Williams 4e Chapter 06

Sustainable
Competitive Advantage
Resources
The assets, capabilities, processes,

information, and knowledge that the
organization controls
Competitive
Advantage
Providing greater value for customers

than competitors can
Sustainable
Competitive
Advantage
A competitive advantage that other

companies have tried unsuccessfully
to duplicate
1
Chapter 6
Copyright 2007 by South-Western, a division of Thomson Learning. All rights reserved
Requirements for
Sustainable Competitive Advantage
Valuable
Resources
Rare
Resources
Sustainabl
e
Competitiv
e
Advantage
Imperfectly
Imitable
Resources
NonSubstitutable
Resources
1
Chapter 6
Adapted from Exhibit 6.1
Strategy-Making Process
Assess need
for
strategic change
Conduct a
Situational
Analysis
2
Chapter 6
Choose
Strategic
Alternatives
Assessing the Need

for Strategic Change
Step 1
Assess need
for strategic change
Avoid Competitive Inertia

a reluctance to change strategies or competitive
practices that have been successful in the past
Look for Strategic Dissonance

a discrepancy between a companys intended strategy
and the strategic actions managers take when
implementing that strategy
2.
1
Chapter 6
Doing the Right Thing

Is Ethics an Overlooked Source of
Competitive Advantage?
Volvos reputation for safe cars has been
a source of competitive advantage
Johnson & Johnson is admired for its response
to the Tylenol cyanide contamination incidence
Should ethics be the first source of
competitive advantage? Probably not
2.
1
Start with low costs, good service, or unique product

capabilities. Use ethics as a way to differentiate your
company from the competition.
Chapter 6
Situational Analysis
S
Strengths
Internal
Weaknesses
Opportunities
External
Threats
2.
2
Chapter 6
Situational Analysis
I
N
T
E
R
N
A
L
Strength
s
Distinctive
Competence
Core Capability
Weaknesse
s
E
X
T
E
R
N
A
L
Opportunitie
s
Environmental
Scanning
Strategic Groups
Shadow-Strategy
Task Force
Threat
s
2.
2
Chapter 6
Strategic Groups
Core Firms
central companies in a strategic group
Secondary Firms
firms that follow related, but somewhat different,
strategies than do core firms
Transient Firms
companies whose strategies change from one
strategic position to another
Shadow-strategy task force

2.
2
seeks out its own companys weaknesses and

determine how other companies could exploit them
Chapter 6
Choosing Strategic Alternatives

Risk-Avoiding Strategy
protect an existing
competitive advantage
Risk-Seeking Strategy
extend or create a sustainable
competitive advantage
Strategic Reference Points

targets used by managers to determine if the firm
has developed the core competencies it needs to
achieve a sustainable competitive advantage
2.
3
Chapter 6
Strategic Reference Points
2.
3

Chapter 6
Corporate-Level Strategies
Corporate-Level
Strategy
The overall organizational strategy

that addresses the question What
business(es) are we in or should we
be in?
3
Chapter 6
Corporate-Level Strategies
PORTFOLIO STRATEGY
Acquisitions,
unrelated diversification,
related diversification,
single businesses
BCG Matrix
Stars
Question marks
Cash cows
Dogs
GRAND STRATEGIES
Growth
Stability
Retrenchment/
recovery
3
Chapter 6
Market Growth
BCG Matrix
3.
1
High
Lo
w
Question Marks
Stars
Dogs
Cash Cows
Small
Large
Relative Market Share

Chapter 6
BCG Matrix
3.
1
Stars
companies with a large share

of a fast-growing market
Question
Marks
companies with a small share

of a fast-growing market
Cash
Cows
companies with a large share

of a slow-growing market
Dogs
companies with a small share

of a slow-growing market
Chapter 6
BCG Matrix
Market Growth
Company A
High
Stars
Company C
Company B
Company G
Lo
w
3.
1
Question Marks
Company D
Company E
Dogs
Company H
Cash Cows
Company F
Small
Large
Relative Market Share

Chapter 6
Diversification and Risk
Ris
k
High
Relationship Between
Diversification and Risk
Lo
w
3.
1
Single
Business
Related
Diversification
Chapter 6
Unrelated
Diversification
Problems with Portfolio Strategy

Unrelated diversification does not reduce risk.
Present performance is used to predict future
performance.
Cash cows fail to aggressively pursue opportunities

and defense themselves from threats.
Being labeled a cash cow can hurt employee

morale.
Companies often overpay to acquire stars.

Acquiring firms often treat stars as conquered foes.
Chapter 6
Grand Strategies
3.
2
Growth
Strategy
focuses on increasing profits,

revenues, market share, or number
of places to do business
Stability
Strategy
focuses on improving the way in

which
the company sells the same products
or services to the same customers
Retrenchment
Strategy
focuses on turning around very poor

company performance by shrinking
the size or scope of the business
Chapter 6
Industry-Level Strategies
Five
Industry Forces
Positioning
Strategies
4
Chapter 6
Adaptive
Strategies
Porters Five Industry Forces

Threats of
New Entrants
Bargaining
Power of
Suppliers
4.
1
Character
of
Rivalry
Bargaining
Power of
Buyers
Threat of
Substitutes
Chapter 6
Positioning Strategies
Cost Leadership
Differentiation
Focus Strategy
4.
2
Chapter 6
Differentiation
Chapter 6
Adaptive Strategies
Defenders
seek moderate growth
retain customers
Analyzers
blend of defender &
prospector strategies
imitate others
successes
Prospectors
seek fast growth
emphasize risk taking
innovation
Reactors
use an inconsistent
strategy
respond to changes
4.
3
Chapter 6
Firm-Level Strategies
Basics of
Direct
Competition
Strategic Moves
in
Direct
Competition
5
Chapter 6
Entrepreneurshi
p
and
Intrapreneurship
Market commonality
Attack
ENTREPRENEURIA
L
INTRAPRENEURIAL
ORIENTATION
Autonomy
Resource similarity
Response
Innovativeness
DIRECT
COMPETITION
STRATEGIC
MOVES OF
DIRECT COMP.
Risk taking
Proactiveness
Competitive
Aggressiveness
5
Chapter 6
Market Commonality
Resource Similarity
Attack
Firm A
Response
Firm B
Entering market is most forceful attack.

Exiting market is clear defensive signal of retreat.
Entrepreneurship is strategy of entering established markets
or developing new market.
5
Chapter 6
Direct Competition
McDonalds
Wendys McDonalds
Burger
King
Market
Commonality
High
McDonalds
III
IV
McDonalds
Low
5.
1
II
Lubys Cafeteria
Low
Resource
Similarity
Chapter 6
High
Subwa
y
Strategic Moves of
Direct Competition
Attack
A competitive move designed to reduce a
rivals market share or profits.
Response
5.
2
A competitive countermove, prompted by

a rivals attack, to defend or improve a
companys market share or profit.
Chapter 6
Strategic Moves of
Direct Competition
Types of Responses
1. Match or mirror your competitors move.
2. Respond along a different dimension

from
your competitors move or attack.
5.
2
Chapter 6
Strategic Moves of
Direct Competition
Competitor
Analysis
5.
2
Interfirm Rivalry:
Action & Response
Strong Market
Commonality
Less Likelihood
of an Attack
Weak Market
Commonality
Greater Likelihood
of an Attack
Strong Resource
Commonality
Less Likelihood
of a Response
Low Resource
Commonality
Greater Likelihood
of a Response
Chapter 6
Entrepreneurship and
Intrapreneurship
Entrepreneurship
the process of entering new or established
markets with new goods or services
Intrapreneurship
entrepreneurship within an
existing organization
Entrepreneurial orientation
the set of processes, practices, and decisionmaking activities that lead to new entry
5.
3
Chapter 6
Key Dimensions of
Entrepreneurial Orientation
Risk Taking
Autonomy
Innovativeness
Proactiveness
5.
3
Competitive
Aggressiveness
Chapter 6

Williams 4e Chapter 06

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Sustainable

The assets, capabilities, processes,

Providing greater value for customers

A competitive advantage that other

Adapted from Exhibit 6.1

Assessing the Need

Avoid Competitive Inertia

Look for Strategic Dissonance

Doing the Right Thing

Start with low costs, good service, or unique product

Adapted from Exhibit 6.4

Shadow-strategy task force

seeks out its own companys weaknesses and

Choosing Strategic Alternatives

Strategic Reference Points

Strategic Reference Points

Adapted from Exhibit 6.6

The overall organizational strategy

Relative Market Share

companies with a large share

companies with a small share

companies with a large share

companies with a small share

Relative Market Share

Adapted from Exhibit 6.8

Diversification and Risk

Problems with Portfolio Strategy

Cash cows fail to aggressively pursue opportunities

Being labeled a cash cow can hurt employee

Companies often overpay to acquire stars.

focuses on increasing profits,

focuses on improving the way in

focuses on turning around very poor

Porters Five Industry Forces

Adapted from Exhibit 6.12

Entering market is most forceful attack.

Adapted from Exhibit 6.13

Adapted from Exhibit 6.14

A competitive countermove, prompted by

1. Match or mirror your competitors move.

2. Respond along a different dimension

Adapted from Exhibit 6.15

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