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Developing Sustainable Advantage (SCA).pptx
- 2. Approaches to Developing SCA • The Industrial Organization (I/O) approach to competitive advantage advocates that external (industry) factors are more important than internal factors in a firm achieving competitive advantage. – I/O focuses on analyzing external forces and industry variables as a basis for getting and keeping competitive advantage. – Competitive advantage is determined largely by competitive positioning within an industry, according to I/O advocates. – Managing strategically from the I/O perspective entails firms striving to compete in attractive industries, avoiding weak or faltering industries, and gaining a full understanding of key external factor relationships within that attractive industry. • Porter’s Five Forces Industry Analysis and STEP (Macroenvironment) Analysis are examples of I/O Approaches
- 3. Approaches to Developing SCA • The Resource-Based View (RBV) approach to competitive advantage contends that internal resources are more important for a firm than external factors in achieving and sustaining competitive advantage. • In contrast to the I/O theory presented in the previous chapter, proponents of the RBV view contend that organizational performance will primarily be determined by internal resources that can be grouped into three all-encompassing categories: Physical resources, human resources, and organizational resources. – Physical resources include all plant and equipment, location, technology, raw materials, machines; – human resources include all employees, training, experience, intelligence, knowledge, skills, abilities; and – organizational resources include firm structure, planning processes, information systems, patents, trademarks, copyrights, databases, and so on. RBV theory asserts that resources are actually what helps a firm exploit opportunities and neutralize threats.
- 4. Value Chain Analysis © 2001 Prentice Hall Ch. 4-4
- 5. Which approach is best? • However, it is not a question of whether external or internal factors are more important in gaining and maintaining competitive advantage. – Effective integration and understanding of both external and internal factors is the key to securing and keeping a competitive advantage. – Matching key external opportunities/threats with key internal strengths/weaknesses provides the basis for successful strategy formulation.
- 6. SCA • The idea for the SCA concept was first introduced in 1984 by George Day. – he implied that there were certain types of strategies that could help an organization "sustain the competitive advantage." • Porter (1985) moved the idea to a concept by describing the types of competitive strategies an organization should possess in order to achieve long term SCA. One of Porter's major contributions to this area is the Five Force Analysis model.
- 7. Core Competencies • Barney (1991) defined sustainable competitive advantage as when an organization is implementing a value creating strategy that is not being implemented by any current or potential competitors and when the competitors are unable to duplicate the process“ • The sources of the advantage are known as core competencies. – Core competencies imply that the organization has an advantage that is distinct and unique to that particular firm. The organization usually has a brand or patent which separates them from the competition.
- 8. Core Competencies • Core competencies consist of the characteristics which allow a business to recognize competitive advantage. • Since there are many tasks and activities in a business and competencies associated with the tasks, many businesses have focused on competencies that primarily affect their competitive advantage. • Core competencies are not constant. They tend to change as the organization changes. Therefore, it's important that the competencies are flexible and not etched in stone. As a business changes so will the core competencies. • Where do organizations derive their core competencies?
- 9. Developing Core Competencies or Competitive Advantage • Hamel and Prahalad (1989) identified three factors which are necessary to developing a business's core competencies. The factors focus on the specified achievements of the core competencies and any business. The factors are: – Provide potential access to a wide variety of markets -- the core competencies support the creation of new products and services. – Focus on the perceived value with which a customer measures a product -- the core competencies allow a business to deliver products based on customer preference. – Makes it difficult for competitors to duplicate -- the core competencies create something within a company that other competitors cannot imitate. There is a sense of uniqueness.
- 10. Developing SCA • Core competencies/competitive advantages that are: – Hard to imitate (nonimitable) – Unique/rare – Not easily substitutable (nonsubstitutable) • Become a company’s sustainable competitive advantage
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