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    This document discusses competitive advantage and how companies can achieve and sustain it. It defines competitive advantage as efficiency, quality, innovation, and customer responsiveness. Companies gain competitive advantage through superior resources, capabilities, and competencies that allow them to create more value for customers at lower costs than competitors or offer differentiated products. The document also examines reasons why companies fail to maintain competitive advantage and provides strategies for avoiding failure and sustaining competitive advantage over time.

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    This document discusses competitive advantage and how companies can achieve and sustain it. It defines competitive advantage as efficiency, quality, innovation, and customer responsiveness. Companies gain competitive advantage through superior resources, capabilities, and competencies that allow them to create more value for customers at lower costs than competitors or offer differentiated products. The document also examines reasons why companies fail to maintain competitive advantage and provides strategies for avoiding failure and sustaining competitive advantage over time.

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    © All Rights Reserved
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    6 views12 pages

    CH04 Rev

    Uploaded by

    kefiro
    This document discusses competitive advantage and how companies can achieve and sustain it. It defines competitive advantage as efficiency, quality, innovation, and customer responsiveness. Companies gain competitive advantage through superior resources, capabilities, and competencies that allow them to create more value for customers at lower costs than competitors or offer differentiated products. The document also examines reasons why companies fail to maintain competitive advantage and provides strategies for avoiding failure and sustaining competitive advantage over time.

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    of 12

    4-1

    Chapter 4 -- Internal Analysis:


    Resources, Capabilities, Competencies,
    and Competitive Advantage
    Text by
    Charles W. L. Hill
    Gareth R. Jones

    Multimedia Slides by
    Milton M. Pressley
    Univ. of New Orleans

    Copyright © 1998 by Houghton Mifflin Company. All rights reserved.


    4-2

    Competitive Advantage: Value


    Creation, Low Cost, and
    Differentiation

    • Competitive Advantage
    • Sustained Competitive
    Advantage

    Copyright © 1998 by Houghton Mifflin Company. All rights reserved.


    4-3

    Figure 4.2: Value Creation

    V-P
    V=Value to Consumer
    V P-C P=Price
    C=Costs of Production

    P V-P=Consumer Surplus
    P-C=Profit Margin
    C C

    Copyright © 1998 by Houghton Mifflin Company. All rights reserved.


    4-4
    Figure 4.3: Generic Building Blocks
    of Competitive Advantage (Continued)
    Superior
    Efficiency

    Competitive
    Superior Advantage: Superior
    Innovation •Low Cost Quality
    •Differentiation

    Superior
    Customer
    Responsiveness

    Copyright © 1998 by Houghton Mifflin Company. All rights reserved.


    4-5

    Figure 4.5: Summary of the Impact of Efficiency,


    Quality, Innovation, and Customer
    Responsiveness on Unit Costs and Prices
    Efficiency

    Lower Unit Costs

    Innovation Quality

    Higher Unit Prices

    Customer
    Responsiveness

    Copyright © 1998 by Houghton Mifflin Company. All rights reserved.


    4-6

    Figure 4.4: The Impact of


    Quality on Profits
    Increased Lower
    Productivity Costs

    Increased Higher
    Quality Profits

    Increased Higher
    Reliability Prices

    Copyright © 1998 by Houghton Mifflin Company. All rights reserved.


    4-7
    Business Functions, The Value
    Chain, and Value Creation
    Figure 4.6: The Value Chain

    Company Infra-Structure
    Support
    Activitie Human Resources
    s
    Materials Management

    Research Marketing
    Inputs Produc-
    and and Service Outputs
    tion
    Development Sales

    Primary Activities

    Copyright © 1998 by Houghton Mifflin Company. All rights reserved.


    4-8

    Distinctive Competencies,
    Resources, and Capabilities
    Figure 4.7: The Roots of Competitive Advantage

    Resources

    Superior Differentia-
    tion

    Distinctive •Efficiency
    Competencies •Quality Value Higher
    •Innovation Creation Profits
    •Customer
    Respon-
    siveness Low Cost

    Capabilities

    Copyright © 1998 by Houghton Mifflin Company. All rights reserved.


    4-9

    The Durability of
    Competitive Advantage
    • Barriers to Imitation
    – Imitating Resources
    – Imitating Capabilities
    • Capability of Competitors
    – Strategic Commitment
    • Industry Dynamism

    Copyright © 1998 by Houghton Mifflin Company. All rights reserved.


    4-10

    Why Do Companies Fail?

    • Inertia

    • Prior Strategic
    Commitments

    Copyright © 1998 by Houghton Mifflin Company. All rights reserved.


    4-11

    Why Do Companies Fail?

    • The Icarus
    Paradox

    Copyright © 1998 by Houghton Mifflin Company. All rights reserved.


    4-12

    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

    Copyright © 1998 by Houghton Mifflin Company. All rights reserved.

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