ILRHR4640 Lecture 7- Creating Competitive Advantage

ILRHR4640 Lecture 7- Creating Competitive Advantage -...

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Unformatted text preview: Creating Competitive Advantage Advantage Dr. Daniel Cohen Key Learning Points Key Understand benefits of inter­industry analysis Understand concept of CA and SCA Understand concept of added value Learn how to do an activity analysis of relative cost Learn how to do an activity analysis of customer willingness to pay It’s Not Just the Industry It’s Industry analysis is important Structurally, some industries are more attractive than others However, great variance exists within Industries Strategists need systematic way to analyze within industry variance Notion of Competitive Advantage Notion CA: occurs when firm drives a wide wedge between willingness to pay can and costs Two Keys: • Doing something unique or valuable that would be missed • Full range of activities acting in harmony CA VS SCA CA A CA exists at a point in time An SCA sustains over a period of time SCA neutralizes unattractive industry features and exploits attractive features Concept of Added Value Concept “Maximal value created by all participants in a transaction minus the maximal value that could be created without firm” The value that would be lost should firm disappear Two Ways to CA Two Raise customer’s willingness to pay Reduce supplier costs without reducing customer willingness to pay Root of CA is scarcity—how replaceable is firm? Activity Analysis Activity Analyzing firm’s activities will lead to cost vs differentiation approach to CA We’ve talked about IKEA and SW activities leading to CA Let’s pick a differentiator and examine activities… Activity Analysis System Activity Catalog activities (the value chain) Use activities to analyze relative costs • • • Primary and support • Costs relative to competition on activity basis Use activities to analyze relative willingness to pay Explore options and make choices Nike vs New Balance Willingness to pay can be intangible and hard to measure • What drives competitors • How will competitors react • Don’t forget customers—especially EA Questions? Questions? ...
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