Competitive advantage

It is also known as strategic advantage, is

essentially a position of superiority on the
part of organization in relation to its
competitors. It is externally focused while
organizational competencies are internally
focused.
Definition Competitive
advantage
Competitive advantage exists when there is
a match between the distinct competencies
of a firm and the factors critical for success
within its industry that permits the firm to
outperform competitors.
Competitive advantage of an organization is
largely determined by the national
competitive advantage.
Dynamics of national competitive advantage
Firm strategy, structure
and rivalry
Factor
conditions
Demand
conditions
Related and
Supporting industries
Determinants of national competitive advantage
Factor conditions
Can be grouped into five broad categories:
Human resources, knowledge resources,
physical resources, capital resources and
infrastructure.
Demand conditions
Three characteristics of home demand are
particularly important:
I)The composition of home demand
II)The size and pattern of growth of home demand
III)The means by which a nations home demand pulls
the nations products and services into foreign markets.
Related and supporting industries
In the long run the relationship between main
industry and related and supporting industries
becomes reciprocal. If the main industry is
developed the related industries will also
developed.
Firm strategy, structure and rivalry
The aggregate of these determines national
competitive advantage.
Approaches for competitive advantage
Generic competitive advantage
Strategic intent
Benchmarking
Synergistic approach
Critical success factors approach
Generic competitive advantage
It is a basic one which can be combined with other
strategies. It is based on the principle that the
achievement of competitive advantage is at the
core of a superior marketing strategy. It considers
two dimensions competitive base and competitive
scope. By combining both these dimensions Porter
has identified four competitive strategies
Generic competitive advantage
Cost focus
Overall cost
leadership
Differentiation
Focused
Differentiation
Generic competitive advantage
Broad
Narrow
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Cost
Differentiation
Competitive base
Overall cost leadership
It is based on a companys position as the industrys least
cost producer.
Two essential features:
1) The company pursuing overall cost leadership must
aggressively pursue a position of cost leadership by
constructing the most efficient scale facilities and must
be good in engineering, manufacturing and physical
distribution.
2) The company has a large market share so that its per
unit cost is the lowest.

Cost focus
In this organization focuses on a narrow
segment of the market and offers products at
lower price that its competitors on the basis
of its low cost.
Differentiation
The act of designing a set of meaningful differences to
distinguish the companys offerings from competitors offerings.
A product can be differentiated on several bases:
Product characteristics: form, features, performance, quality,
durability, reliability, style, design etc.
Services: ordering, ease, delivery, installation, customer
training, maintenance and repair etc.
Personnel: competence, courtesy, credibility, reliability,
responsiveness and communication.
Channel: coverage, expertise and performance etc.
Image: symbols, media, atmosphere etc.

Focused differentiation
It is undertaken to achieve advantage in a
narrowly defined market/customer segment.
Strategic intent
The essence of strategy lies in creating
tomorrows competitive advantage faster than
competitors mimic the ones you possess today.
Hamel and Prahalad have identified four
approaches for generating competitive advantage
based on strategic intent:
1) Building layers of advantage
2) Searching for loose bricks
3) Changing the rules of engagement
4) Collaborating

Building layers of advantage

It involves generating layers of advantages on top of
another advantage. This is essentially based on
moving up in value chain . This can be done through
moving to upward value chain or downward value
chain.
Loose bricks
It refers to creating advantage in those areas which
have been let loose by the existing competitors, that
is, the areas uncovered by them.
Changing the rules of engagement
New CSFs may be created which may
generate advantage to the company which
has introduced it.
Collaborating
It refers to entering into collaboration with
another which has competence in areas that
can be used as a source of competitive
advantage.
Benchmarking
It is a process of identifying, understanding
and adapting outstanding practices from
within the same organizations or from other
businesses to help improve performance.
Process of benchmarking
Planning, Analysis, Integration, Action, Maturity.
Planning: what is to be benchmarked, to whom will be
compared, hw will data be collected?
Analysis: to determine current performance gap and projected
future performance level.
Integration: process of using benchmarking findings to set
operational targets for change.
Action: implementation of specific action and monitoring its
results followed by recalibration of benchmarks.
Maturity: impact of benchmarking should be evaluated in terms
of final objective achievement such as cost reduction, customer
satisfaction etc.


Synergistic approach
It is the process of putting two or more elements
together to achieve a sum total greater that the sum
total of individual elements separately.
Areas of synergistic effect
Production synergy
Marketing synergy
Research and development synergy
Financial synergy
General management synergy
Critical success factors approach
Also referred as strategic factors or key factors for
success are those characteristics, conditions or
variables which when maintained and sustained
can have significant impact on the success of an
organization competing in a particular industry.
Identifying industry CSFs
Can be identified based on logic, intuition,
judgment.
Can also be identified internally by using
creative techniques like brainstorming
Can also be traced from other companies
statements, expert opinions,
organizational success stories etc.
Organizational critical success factors
Shared
values
Staff
Skills
structure
Strategy Systems
Style
Mckinsey 7-s framework