Technology can provide competitive advantages through both cost-based and differentiation-based strategies. Cost-based strategies pursue cost advantages through economies of scale, supply chain efficiencies like Walmart, or technology that reduces costs. Differentiation strategies use technology to uniquely understand customers, deliver value in new ways, or integrate technology into products and services. Effective strategies pursue both cost leadership and differentiation, while challenges include organizational change, overreliance on costs, and maintaining unique value over time.

1. Technology and Traditional Sources of Competitive Advantage Tonje Hovland Berntsen

2. Classical Source of Competitive Advantage The classical sources of competitive advantage: Low-cost strategy Differentiation strategy

3. Generic Competitive Strategy Matrix

4. Cost-Based Strategies Discussion Question: How do cost-based strategies (cost advantages) provide a powerful competitive advantage? Pursue options unavailabe to other firms Lower cost base  ability to win on price and gain market share and volume Win on profit margin and reinvest for further competitive advantage

5. Technology and Cost Reduction

6. Technology and Cost Reduction Porter’s 10 cost drivers: Economies of scale Learning Capacity utilization Linkages among activities Interrelationships among business units Degree of vertical integration Timing of market entry Firm’s policy of cost or differentiation Geographic location Institutional factors

7. Technology and Cost Reduction

8. Wal-Mart One of the most efficient retail operators in the world Grown at a double-digit annual pace 2 million employees Technology or scale and supply chain capabilities? http://www.youtube.com/watch?v=b5K1yrICMII

9. Total Cost of Ownership (TCO) TCO: A tool to assess both direct and indirect costs and benefits Integration costs Maintainance and support costs Learning Ambiguities in process change New technology  Change

10. Total Cost of Ownership (TCO)

11. Cost-Based Strategies - Challenges Organizational change  Cost savings Easy to become over-reliant on cost-based advantage Innovation is the determinator

12. Differentiation-Based Strategies Discussion Question: What makes a differentiation strategy different from a cost-based strategy? Highly ambiguous measure Multiple valuable and unique attributes Multiple firms can succeed Customer based

13. Technology and Differentiation Drivers of success in differentiation: In-depth understanding of the target customer base Relevance Tradeoffs The ability to generate uniqueness

14. Technology and Differentiation Three approaches to creating a potentially unique application: As an integral part of a product or service Indirectly in the production of the product or service Through the delivery of the product or service

15. Differentiation - Challenges A misstep can result in added cost or negative value Changing customer preferences and substitute offerings ” Differentiate its differentiation” Image/Reputation Time in business Installed base Visibility Market share

16. Narrow or Broad Customer Target? Important issues determining focus: The extent to which individual segments are homogenous and unique in their needs The ability of the firm to develop unique advantages aimed at a segment

17. Pursuing Both Strategies

18. Questions or comments? Thank you!!

19. References http://www.atwebo.com/porter%27s_comptetitive_strategy.htm http://www.netmba.com/strategy/value-chain/ http://searchdatacenter.techtarget.com/sDefinition/0,,sid80_gci342316,00.html http://www.tascomi.com/images/elements/lcow.gif