can replace multiple fork lifts•The portal crane business definitely creates value for lumber customers− $1MM to eliminate fork lift fleet− $6.5MM in fuel savings•Yet Harnischfeger makes essentially no money. Why?

…not so unique•Harnischfeger execs form Kranco in an MBO. Duplicate the portal crane technology− Same WTP: presence of twocrane companies doesn’t increase market for lumber moving− Same WTS: identical inputs, suppliers•Do lumber yards care who they buy from?•World wouldn’t care if one firm disappeared

Competitive Advantage andPositioning

Positioning• The positionof a firm within an industry can be a source of competitive advantage.•What do we mean by position?− If your firm is close to what customers want in the space of possible products, and there are no rivals selling similar products, then WTP must be high− If your firm is close to a mass of suppliers, with no rivals buying similar inputs, then WTS could be pretty low− Position can thus generate value•What other “positioning” choices can firms make?

Value positioning: airlines•Spirit, Southwest, and United− Who can we all agree is the worst? (vertical quality)− Why do we disagree about the other two? (horizontal quality)•Managers in each of these firms made conscious decisions about how much (and what kind of) consumer benefit to deliver•Quality choices can generate value if they are unique− Would Spirit make any money if RyanAir was in the US?− Would Southwest make any money if other airlines served MDW?

Cost positioning: airlines (again)•Spirit, Southwest, and United− Who can we all agree has highest costs?− Why do we disagree about the other two?− How are our answers correlated to the quality positions?•Usually hard to be high quality and low cost, but then there’s Southwest. We’ll talk more about this next week…•Again, managers in each of these firms made conscious decisions about “what to be” – high quality or low cost