com- petitive Advantage Above Average to Average Returns Yes Yes Yes Yes Sustainable Com- petitive Advantage Above Average Returns
  14. 14. Questions? Thank You

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