16 Copyright 2005 Professor Michael E Porter 20060606 HSM Chicago 06052006

16 copyright 2005 professor michael e porter 20060606

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16 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Determinants of Relative Performance Differentiation (Higher Price) Lower Cost Competitive Advantage
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17 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt SOUTHWEST AIRLINES EXAMPLE OF COMPETITIVE POSITIONING BY LOWERING COSTS
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18 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Linking Strategy to Relative Performance Southwest Airlines Cents per ASM Note: ASM (Available Seat Miles) defined as total seats available multiplied by miles flown Source: Airline annual reports and author’s calculations Operating Profit per Available Seat Mile Operating Cost per Available Seat Mile Cost Advantage: 2.44 Pricing Differential: 1.72 Revenue and Cost per Available Seat Mile, Average of 1998 - 2000
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19 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt PACCAR TRUCKING EXAMPLE OF COMPETITIVE POSITIONING BY DIFFERENTIATION
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20 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt
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21 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Paccar brands
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22 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Marketing & Sales (Lead generation, Model home display, Sales force, Customer selection of personalized options) Land Acquisition & Development ( Identify attractive markets, Secure land, Procure entitlements and permits, Prepare site) Construction (Design, Engineering, Schedule and manage construction process) Closing (e.g. Customer Financing, Contract, Title, Closing) After-Sales Service (e.g. Warranties, Customer Complaints) M a r g i n Primary Activities Support Activities Firm Infrastructure (e.g. Financing, Planning, Investor Relations) Procurement (e.g. Materials, Subcontracted Labor, Advertising, Services) Technology Development (e.g. Product Design, Testing, Process Design, Materials Research, Market Research) Human Resource Management (e.g. Recruiting, Training, Compensation System) Identifying the Value Chain Homebuilding Value What buyers are willing to pay Competing in a business involves performing a set of discrete activities , in which competitive advantage resides The value chain is unique to each business
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23 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Creating a unique and sustainable competitive position Assimilating, attaining, and extending best practices Operational Effectiveness Strategic Positioning Run the same races faster Choose to run a different race Achieving Superior Performance Operational Effectiveness is Not Strategy
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24 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Five Tests of a Good Strategy A unique value proposition compared to other organizations A different , tailored value chain Clear tradeoffs, and choosing what not to do Activities that fit together and reinforce each other Continuity of strategy with continual improvement in realizing the strategy A unique value proposition
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