Valtech Brownbag about core strategic concepts. Competitive advantage is about the pursuit of sustainable sources of growth and value to shareholders. In this session we review Porter's Cost Leadership, Differentiation and Focus strategy principles with some examples.

1. Competitive
Advantage
By Simon Barna
Valtech Brown Bag
24 January, 2019

2. Say, you’ve got a business

3. And customers love it

4. Now you’ve got competitionNow you’ve got competitionNow you’ve got competition

5. Option A
Change your margin

6. Your Price Competitor Price
£2.00 £2.00

7. Your Price Competitor Price
£2.00 £2.00£1.99
£1.95
£1.90 £1.80
£1.70 £1.50£1.00
£0.50
!

8. Your Cost Competitor Cost
£0.30 £0.30

9. Your Cost Competitor Cost
£0.30 £0.30£0.20
!
"

10. Cost
leadership

11. Do things cheaper or do them differently

13. Cost advantage cheat sheet
!Get the scale right
!Optimise capacity
utilization: reduce waste
& exploit synergies
!Learn & reconfigure value
chain
DO DON’T
"Focus on production &
overlook small or indirect
activities
"Ignore diminishing returns
for incrementalism
"Forget cost of capital

14. Option B
Change your product

15. Your Offer Competitor Offer
£2.00 £2.00

16. Your Offer Competitor Offer
£2.00 £2.00£5.00
!

17. Cost
leadership
Differentiation

18. Increase perceived value (aka. UVP)

19. Increase perceived value (aka. UVP)

21. Differentiation cheat sheet
!Increase customers’
performance / reduce
their waste
!Lower the customer’s cost
of installation and usage
!Change value perception
(use and signaling
criteria)
DO DON’T
"Focus on product quality
(rather than customer’s
perception of value)
"Make it too unique
or not valuable to
customer at all
"Make it too expensive

22. Focus

23. Your market
This woman
is vegan
He’s on low-cholesterol diet
He’s on a high-protein diet
She loves her dog with
caramelized onions
He wants a quick bite
She wants to sit
down for a meal
She ain’t paying for
extra hipster stuff
She only
eats halal
He can’t
eat halal

24. Market focus

25. Market focus

26. Lower cost Unique offer
Cost
leadership
Cost focus
Differentiation
Differentiation
focus
Market
Market segment

27. Find a unique way to segment the market

29. Focus cheat sheet
!Know your customers
!Choose unique
combination of
segmentation variables
!Tailor offer: add or reduce
product functions, change
tech, design or bundle
DO DON’T
"Compromise focus for
broad targeting
"Be outfocused by a
competitor with an even
narrower target
"Segment spillover and
segment substitution

30. Take aways

31. Competitive Advantage
company assets, attributes, or abilities that allow
a firm to earn a higher rate of economic profit
than the average rate of economic profit of other
firms competing within the same market

32. Lower cost Unique offer
Cost
leadership
Cost focus
Differentiation
Differentiation
focus
Market
Market segment

38. Thank you
Valtech Brown Bag
24 January, 2019