ICWS PMM 1010 Strategy Week 3 Lecture Essay

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PMM 1010 Strategy
Dr Stephen J Pratt

Competitive Advantage
• Competitive Advantage over rivals  when profitability is greater than the average of all companies in its industry.
• Distinctive competencies
– Distinctive strengths that allow a company to differentiate it products/services over rivals
– Based on resources and capabilities
• Resources
– Assets of a company
• Tangible and intangible
• Valuable when they enable a company to create strong demand for its products/services
• Barriers to imitation
• Capabilities
– Skills at productively coordinating its resources.
Dr Stephen Pratt

ICWS – PMM 1010 Strategy – Week 3

Slide 2 of 23

Building blocks of competitive advantage • Four factors contribute to the establishment and sustainability of a competitive advantage:
– Superior efficiency
– Quality
Quality
– Innovation
– Customer responsiveness
Superior
efficiency

Competitive
Advantage
-Low cost
-Differentiation

Customer responsiveness Innovation
Dr Stephen Pratt

ICWS – PMM 1010 Strategy – Week 3

Slide 3 of 23

Efficiency
• Business is a process which transforms inputs into outputs
– Inputs = Materials + Plant usage + Management + Investment + People etc
– Outputs = Goods and services
– Efficiency = Amount of inputs to produce a given output
– Employee productivity at lowest possible cost

Dr Stephen Pratt

ICWS – PMM 1010 Strategy – Week 3

Slide 4 of 23

Quality
• A product and/or service has a number of characteristics
– Features, reliability, form, style, performance, durability and design
• Customers perceive these characteristics as contributing to the quality of a product and/or service
• Design, style, and general aesthetic appeal  excellence
• Durability and performance  reliability
• Quality  product + production processes + management
–  Total Quality Management

Dr Stephen Pratt

ICWS – PMM 1010 Strategy – Week 3

Slide 5 of 23

Innovation
• Creation of new processes and/or products/services
• Product/service innovation  development of new products/services that are either new or are enhanced versions of existing products/services
– Enhancement = Different/improved functionality or quality
• Process innovation  development of new processes for producing and/or delivering products/services to the customer

Dr Stephen Pratt

ICWS – PMM 1010 Strategy – Week 3

Slide 6 of 23

Customer responsiveness
• Identifying, responding and satisfying customer needs
– Better utilisation and general experience of using the product and/or service • Designing products/services that address specific, unique, customer demands • Customer response time  time taken to respond to the demand/needs of customers
• Addressing customer requirements  superior design
– Linked to quality and innovation
• Build a brand  loyalty
– Valued customer base

Dr Stephen Pratt

ICWS – PMM 1010 Strategy – Week 3

Slide 7 of 23

Value Creation
Company needs to develop a business model that capitalises on its strengths to differentiate its products/services & lower its costs

Company specific strengths /competencies that allow it to achieve superior efficiency, quality, innovation & customer responsiveness

Business
Model

Competitive
Advantage
Distinctive
Competencies

Dr Stephen Pratt

Strategies

ICWS – PMM 1010 Strategy – Week 3

Company implements a strategy(ies) to configure its value chain and create distinctiveness that will give it a competitive advantage. Slide 8 of 23

Value Chain
Businesses can add value through cooperation with their suppliers, customers and distributors. Upstream value
 Downstream value

Value Chain
- Looks at an organisation’s resources.
- Determine its strengths and weaknesses.
- Competitive position
- Used to identify future strategic direction.

Value Chain Analysis
Activities/processes that contribute to making products/services.
 Assess the value/contribution that an activity/process to the business.

Value or Margin
Amount of revenue earned.
 Price of the product/service multiplied by the…