Strategy for the Internal

Environment
Presentation prepared by Dr.
Debra Louis Connelley
Touro University International
Click on the speaker icon for sound.
 Looking Ahead
Competitive advantage: Value creation, low cost,
& differentiation
The building blocks of competitive advantage
Business functions, the value chain and value
creation
Distinctive competencies, resources, and
capabilities
The durability of competitive advantage
Why do companies fail?
Avoiding failure and sustaining competitive
advantage
 Competitive Advantage: Value
Creation, Low Cost & Differentiation
Value: Value to the customer – cost

A firm can increase value by lowering costs or

increasing the value to the customer (design,
quality, etc.)
– Low cost (Compaq)
– Differentiation (Nordstrom’s)

The concept of value creation lies at the core of

competitive advantage.

A company has high profits when it creates more

value for its customers.
The Building Blocks of Competitive
Advantage
Superior
quality

Competitive Advantage: Superior

Superior
customer
efficiency •Low cost responsiveness
•Differentiation

Superior
innovation
Business Functions, the Value Chain,
and Value Creation
Company infrastructure

Support Human resources

Activities

Materials management

Inputs Research & Marketing

Production Service Outputs
development and sales

Primary Activities
 Distinctive Competencies,
Resources, & Capabilities
Resources

Differentiation
Superior

•Efficiency Value
Distinctive •Quality
Competencies Creation
•Innovation
•Customer
responsiveness
Low Cost

Higher
Capabilities Profits
 The Durability of Competitive
Advantage
Barriers to Imitation
– Imitating resources
– Imitating capabilities

Capacity of Competitors

Industry Dynamism
 Why do Companies Fail?
Inertia

Prior Strategic Commitments

The Icarus Paradox

Avoiding Failure and Sustaining
Competitive Advantage
Focus on the building blocks of
competitive advantage
Institute continuous improvement
and learning
Track best industrial practice and use
benchmarking
Overcome inertia