1 Strategy Competitive Advantage Competitive Advantage. Always relative not absolute – compare to benchmark Sustainable competitive advantage – maintain over a long period of time Must be based on strategic choices (cannot do everything). Example: JetBlue Airline – David Neeleman ‘Morris Air e-ticket’ bought by SW Air in Founded JetBlue 1998 – Low cost and differentiation strategy tried. Strategy is not: A grandiose statement such as: (we will be number 1). Managers must meet competitive challenge. Blockbuster vs. Netflix. Organizational performance is determined by : Industry effects – caused by the structure of the industry Firm effects – caused by the actions of management

2 Strategy Competitive Advantage Stakeholders and competitive advantage. Identify what are the interest, opportunities and threats, social issues and concerns for: Internal – employees, stockholders, managers External – customers, suppliers, partners, community, government Analyze, Formulate, and Implement (AFI) framework. SWOT analysis, Level of strategy ( Business, Corporate, Global ). Implement organizational design. Black-Swan events. The impact of a highly improbable event (Nicholas Taleb).

3 Competitive Forces Shape Strategy How Competitive Forces Shape Strategy: “By being aware of competitive forces, an organization can position itself to be less vulnerable to attack” (Michael E. Porter, 1979)

4 Competitive Forces Shape Strategy Porter’s 5 Forces Model Threat of New Entrants Bargaining Industry Bargaining Power of Competitive Power of Suppliers Rivalry Customers Threat of Substitutes

5 Strategic Planning Model Critical Success Factor: Strategic Innovation Environmental Execution Analysis Formulation Implementation& Control S trengths MissionBudgetsMonitor W eaknesses ObjectivesProgramsFeedback O pportunities STRATEGYProcedures T hreats Organizational Structure Policy Guidelines Feedback

6 Life Cycle and Competitive Advantage Introduction Growth Maturity Decline R&D Improve product Focus on Cost Control Tech change Econ of scale Standardize Reduce capacity Attention to Process improve Efficiency Cut products quality Distribution Costs cuts Design change Value added Few changes Process change Forecasting Optimal capacity Creating a Sustainable Competitive Advantage (David A. Aaker, 1989) Stage of the Product Life Cycle, Business Strategy, and Business Performance (Anderson & Zeithaml, 1984)

7 Automobile Industry: Growth to Maturity ( ) I. Depression to WWII II. Post WWII III. 1970s – The Oil Embargo and Competitive Rules Change IV. Today – The Rules are Still Changing * In Maturity, focus on standardization, efficiency and costs* * Grow by capturing existing market share* U.S. Motor Vehicle Sales (Millions of units) Year 1986 … Units Source: Ward’s Automotive Reports

8 Automobile Industry: (Growth Phase I) * In Introduction, focus is on R&D, technical and design changes, attention to quality, and process changes* Source: U.S. Automobile Production Figure-Wikipedia

Automotive Industry Clusters in Alabama Legend Concentration of Automotive Suppliers Suppliers by Zip Code There are more than 383 Automotive Companies and Suppliers in Alabama.

10 Strategic Planning The Locomotive Industry The Big Three American Locomotive (ALCO)Baldwin LocomotiveLima Locomotive

11 Locomotive Industry 1939 General Motors Electro-Motive Division took lead in diesel-electric locomotives Why? Growth Market Strength (R&D, developmental capital, aggressive marketing) Opportunity (Railroads wanted more diesel- electric locomotives) WWII Opportunity offered by history Demand not determined by general market forces 1950sEnd of Steam

12 Strategic Planning Locomotive Industry Technology Matures Maturity – Focus on standardization, efficiency and costs Strength- Efficiency through standardization Opportunity- Growth of container freight Today – Big Two (EMD and GE) EMD GE

13 Strategy Competitive Advantage Differentiation (RCA used its R&D strength and its organizational structure to market successfully Color TV) Transformation: From ordinary to revolutionary

14 RCA Strategic Advantage Differentiation

15 Strategy Competitive Advantage Low Cost (Southwest Airlines strives to recruit and train the best personnel available, create innovative flight schedules, stress strong customer support, and provide high pay for employees) Transformation: From in-state service to national to?

16 Competitive Advantage Southwest – Low Cost

17 Strategy Competitive Advantage Innovation/Response (FedEx uses a hub-and-spoke system to rapidly respond to request for package shipments worldwide) Transformation: From national letter carrier to global cargo carrier

18 Strategic Advantage FedEx - Response

19 Strategy Competitive Advantage Diversification (Boeing reacts to the maturing airframe market) Transformation: From an airplane builder to a high-tech product and service provider

20 Strategic Advantage Boeing

21 Strategic Advantage Boeing – Delta Rocket