Strategic Management in Action Ch

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					Strategic Management in Action
             Ch. 6
  Andrew Etlinger
  Ashley Harris
  Blake Green
  David Styers
  Carolynn Schnaubelt
        Competitive Advantage
• Competitive Advantage is a key concept in
  strategic management
• “Getting it and keeping it what managing is all
• Competitive Advantage- when an organization
  does something that others cant or does it better
  than others do (distinctive capability). Or, an
  organization has something that other
  competitors don’t (unique resources)
     Understanding Competition
• Competition- occurs when organizations
  battle or vie for some desired object or
  outcome, typically customers, market share,
  survey rankings, or needed resources

• What competition might an organization face?
        Who are competitors?
• There are three approaches to defining an
  organization’s competition
  – Industry
  – Market
  – Strategic Groups
     Industry Approach and Market
• Industry: Identifies competitors who make the
  same or very similar goods and services
• Example: video rental industry, automobile
  industry, credit card industry, or the spa
• Market: Identifies competitors who offer the
  same customer needs
• Example: Entertainment Industry
     Strategic Groups Approach
• Identifies not only a firms competitors but
  shows which are most relevant
• Based on the Strategic Groups covered in Ch.3
• Figure 6.2
          Competitive Strategy
• Organizations attempt to create a sustainable
  competitive advantage. An organization does
  this by using its competitive strategy, which is
  based on the competitive advantages that the
  firm has developed.
• Examples: Netflix
         Approaches to Defining
          Competitive Strategy
• Miles & Snow’s Adaptive Strategies
  – Prospector Strategy
  – Defender Strategy
  – Analyzer Strategy
  – Reactor Strategy
• Porter’s Generic Competitive Strategies
  – Cost Leadership Strategy
  – Differentiation Strategy
  – Focus Strategy
  Miles & Snow’s Adaptive Strategies

• Prospector Strategy- an organization that
  continually innovates by finding and exploiting
  new product and market opportunities.
  – Constantly innovating, developing, and testing
    new products.
  – Creates uncertainty for the prospector’s
    competitors because they never know what to
    expect next.
  – Examples: Fox Broadcasting Network & MTV
  Miles & Snow’s Adaptive Strategies
• Defender Strategy- used to protect current
  market share by emphasizing existing products
  and producing only a limited product line.
   – Prevent competitors from stealing ideas from their
• Analyzer Strategy- strategy of analysis and
  imitation. Analyzers look for and copy the ides of
  successful prospectors.
   – Ex. Suave Shampoo and skin care
  Miles & Snow’s Adaptive Strategies
• Reactor Strategy- characterized by the lack of
  a coherent strategic plan or apparent means
  of competing.
  – Reactors react to environmental changes and
    make adjustments only when finally forced to do
    so by environmental pressures.
  – Can be thought of as a “default” strategy because
    it is not a recommended competitive strategy for
    developing competitive advantage.
   Porter’s Generic Competitive Strategies

• Porter believes competitive advantage can only
  come from 2 sources:
  – Having the lowest costs in the industry
  – Possessing significant and desirable differences from
• Cost Leadership Strategy- an organization strives
  to have the lowest costs in its industry and
  produces products for a broad customer base.
  – Main objective is to keep costs as low as possible.
  – Ex. Wal-Mart
      Porter’s Generic Competitive
• Differentiation Strategy- an organization
  competes by providing unique products with
  features that customers value, perceive as
  different , and are wiling to pay a premium for.
  – Try to create brand loyalty: when customers
    consistently seek out, purchase, and use a
    particular brand.
  – Ex. Pottery barn used to be unique in their
                     Focus Strategy
• It’s when an organization pursues either a cost of differentiation
  advantage but within a limited (narrow) customer group or
• There are three broad ways to segment specialized market niches:
   – Geographical
   – Type of customer
   – Product line segment
• What’s involved in a focus strategy?
   – Cost focuser competes by having lower costs than the overall industry
     cost leader in specific and narrow niches.
   – Differentiation focuser uses whatever forms of differentiation the
     broad differentiator might use and specializes in one or a few
             Focus Strategy (cont.)
• Advantages:
   – Focuser knows its market niche well and can stay close to
     customers and respond quickly to their changing needs.
   – They can develop strong brand loyalty by effectively and
     efficiently responding to customers needs.
• Drawbacks:
   – Focuser can often operates on a small scale making it difficult to
     lower costs significantly.
   – The niche customers might change their tastes or needs.
   – There’s always the threat of a broad-based differentiator taking
     notice of the focuser’s market niche.
• Stuck in the middle
   – Happens when an organization hasn’t developed a low cost or a
     differentiation competitive advantage.
 Contemporary Views on Competitive
• Integrated low cost-differentiation strategy
  involves simultaneously achieving low costs
  and high levels of differentiation.
  – This is not easy to pursue because an organization
    basically has to be good at everything.
  – Technology is what makes this strategy possible
  – Increasing affordability of information technology
    has made it easier for organizations to pursue
    product and service differentiation and still keep
    their costs low.
 Contemporary Views on Competitive
         Strategy (cont.)
• Mintzberg’s Generic Competitive Strategies were
  developed because he felt they better reflected the
  increasing complexity of the competitive environment.
   – Differentiation by price: having the lowest costs didn’t
     provide a competitive advantage by itself but the
     advantage came from the fact that is allowed the
     organization to charger below-average market prices.
   – Differentiation by marketing image: create a certain image
     in customers’ minds and use it as a competitive weapon.
   – Differentiation by product design: compete on the basis of
     providing desirable product features and design
Contemporary Views on Competitive
        Strategy (cont.)
– Differentiation by quality: compete by delivering a
  higher reliability and performance at a
  comparable price.
– Differentiation by product support: emphasized
  the customer support services provided by the
– Undifferentiated strategy: situations in which an
  organization had no basis for differentiation or
  when it deliberately followed a copycat strategy.
       Strategy Implementation
• If a strategy is not implemented, then it is only
  an idea
• Once it is implemented, it must be evaluated
  and changed if necessary
• The organization’s functional strategies play a
  major role in strategy implementation
• Dual Roles
  – 1st choice depends on the organization’s resources
    and capabilities being acquired and developed
    through functional strategies
  – Once the competitive strategy is determined, the
    resources, capabilities and competencies found
    are HOW they are implemented
    Offensive Competitive Actions
• An organization’s attempt to exploit and strengthen its
  competitive position through attacks
• Different types:
   – Frontal assault – going head to head with competitor and
     matching them in everything
   – Attach competitor’s weakness
   – All out attack – hitting them from product and market
     segment side
   – Maneuvering around competitor and changing rules of the
   – Guerilla attacks
   Defensive Competitive Actions
• An organization’s attempt to exploit and
  strengthen its competitive position through
• Different types:
  – Don’t give them areas to attack
  – Increase competitor’s beliefs that retaliation will
    occur if they are attacked
  – Lower incentive for competitor to attack
 Evaluating Competitive Strategies
• Ask questions:
  – What are the results?
  – Are they having the intended effect?
  – Are we successfully exploiting our competitive
• Don’t ONLY look at results
• You must determine what happened and why
  – Pinpoint areas of competitive weakness
• If levels of performance haven’t been reached,
  change might need to occur
       Takeaways (Conclusions)
• Competitive Advantage

• Approaches to defining a competitor are:
  – Industry perspective
  – Market perspective
  – Strategic groups concept
              Takeaways (Cont.)
• Miles and Snow’s Four Adaptive Strategies
   – Prospector, Defender, Analyzer, and Reactor

• Porter’s three strategies
   – Cost leadership, differentiation, and focus

• Two Contemporary views on competitive
  strategy: integrated low cost-differentiation vs.
  Mintzberg’s generic competitive strategies.

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