1. The Nature and Sources of Competitive Advantage
©2015 Robert M. Grant & Judith Jordan

2. Learning Objectives
By the time you have completed this topic you will be able to:
understand the meaning of the term ‘competitive advantage’ and identify the circumstances in which a firm can create a competitive advantage over a rival
predict the potential for competition to wear away competitive advantage through imitation
recognise how resource conditions create imperfections in the competitive process that offer opportunities for competitive advantage
distinguish the two primary types of competitive advantage: cost advantage and differentiation advantage
identify potential sources of cost and differentiation advantage and recommend strategies to enhance competitiveness
appreciate the pitfalls of being ‘stuck in the middle’ and the challenge of achieving effective differentiation and low cost together
©2015 Robert M. Grant & Judith Jordan

3. Emergence of Competitive Advantage
©2015 Robert M. Grant & Judith Jordan

4. Competitive Advantage from Innovation: New Game Strategies
Strategic Innovation: Creating customer value from novel products, experiences or modes of product delivery.
Strategic innovation may involve:
Creating new industries, e.g. Xerox and plain paper copies; Craig McCaw and wireless telephone technology
Creating new customer segments, e.g. Apple established the market for home computers; the Nintendo Wii extended the market for video games to new types of customer
New sources of competitive advantage; novel approaches to creating consumer value, e.g. Dell Computer’s direct sales model; Cirque du Soleil’s reinvention of the circus
©2015 Robert M. Grant & Judith Jordan

5. Sustaining Competitive Advantage: Types of Isolating Mechanism
©2015 Robert M. Grant & Judith Jordan

6. Sources of Competitive Advantage
©2015 Robert M. Grant & Judith Jordan

7. Features of Cost Leadership and Differentiation Strategies
©2015 Robert M. Grant & Judith Jordan

8. Drivers of Cost Advantage
©2015 Robert M. Grant & Judith Jordan

9. Value Chain Analysis of Cost Advantage
Disaggregate the firm into separate activities
Establish the relative importance of different activities with respect to the total cost of the product
Identify cost drivers and linkages within the value chain
Identify opportunities for reducing costs
©2015 Robert M. Grant & Judith Jordan

10. Using the Value Chain Analysis to Explore Cost-Saving: Singapore Airlines
Porter’s category
Examples of airline activities that fit Porter’s categories
Cost-saving opportunities and initiatives
Inbound logistics
Aircraft, fuel, food and drink
Young fleet – the lower average age of SIA’s aircraft offer greater fuel efficiency. Staff are trained to reduce food and drink wastage.
Operations
Airport and gate operations, ticketing, flight scheduling, baggage handling, repair & maintenance
SIA endeavors to reduce costs through improving efficiency and adopting best practices.
Outbound logistics
Flight connections, partnerships and alliances with other operators
Routes are constantly being added and subtracted from the company’s route map to optimize load factors.
Marketing & sales
Promotion, advertising
The company’s success in achieving awards provides free publicity and promotes the company and its brand.
Service
Pre and post flight service
Online booking of meals and seats allows better forward planning. Social media provides a low cost means of building connections with customers.
Firm infrastructure
Management system – yield management, IT services, budgeting
Small headquarters located in low-cost location.
HRM
Recruitment and Reward
Training
Training is in-house and delivered by senior cabin crew rather than third parties. Training emphasizes both attentive service and waste control.
Technology development
IT systems
Non-strategic IT services outsourced to low-cost providers. Off-the shelf software systems purchased.
Procurement
Acquisition of aircraft and other inputs
A culture of hard bargaining
©2015 Robert M. Grant & Judith Jordan

11. Using the Value Chain to Identify Differentiation Potential on the Supply Side
©2015 Robert M. Grant & Judith Jordan

12. Porter’s Generic Strategies
©2015 Robert M. Grant & Judith Jordan

13. Stuck in the Middle: Porter’s Three Generic Strategies
©2015 Robert M. Grant & Judith Jordan