Core Competencies Critical Resources Key Success Factors Core Competencies

Core competencies critical resources key success

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“Core” Competencies “Critical” Resources “Key” Success Factors “Core” Competencies “Critical” Resources Competitive advantage is seen as concentrated in a few parts of the value chain
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31 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Mutually Reinforcing Activities Zara Apparel Source: Draws on research by Jorge Lopez Ramon (IESE) at the Institute for Strategy and Competitiveness, HBS Very flexible production system Tight coordination with 20 wholly-owned factories Extensive use of store sales data JIT delivery Very frequent product changes Cutting- edge fashion at moderate price and quality Word-of- mouth marketing and repeat buying Little media advertising Widely popular styles Prime store locations in high traffic areas Customers chic but cost- conscious Advanced production machinery Global team of trend- spotters Productio n in Europe Fit is leveraging what is different to be more different
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32 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Continuity of Strategy Continuity of strategy is fundamental to sustainable competitive advantage e.g., allows the organization to understand the strategy builds truly unique skills and assets related to the strategy establishes a clear identity with customers, channels, and other outside entities strengthens the fit across the value chain Reinvention and frequent shifts in direction are costly and confuse the customer, the industry, and the organization Continuity is required in the value proposition Successful companies continuously improve in how they realize their strategy Strategic continuity and continuous change should occur simultaneously . They are not inconsistent Continuity of strategy allows learning and change to be faster and more effective
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33 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Barriers to Strategy Flawed Concepts Misunderstanding of strategy itself Poor industry definition Industry Pressures Industry conventional wisdom leads all companies to follow common practices Labor agreements limit ways of configuring activities Regulation constrains price, product, service or process alternatives Customers ask for incompatible features or request new products or services that do not fit the strategy
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34 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Barriers to Strategy Capital Market Biases Strong pressures to emulate the currently “successful” peers Pressure to grow faster than the industry A strong bias for “ doing deals ” (M&A) Internal Practices Inappropriate goals and performance metrics bias strategy choices Short time horizon Over-weighting of equity-based compensation amplifies unhealthy stock market pressures Rapid turnover of leadership undermines the strategic direction to achieve short-term performance benefits A desire for consensus
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