CREATING COMPETITIVE

ADVANTAGE

Group 3

Competitive
Advantage
What over
is Competitive
Advantage?
An advantage
competitors gained
by offering consumers
greater value than
competitors offer

Why is it required for companies?

To increase profits and earn superior position in the market.

How is it achieved?
Develop resources and capabilities, which are rare, valuable, nontradable and unique.

Value addition
Total value created by company(A-B)
Supplier opportunity cost
of company

Supplier opportunity cost of

competitor company

Willingness to pay for

company product

D
Willingness to pay for
competitor product

Total value created by competitor company

(C-D)

pes of competitive advantage

25
20
15
10
5
0

Willingness to
pay
Supplier
Opprtunity Cost

How to Achieve Competitive

Advantage
Creating/Adding Value

Differentiat
ing
Startegy

Low Cost
Startegy

Boost Customer willingness to

pay by creating differentiation
which allows to command
premium

Large Cost Saving on all the

activities with a slight decrease
in customers willingness to pay

How to Achieve Low Cost Strategy

Activity Analysis
Identification & description of activities in an organisation &
evaluation of their impact on its operation

Examples of Activities
a.
b.
c.
d.
e.

What activities are executed

How many people performed the activities
How much time they spend on activity
How much and which resources are consumed
Where manufacturing plant is setup

Use Activity analysis to analyse Cost or

relative cost analysis

Cost Drivers
Cost drivers are associated with each activity and they
are the factors that make the cost of an activity rise or
fall.
Cost drivers are critical and to estimate the competitors
cost position

How to choose cost drivers

On breaking down
1. Primary Activities

2. Support Activities

Relative Cost Analysis

Low cost position is the key to added value and competitive
advantage and relative cost analysis to focus on differences
in individual activities, not just on differences on total cost

Conclusion

Understanding the root of economic performance

difference is important

Strategy needs a systematic way to understand and

analyze within industry differences in performance

Competitive advantage is the reason behind brand

loyalty, and why we prefer one product or service
over another

Industry analysis is crucial for creating competitive

advantage

A firm cannot claim any value unless it adds some

value to the product

A firm must drive a wide wedge between customer

willingness to pay and supplier opportunity cost

A firm should do different things than its rivals to

establish competitive advantage

THANK YOU