Tambahan Materi SM-

Business Strategy
Amin Wibowo, Ph.D
Competitive Advantage & Economic Value

COMPETITIVE
HIGHEST
ADVANTAGE =
VALUE
–
COST

5–2
 Industry and Firm Effects Jointly
Determine Competitive Advantage

6–3
 Sustainable Competitive Advantage

• Costly Duplication due to:

➢ Historical Conditions;

➢ Uncertainty;

➢ Social Complexity; and

➢ Property Rights Protection.

6–4
 Types of Competitive Advantage

Buyer value generated (willingness to pay)

Costs incurred (including opportunity cost of capital)

$

Value
Created

Industry Successful Successful Competitor

average differentiated low-cost with dual
competitor competitor competitor advantage

© 2005 Mara Lederman, Rotman School of Management

 Value Drivers: Differentiation

• Differentiation:

➢ Product features, customer service, customization, and complements

➢ Competitive advantage = economic value created (V-C) > competitors

❖ Marriott line of Hotels

6–6
 Cost Drivers: Cost-Leadership

• Cost Leadership:
➢ Cost of input factors, economies of scale, and learning-curve and
experience-curve effects
➢ Competitive advantage = economic value created (V-C) > competitors
❖ Walmart vs. Kmart
❖ Dell vs. Compaq, Gateway, & HP
6–7
Competitive Positioning and the Five Forces

6–8
Value and Cost Drivers

6–9
Watch this Movie

5-10
 Being Different?

◆ Joger vs. Dagadu?

◆ Starbucks vs. J-Co?

◆ Waroeng Steak vs. R&B Steak?

◆ RM. Padang Sederhana vs. RM. Padang Murah

Meriah

◆ FEB UGM vs. FEB UI?

Copyright © Houghton Mifflin Company. 5 | 11 5-11
Distinguishing Features of the Generic Strategies

Cost Differentiation Focus CL Focus

Leadership Differentiation
Strategic A broad cross- A broad cross- A narrow A narrow
Target section of the section of the market niche market niche
market market
Basis of CA Lower overall Ability to offer Lower overall Attributes that
costs than buyers cost than rivals appeal
rivals something specifically to
attractively niche members
different from
rivals
Product line A good basic Many product Features and Features and
product with variations, wide attributes attributes
few frills selection; tailored to the tailored to the
(acceptable emphasis on tastes and tastes and
quality and differentiating requirements of requirements of
limited features niche members niche members
selection)
Copyright © Houghton Mifflin Company. 5 | 12 5-12
 Distinguishing Features of the Generic
Strategies (Cont.)
Cost Differentiation Focus CL Focus
Leadership Differentiation
Production A continuous Build in A continuous Custom-made
emphasis search for cost whatever search for cost products that
reduction differentiating reduction while match the taste
without features buyers incorporating and
sacrificing are willing to features and requirements of
acceptable pay for; strive attributes niche members
quality and for product matched to
essential superiority niche member
features preferences
Marketing Try to make a Tout Communicate Communicate
emphasis virtue out of differentiating attractive how product
product features features of a offering does
features that Charge a budget-priced the best job of
lead to low cost premium price product offering meeting niche
to cover extra that fits niche buyers’
costs of buyers’ expectations
differentiating expectations
features
Copyright © Houghton Mifflin Company. 5 | 13 5-13
 Distinguishing Features of the Generic
Strategies (Cont.)
Cost Differentiation Focus CL Focus
Leadership Differentiation
Keys to Economical Stress constant Stay committed Stay committed
sustaining the prices/good innovation to to serving the to serving the
strategy value stay ahead of niche at lowest niche better
Strive to imitative overall cost; that rivals;
manage costs competitors don’t blur the don’t blur the
down, year Concentrate on firm’s image by firm’s image by
after year, in a few key entering other entering other
every area of differentiating market market
the business features segments or segments or
adding other adding other
products to products to
widen market widen market
appeal appeal

Copyright © Houghton Mifflin Company. 5 | 14 5-14

 Other SBU Strategy

◆ Porter’stypology IS NOT the only competitive strategy

◆ What’s else?
➔ Miles and Snow?
➔ Tracey and Wiersema?
➔ Hamel and Prahalad?

◆ So…?

5-15
 Miles & Snow Strategy Types
Defenders
Prospectors
Analyzers
Reactors (?)
Competitive advantage results from a clear and direct
match between the firm’s:
➔ Mission and values
◼ The firm’s definition of itself
➔ Approach to business-level strategy
◼ New vs. existing markets, first-mover advantage, cost vs.
innovation
➔ Characteristics and behaviors
◼ Organizational structure, corporate culture,
command/control systems

Page 16 5-16
 Defenders
Perspective Process
◆ Defend current markets ◆ Intensive, systematic
◆ Narrow product domain strategic planning
◆ Cautious growth ◆ Centralized control
strategies systems
◆ Emphasis on efficiency ◆ Leverage existing,
proven technologies
◆ Performance based on
efficiency

Page 17 5-17
 Prospectors
Perspective Process
◆ Open to ◆ Strategy driven by
experimentation innovation
◆ Exploration of new ◆ First-mover advantage
markets ◆ Decentralized control
◆ Aware of external systems
trends ◆ Performance based on
◆ Open to growth spurts results
◆ Emphasis on
innovation

Page 18 5-18
 Analyzers
Perspective Process
◆ Keenly aware of ◆ Strategy driven by
external trends competitive intelligence,
◆ Balance between analysis
exploration and ◆ “Fast-second” strategic
exploitation maneuvering
◆ Purposeful growth ◆ Performance based on
building on proven results
capabilities, ideas

Page 19 5-19
 Value Disciplines (Treacy & Wiersema, 1993)

◆ Product leadership
➔ Produce a continuous stream of state-of-the-art products and services
➔ Based on four principles
◼ 1) encouragement of innovation
◼ 2) risk-oriented management style
◼ 3) talented product design people
◼ 4) educate and lead the market

5-20
 Value Disciplines

◆ Operational Excellence
➔ Strategic approach aimed at better production and delivery mechanisms
◼ Wal-Mart, American Airlines, Fed-Ex

5-21
 Value Disciplines

◆ Customer Intimacy
➔ Concentrates on building customer loyalty
➔ Can be expensive, but the long-term benefits of a loyal clientele can pay off

5-22
 Hamel and Prahalad

◆ Rule maker
➔ the incumbents that built the industry.
➔ IBM, CBS, United Airlines, Merrill Lynch, Sears, Coca-Cola, and
➔ The creators and protectors of industrial orthodoxy.
➔ They are the oligarchy.

◆ Rule taker

◆ Rule breaker

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◆ Rule Takers
➔ The companies that pay homage to the industrial "lords."
➔ Fujitsu, ABC, U.S. Air, Smith Barney, J.C. Penney, and numerous others are
those peasants.
➔ Their life is hard. Imagine working at Fujitsu for 30 years trying to catch IBM in
the mainframe business, or being McDonnell Douglas to Boeing, or Avis to
Hertz. We Try Harder may be a great advertising slogan, but it's depressingly
futile as a strategy.

5-24
◆ Rule Breakers
➔ IKEA, the Body Shop, Charles Schwab, Dell Computer, Swatch, Southwest
Airlines, and many more are the rule breakers.
➔ Shackled neither by convention nor by respect for precedent, these
companies are intent on overturning the industrial order.
➔ They are the malcontents, the radicals, the industry revolutionaries.

5-25