Lecture 3_Competitive Adv_Post

Lecture 3_Competitive Adv_Post - BASES OF COMPETITIVE...

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BASES OF COMPETITIVE ADVANTAGE
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Competitive Advantage Definition Competitive Advantage= Ability to outperform rivals on (potential) profitability
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Competitive Advantages (Sources of Rates of Profit in Excess of the Competitive Level) Avoiding Competition Outperforming Competition Attractive Industry Attractive Niche Cost Advantage Differentiation Advantage Sources of Competitive Advantage Attractive Strategic Group Entry Barriers Mobility Barriers Isolating Mechanisms
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AVOIDING COMPETITION: Building Barriers to Imitation
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Attractive Industry protected by Entry Barriers Attractive Strategic Groups (within Industry) protected by Mobility Barriers Attractive Competitive Positions (within Strategic Group) protected by Isolating Mechanisms AND/OR AND/OR Sources of Superior Performance: Impediments to Imitation
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Avoid Competitors Get into new market first Find an undesirable (?) or protected niche Keep competitors out Keep the niche undesirable (?) or protected Build Isolating Mechanisms Avoiding Competitors Source: George Yip, 1997
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Isolating Mechanisms Isolating Mechanisms (or barriers to imitation) are firm-specific barriers to entry Protect firms’ profits from imitative competition and serve as the bases for competitive sustainability Barriers to entry (and mobility barriers) are aggregations of firm level isolating mechanisms Industries - Barriers to entry Strategic Groups - Mobility barriers Competitive positions - Isolating mechanisms
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Isolating Mechanisms Information Impactedness Response Lags Economies of Scale and Scope Producer Learning Buyer Switching Costs Reputation Buyer Evaluation Costs Advertising and Channel Crowding
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OUTPERFORMING COMPETITION: Building Distinctive Competencies
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Added value = total value created with the firm in the game - total value created without the firm in the game OR EQUIVALENTLY the value that would be lost to the world if the firm
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Lecture 3_Competitive Adv_Post - BASES OF COMPETITIVE...

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