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Chapter 3 Positioning and Competitiveness

Chapter 3 Positioning and Competitiveness. Designing a Competitive Business Model and Building a Solid Strategic Plan. 3 What Is a Competitive Advantage?. Your book’s definition: A collection of factors that set you apart “Honda’s competitive advantage is their engine technology.”

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Chapter 3 Positioning and Competitiveness

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  1. Chapter 3Positioning and Competitiveness Designing a Competitive Business Model and Building a Solid Strategic Plan

  2. 3What Is a Competitive Advantage? • Your book’s definition: • A collection of factors that set you apart • “Honda’s competitive advantage is their engine technology.” • Everyone else in the free world: • The status of having superior performance over your competitors (through some collection of factors) • You either have a competitive advantageor you don’t • It’s not what you have, it’s the fact that you have something that makes you better. • “Toyota has a competitive advantage over Ford” • Toyota’s 2012 profit margin: 4.36% on $247 B in sales; Ford’s: 4.22% on $134 B sales • What makes Toyota better?

  3. What Can Make You Better (and give you a competitive advantage) • Products you sell • Technology • Inexpensive inputs (labor, parts) • Rareness • Service you provide • Hours open • Convenience of location • Friendliness and helpfulness • Pricing you offer • Reasonable, NOT NECESSARILY LOWEST

  4. Entrepreneurs of the Day • Greg Watkins (producer) and Chuck Creekmur (journalist) • #1 urban website in ten years of existence (started in 1998) • Originally wanted to promote a fledgling production label (Oblique Recordings) • Also wanted to provide a one-stop shop for urban content (downloads) • Used by industry great Russell Simmons for keeping up with news • In 2003, site made enough money so that both entrepreneurs could quit their jobs. • Revenue exceeded $4 million in 2007

  5. The Sustainable Competitive Advantage – The VRIO Framework (NOT IN THE TEXT) • Value • The factor has to provide value to customers • Rareness • Not everyone can have this factor • Imitability • The factor must be hard to copy or substitute • Organization • The business must have the right policies and operational know-how to nurture the factor.

  6. The Sustainable Competitive Advantage – The VRIO Framework • Let’s take this through an example – how about McDonald’s fries? Are they a source of competitive advantage for McDonalds? Can they be a sustainable source of competitive advantage over others? • How do we know if McDonald’s even has a competitive advantage over other restaurants? • What other things might be factors for competitive advantage in the fast food subindustry?

  7. What Types of Things Can Bring About a Competitive Advantage? • Superior customer intimacy • Understanding exactly the mix of things customers want in your product or service • Focus • Fewer product lines; better understanding • Cost control • Knowing your financials and controlling them, not the other way around

  8. The Purpose of a Strategic Plan • To set up your business to achieve competitive advantage status • How? • Planning of resource allocation (budgets, time, attention, etc.) • Resources build key competitive factors • Factors build your competitive advantage

  9. What Does a Strategic Plan Look Like? • Has mission, vision, and values • Has company goals and objectives • Has SWOT analysis • Has short-term and long-term plans for • Marketing (promotion, distribution, product development) • Management development and succession • Market or locale dominance

  10. The Strategic Management Process • Develop mission, vision, values, goals, and objectives. • Do an environmental scan. • Set appropriate strategies that take scan into consideration. • Implement the strategies. • Evaluate whether you hit your objectives, feedback and learn.

  11. Environmental Scan • Internal Environment • Strengths and weaknesses • Management, marketing, human resources, capital • External Environment • Opportunities and threats • Competitors, suppliers, customers, ability to meet the demands of your environment

  12. Strategy Forming and Implementing • Come up with plans for the next 5 years for: • Keeping high quality management • Expanding product lines and pricing them • Expanding impact in the market • Expanding locations • Keeping cost levels down • Promoting yourself • Break these down into to-do lists with deadlines; assign responsibilities.

  13. Types of Strategic Positions • Business-level strategies and market segments • Cost leadership • Differentiation • Focus • Focused cost leadership • Focused differentiation • Last step: create a control system to monitor when things are not going to plan.

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