Creating Competitive Advantage P. Ghemawat & J. Rivkin Cont’d. How does a firm identify opportunities to create competitive advantage Dumb (or smart) luck. Strategists Pankaj Ghemawat and Jan Rivkin appear in the HBR February edition. In it, they examine why large differences in economic performance exist, . Creating Competitive Advantage P. Ghemawat J. W. Rivkin December 22nd, Submitted By: Group A5 – Section A Ajay Bansal Alpesh Chaddha Aman.
For example, it can estimate how much a customer will pay for a product that is one day fresher. Third, managers assess how successful they and competitors are at fulfilling customer needs. Despite this gap, Harnischfeger was making little profit on its sales of portal cranes by the late s. Marketing courses discuss ways to pinpoint such 30 customer needs and desires through formal or informal market research. Explore Options and Make Choices When exploring options, the management team must work vigilantly to build a vision of the whole Competitive advantage comes from an integrated set of choices about activities A firm must usually consider changing many of its activities in unison in order to improve long-term prospects When considering changes in activities, it is crucial to consider competitors reactions.
By shipping clothes on the proper hangers and in certain containers, the manufacturers can greatly reduce the labor and time required to get clothes from the department store loading dock to the sales floor.
For now, suppose that Harnischfeger is the only company that can provide a portal crane and International Paper is the sole customer. Second, the firm can devise a way to reduce supplier opportunity cost without sacrificing commensurate willingness to pay.
They spent little time considering the drivers of advertising costs. In the s and s, for instance, Japanese manufacturers in a number of industries found that by reducing defect rates, they could make higherquality products at lower cost. The note separates the challenge of creating competitive advantage at a point in time from the problem of sustaining advantage over time. Exceptions to this rule arise when the price of a good conveys information about it.
Of course, this is a general pattern that may or may not hold up in a particular setting. Advantae, competitive advantage usually comes from the full range of a firm’s activities–from production to finance, from marketing to logistics–acting in harmony. A firm such as Schering-Plough that earns superior, long-run financial returns within its industry is said to enjoy a competitive advantage over its rivals.
HBR: Creating Competitive Advantage
Free Press,Chapter cteating for a more extensive list of general guidelines. It emphasizes two themes: Moreover, customer service helped Intuit sustain its advantage over rivals such as Microsoft. Outbound logistics costs also rose with product variety; a broad product line made it difficult for drivers to restock shelves and remove out-of-date merchandise.
Finally, support activities can have a surprisingly large, if indirect, impact on willingness to pay. Cite View Details Related. The management team has the machinery in place to understand how changes in activities will affect competitive advantage.
Vertical differentiation arises when customers agree on which product is better—the hardback edition, now—but they differ in how much they will pay for the better product. As Figure 7 shows, although Collins sold the typical package of snack cakes to retailers for 72? Many pharmaceuticals are made from commodities with little labor input, while unions exercise such power in the steel industry that labor costs often account for a quarter of total revenue.
Conclusion This note has covered a lot of ground, but the main ideas are fairly simple: The ruggedness of the landscape has a couple of vital implications. The added value of a firm is the value created by all participants in a transaction minus the maximal value that could be created without the firm. To introduce the concept, we use the example 9 of the portal crane business of Harnischfeger Industries.
Betsy Baking packed its product with preservatives so that deliveries could be made less frequently, kept its product line very simple, and benefited from growing market share. An analysis of relative costs and willingness to pay shows why Betsy Baking and Collins fared so differently.
Creating Competitive Advantage P. Ghemawat & J. Rivkin
You are commenting using your Twitter account. After all, it has little or no added value. Steel performed far worse than many other steel producers.
The goal of xompetitive senior management team is to guide its firm to a high point on this landscape—a set of decisions that, together, generate a great deal of added value. Identities of the companies and other items have been altered substantially to protect proprietary information.
By continuing to use this website, you agree to their use. In examining the logic of how firms create competitive advantage, this note emphasizes two themes. Figure 9 shows such an analysis for the snack cake market. Ggemawat can leave a responseor trackback from your own site. Some of the activities that Accenture undertakes to differentiate itself are clearly costly: It also tells the analyst how confident he or she can be in the results. But the pivotal decision maker is probably the parent who chooses among the brands.
Differences across firms in activities—differences in what firms actually do day-to-day—produce disparities in cost and ghmeawat to pay and hence dictate competitive advantage.
Notify me of new comments via email. In doing so, the management team must decompose the firm into parts, but also craft a vision of an integrated whole.
Strategy scholars debate, however, how common dual advantages are. Free Press,Chapter 4 and D. A crane was also less expensive ghemaat operate than a forklift fleet; it required less labor, fuel, and maintenance, for instance.
Creating Competitive Advantage
Toward that end, this note uses the notion of competitive advantage. Understanding their roots is crucial for strategists.
The ability to generate and capture profits in an industry derives from added value. Also, Betsy Baking did not run promotions.