K e ytak e aways

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Unformatted text preview: upstarts went under, and Wo rldCo m became the biggest bankruptcy in U.S. histo ry. The impact was also f elt thro ugho ut all industries that supplied the teleco m industry. Firms like Sun, Lucent, and No rtel, who se sales gro wth relied o n big sales to teleco m carriers, saw their value tumble as o rders dried up. Estimates suggest that the teleco mmunicatio ns industry lo st nearly $ 4 trillio n in value in just three years,L. Endlich, Optical Illusio ns: Lucent and the Crash o f Teleco m (New Yo rk: Simo n & Schuster, 2004). much o f it due to executives that placed big bets o n reso urces that weren’t strategic. K E Y TAK E AWAYS Technology can be easy to copy, and technology alone rarely offers sustainable advantage. Firms that leverage technology for strategic positioning use technology to create competitive assets or ways of doing business that are difficult for others to copy. True sustainable advantage comes from assets and business models that are simultaneously valuable, rare, difficult to imitate, and for which there are no substitutes. QU E S TI ONS AND E XE RC I S E S 1. What is operational effectiveness? 2. What is strategic positioning? 3. I s a firm that competes based on the features of technology engaged in operational effectiveness or strategic positioning? Give an example to back up your claim. 4. What is the “resource‐based” view of competitive advantage? What are the characteristics of resources that may yield sustainable competitive advantage? 5. TiVo has a great brand. Why hasn’t it profitably dominated the market for digital video recorders? 6. Examine the FreshDirect business model and list reasons for its competitive advantage. Would a similar business work in your neighborhood? Why or why not? 7. What effect did FreshDirect have on traditional grocers operating in New York City? Why? 8. Choose a technology‐based company. Discuss its competitive advantage based on the resources it controls. 9. Use the resource‐based view of competitive advantage to explain the collapse of many telecommunications firms in the period following the burst of the dot‐com bubble. 10. Consider the examples of Barnes and Noble competing with Amaz on, and Apple offering iTunes. Are either (or both) of these efforts straddling? Why or why not? 2.2 Powerful Resources L E A RN I N G OBJ E C T I V E S 1. Understand that technology is often critical to enabling competitive advantage, and provide examples of firms that have used technology to organiz e for sustained competitive advantage. 2. Understand the value chain concept and be able to examine and compare how various firms organiz e to bring products and services to market. 3. Recogniz e the role technology can play in crafting an imitation‐resistant value chain, as well as when technology choice may render potentially strategic assets less effective. 4. Define the following concepts: brand, scale, data and switching cost assets, differentiation, network effects, and distribution channels. 5. Understand and provide examples of how technology can be used to create or strengthen the resources mentioned above. Management has no magic bullets. There is no exhaustive list o f key reso urces that f irms can lo o k to in o rder to build a sustainable business. And reco gnizing a reso urce do esn’t mean a f irm will be able to acquire it o r explo it it f o rever. But being aware o f majo r so urces o f co mpetitive advantage can help managers reco gnize an o rganizatio n’s o ppo rtunities and vulnerabilities, and can help them brainsto rm winning strategies. And these assets rarely exist in iso latio n. Of tentimes, a f irm with an ef f ective strategic po sitio n can create an arsenal o f assets that reinf o rce o ne ano ther, creating advantages that are particualrly dif f icult f o r rivals to successf ully challenge. Imitation‐Resistant Value Chains While many o f the reso urces belo w are co nsidered in iso latio n, the strength o f any advantage can be f ar mo re signif icant if f irms are able to leverage several o f these reso urces in a way that makes each stro nger and makes the f irm’s way o f do ing business mo re dif f icult f o r rivals to match. Firms that craf t an imit at ion­resist ant value ch ain have develo ped a way o f do ing business that o thers will struggle to replicate, and in nearly every successf ul ef f o rt o f this kind, techno lo gy plays a key enabling ro le. The value ch ain is the set o f interrelated activities that bring pro ducts o r services to market (see belo w). When we co mpare FreshDirect’s value chain to traditio nal rivals, there are dif f erences acro ss every element. But mo st impo rtantly, the elements in FreshDirect’s value chain wo rk to gether to create and reinf o rce co mpetitive advantages that o thers canno t easily co py. Incumbents trying to co py the f irm wo uld be straddled acro ss two business mo dels, unable to reap the f ull advantages o f either. And late-mo ving pure-play rivals will struggle, as FreshDirect’s lead time allo ws the f irm to develo p brand, scale, data, and o ther advantages that newco mers lack (see belo w f o r mo re o n these reso urces). Key Framework: The Value Chain The v alue chain is the “set o f activities thro ugh which a pro duct o r service is created and delivered to custo mers.”M. P o rter, “Strategy and the Internet,” Harv ard Business Rev iew 79, no . 3 (March 2001): 62–78. There are f ive primary co mp...
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