4-1 © 2006 by Nelson, a division of Thomson Canada Limited 2/22/2016 Slides developed by: Peter Yannopoulos Chapter 4 Competitive Advantage and Competitive Strategies

4-2 © 2006 by Nelson, a division of Thomson Canada Limited Competitive Advantage Competitive advantage is something that the organization possesses exclusively or does better than the competition

4-3 © 2006 by Nelson, a division of Thomson Canada Limited The Resource-Based Theory of the Firm The basic principle of the resource-based theory is that strategy formulation begins with an assessment of organizational resources and capabilities

4-4 © 2006 by Nelson, a division of Thomson Canada Limited According to the resource-based theory of the firm The firm is a bundle of resources and capabilities that are the key to achieving a competitive advantage and above average returns

4-5 © 2006 by Nelson, a division of Thomson Canada Limited According to the resource-based theory of the firm Differences in resources and capabilities account for variances in profitability among firms in the same industry Differences in resources and capabilities account for variances in profitability among firms in the same industry

4-6 © 2006 by Nelson, a division of Thomson Canada Limited According to the resource-based theory of the firm Marketing strategy is essentially a search for, and exploitation of competitive advantage

4-7 © 2006 by Nelson, a division of Thomson Canada Limited Sun Tzu “One mark of a great soldier is that he fights on his own terms or fights not at all” “One mark of a great soldier is that he fights on his own terms or fights not at all”

4-8 © 2006 by Nelson, a division of Thomson Canada Limited Competent strategists are those who “engage in battle only when odds are overwhelmingly in their favor” Competent strategists are those who “engage in battle only when odds are overwhelmingly in their favor” Sun Tzu

4-9 © 2006 by Nelson, a division of Thomson Canada Limited Distinctive Competencies The resources and capabilities that are sources of competitive advantages and are critical in helping a firm pursue effective marketing strategies

4-10 © 2006 by Nelson, a division of Thomson Canada Limited Distinctive Competencies Lack of Strategically Equivalent Substitutes Complementary Assets Imperfectly Imitable Valuable Rare DistinctiveCompetencies

4-11 © 2006 by Nelson, a division of Thomson Canada Limited Dynamic Competencies An organization’s ability to create new forms of competitive advantage by developing and reconfiguring its resources and capabilities in response to environmental change

4-12 © 2006 by Nelson, a division of Thomson Canada Limited Sources of Advantage, Position of Advantage, and Performance Sources of Advantage  Distinctive competencies Position of Advantage  Superior customer value  Low cost Performance  ROI  Market share  Customer satisfaction

4-13 © 2006 by Nelson, a division of Thomson Canada Limited Competitive Strategy It represents the choice of how the firm will compete in its chosen market

4-14 © 2006 by Nelson, a division of Thomson Canada Limited The Purpose of Competitive Strategy The purpose of competitive strategy is to seek a position of competitive advantage such as low cost, operational excellence, higher product quality, and superior customer relationships

4-15 © 2006 by Nelson, a division of Thomson Canada Limited Porter’s Generic Strategies Competitive Scope Broad Differentiation Cost Leadership Differentiation Focus Cost Focus Narrow Competitive Advantage Low Cost

4-16 © 2006 by Nelson, a division of Thomson Canada Limited Requirements for Successful Implementation of Porter’s Generic Strategies Cost LeadershipDifferentiationFocus Maintain differentiation parity Maintain cost parityExcellent understanding of segment needs Large price sensitive market Basis of differentiation is unique and valuable The requirements for success in the segment must differ from requirements in other segments Lack of switching costsA large number of customers desires unique features The segment is of little interest to major competitors No other competitor is pursuing a cost leadership strategy Firm possesses the necessary resources and capabilities to pursue differentiation strategy Firm possesses the necessary resources and capabilities to satisfy segment needs

4-17 © 2006 by Nelson, a division of Thomson Canada Limited Differentiation Methods P roductServiceBrand recognitionBrand image

4-18 © 2006 by Nelson, a division of Thomson Canada Limited Value Disciplines Customer Intimacy Operational Excellence ValueDisciplines Product Leadership