Understanding Competitive Advantage

Advanced Competitive Strategy

IIMS PGP Term IV (2021-22)

Instructor: Prarthan B. Desai

Slide# 1
Success of a Competitive Strategy
• When can we say a competitive strategy has been successful?
– When a firm earns superior operating profits (and hence provides better returns
to shareholders) than competitors over a long period of time

• When can a firm achieve consistent better performance over a long

period?
– When it is able to consistently create and capture superior value compared to
its competitors

Slide# 2
Value Creation and Capture

• Value Created: Willingness to Pay (Customer) – Willingness to Supply (Supplier)

• Value Created (simplified): WTP – Cost
• Value Captured (or appropriated): Price – Cost
• Applicable to specific product-customer segment
Source: Eric Van Den Steen, “Creating and Sustaining Competitive Advantage”, HBS. Slide# 3
Competitive Advantage
• Competitive Advantage: Value created and captured by a firm is
superior to its competitors

• Competitive Parity: Many firms can create and capture similar value

• Competitive Disadvantage: Value created and captured by a firm is

inferior to the its competitors

Slide# 4
Types of Competitive Advantage

Cost Advantage WTP or Differentiation Dual Advantage

Advantage
WTP WTP WTP

Cost Cost Cost

Slide# 5
Understanding Competitive Advantage

Slide# 6