1. Competitive Strategic Models
Understand different competitive strategic models
Hamel & Prahalad – competing for the future
Porter’s generic competitive strategies
Chan Kim & Mauborgne - Blue Ocean Strategy
Ridderstrale & Nordstrom - Funky Business

2. Hamel & Prahalad propose
Competitiveness by
Restructuring the firm and downsizing headcount
Reengineering processes and continuous improvement
Reinventing industries and regenerating strategies
Smaller
Better
Different

3. Primary lessons of competitive strategy
Find an attractive industry segment, buy low & sell high
Attractive because…
They have above average profitability
Sizable entry barriers (scale and scope of economies & government regulation) that keeps competitors out
If you can’t get in…
Redraw the industry boundaries so that
What is now attractive lies outside the former
boundaries (Hamel & Prahalad)

4. Industry’s don’t evolve!
Industry leaders are the only ones who benefit from the current state of an industry
Instead firms eager to enter and industry or change their position in it change the rules, they challenge accepted practice by:
Redrawing segment boundaries
Setting new price-performance expectations
Reinventing the product or service concept
(Hamel & Prahalad)

5. Porter’s generic competitive strategies
Competitive strategy as a structuralist theory of strategy where structure shapes strategy
Contends that there are 3 basic competitive strategies:
Cost leadership
Differentiation
Focus
(Michael E. Porter, 1985)

6. Cost leadership
A firm sets out to become the low cost producer in its industry – the strategic logic requires the firm to be the cost leader, not one of several firms vying for this position
Sources of cost advantage depend on the structure of the industry, & may include:
Economies of scale
Proprietary technology
Preferential access to raw materials
(Michael E. Porter, 1985)
Inherent problem is that there can only be ONE cost leader in each industry using this approach

7. Differentiation
A firm seeks to be unique in its industry in some dimension that is highly valued by buyers.
Uniqueness allows a firm to charge a premium price, its factors may include:
The product
The delivery system
The marketing approach
(Michael E. Porter, 1985)

8. Focus
A conscious choice of a narrow competitive scope, focused on a segment or group of segments in an industry, and serves those segments to the exclusion of all others
It has two variants:
Cost focus
Differentiation focus
(Michael E. Porter, 1985)

9. Stuck in the middle
A firm that engages in each generic strategy but fails to achieve any of them is “stuck in the middle”, it possesses no competitive advantage!
Becoming “stuck in the middle” is often a result of a firm’s unwillingness to make
clear choices about how to compete
(Michael E. Porter, 1985)

10. Chan Kim & Mauborgne propose
Red Ocean Strategy
Compete in the existing marketplace
Beat the competition
Exploit existing demand
Make the value cost trade-off
Align the firm’s activities with its strategic choice of differentiation or low cost
Blue Ocean Strategy
Create uncontested market space
Make the competition irrelevant
Create & capture new demand
Break the value cost trade-off
Align the firm’s activities in pursuit of differentiation and low cost

11. What is Blue Ocean Strategy? Some key points
Is a reconstructionist theory of strategy where strategy shapes structure
Is the result of a decade-long study of 150 strategic moves spanning more than 30 industries over 100 years ( )
Is the simultaneous pursuit of differentiation and low cost
The aim is not to out-perform the competition in the existing industry, but to create new market space or a blue ocean, thereby making the competition irrelevant
Is a visual framework designed to effectively build
the collective wisdom of the firm and
allow for effective strategy execution through simple communication
Requires development and alignment of three strategy
propositions: value, profit & people (

12. Blue Ocean basics The three key conceptual building blocks are:
Value innovation
Tipping point leadership
Fair process

13. Value innovation
Assist managers in breaking the value-cost trade-off by answering the following questions:
What factors can be eliminated that the industry has taken for granted?
What factors can be reduced well below the industry’s standard?
What factors can be raised well above the
industry’s standard?
What factors can be created that the
industry has never offered?

14. Tipping point leadership
Tipping point leadership – to change the mass focus on the extremes, people, acts and activities that exercise a disproportionate influence on performance to achieve a strategic shift fast at low cost

15. Fair process
Builds execution into strategy by creating people's buy-in up front. When fair process is exercised in the strategy making process, people:
Trust that a level playing field exists
Are inspired to cooperate voluntarily in executing the resulting strategic decisions
There are 3 mutually reinforcing elements that define fair process:
Engagement – involving individuals on strategic decisions
Explanation – everyone involved or affected understands
why the strategic decision has been made
Clarity of expectation – managers state clearly the
new rules of the game (
Reinforces the notion of strategic intent outlined by Hamel and Prahalad
Eg. GMHA

16. Funky business – freedom to choose
Recipes of the new economy…
Forget the old world order
Forget what you knew yesterday
Competitive advantage comes from being different!
Difference in the way people think, rather than what firms make
Social behavior, expectations and systems are undergoing seismic shifts
Corporate complacency of yesterday has
given way to insecurity and fear
(Ridderstrale & Nordstrom, 2000)

17. The last taboo! The world is becoming more transparent
What do you need to do today and tomorrow to thrive in the new world?
Alberto Alessi is already doing it
So, too, is Steve Jobs & Richard Branson
They are all exploiting the last taboo: competing on feelings and fantasy.
Get ready for E(motional)-commerce!
(Ridderstrale & Nordstrom, 2000)

18. The age of emotional commerce
Power has been transferred from those who sell to those who buy and buyers are more informed than ever before…
if you can compete at an emotional level, you will achieve huge competitive advantages
In almost any industry you examine, you will find that a number of firms are competing on being
sexy, attractive, and creating an emotional
reaction
“Amazon treats you as a celebrity in that they
provide you with an enormous amount of
information that makes your life easier”
(Jonas Ridderstråle)
Non-rational commerce! It doesn’t matter what it costs I’ll still buy it…

19. So what strategy approach is being used here?
Mobile phones plans
Social networking sites
Private health care

20. Key messages
Competitive strategies require some degree of change to create something unique and different
Traditional structuralist models are being challenged by reconstructionist models as the “new” best way forward