GLOBAL STRATEGY

Module 5: Developing Global Competitive Advantage

• READ: Johnson, Gerry. Fundamentals of Strategy. Chapter 4 -
Resources & Capabilities
• READ: The Three A's Model for Global Value.pdf
• READ: Why competitive advantages die.pdf

Assumptions - you are familiar with:

• Ghemawat's 3A Global Strategy Framework
• Resource based view (Capabilities view) of strategy
• VRIO Model
• Value chain and value system
• Activity System
• Benchmarking
• Dynamic Capabilities
 1900 – 1960 Age of Manufacturing
THE AGE OF THE CUSTOMER Mass manufacturing makes industrial powerhouses successful
makes us change the way we think about technology
Ford | RCA | GE | Boeing | P&G | Sony

1960 – 1990 Age of Distribution

Global connections and transportation systems make distributions key

Walmart | Toyota | UPS | CSX

1990 – 2010 Age of Information

Connected PCs and supply chains mean those who control
information flow dominate.
Amazon | Intuit | Google | MBNA

2010 – ? Age of the Customer

Empowered buyers demand a new level of customer obsession

Facebook | IBM | Best Buy | Apple

Source: Competitive Strategy in the Age of the Customer. Forrester Research Inc. June 6 th 2011
VOICE OF THE CUSTOMER

A term that describes your

customer's feedback
about their experiences
with and expectations for
your products or services.
VOICE OF THE CUSTOMER
Attribute rating chart

High Priority for Improvement Strategic Advantage

Value for
money

Convenience
Importance

Trustworthy

Good range / choice

Caring Friendly
Cheap
Luxury
Exciting Over-Invested
Low Innovative

Low Performance High

BUT WHO IS THE CUSTOMER?

Initiator

Buyer

User

Influencer

Gate Keeper

Decider
 CUSTOMER VALUE
Customer’s Perceived Value = Perceived Benefits Perceived Price
HOW DO I INCREASE PERCEIVED BENEFITS?

Improve the product: Product Leadership

Get closer to the customer: Customer intimacy

HOW DO I LOWER PERCEIVED PRICE?

Lower Costs: Operational Excellence

Sounds familiar?
generic competitive strategies
Cost Leadership Differentiation Focus
Implies supplying Differentiation strategy aims A marketing strategy in which a
products in a more to distinguish a product or company concentrates its
cost-effective way service, from other similar resources on entering or
than competitors do. products, offered by the expanding in a narrow market
competitors in the market. or industry segment.
Porter’s generic strategies
Competitive advantage
Lower cost Differentiation

Broad
target 2. Cost Leadership 2. Differentiation

Competitive
scope

Narrow
target
3. Focus

Source: “Competitive Strategy”, Porter, M.E; The Free Press, Macmillan 1980

11
COST LEADERSHIP STRATEGY

An integrated set of actions

designed to produce or
deliver goods or services at
the lowest cost, relative to
that of competitors, with
features that are acceptable
to customers.
ESSENTIAL INGREDIENTS
of a successful cost leadership strategy

Demand Forecasting

Economies of Scale

Standardization

Aiming at Average Customer

Use of Cost Saving Technologies

Differentiation Withholding
 capacity to
absorb minimises effective entry
cost advantage price reduction
increased threat barrier
price

COST LEADERSHIP STRATEGY: BENEFITS

LIMITATIONS OF COST LEADERSHIP

Possibility of Duplication of
Cost Reduction Technique

Dilution of Customer Focus

Reduction in Scope of Product /

Service

Great Threat of Technological Shifts

INTERACTIVE STRATEGIES

Generic strategies need to be

chosen, and adjusted, in the light of
competitors’ strategies. If
everybody else is chasing after cost
leadership, then a differentiation
strategy might be sensible. Business
strategy choices interact with those
of competitors.
 Ramp-up

Launch Erosion

Sustainable competitive
advantage may not
always be possible
OPTIONS INVOLVED IN
COMPETITIVE INTERACTION

Threat assessment

Differentiation response

Cost response
cooperative strategy

Tacit collusion, where

companies agree on a
certain strategy without
any explicit communication
between them.
game theory
getting into your competitors’ minds

It encourages an
organisation to consider
competitors’ likely moves
and the implications of
these moves for its own
strategy.
NASH EQUILIBRIUM

A concept within game theory

where the optimal outcome of a
game is where there is no incentive
to deviate from their initial
strategy because no participant
can gain by a unilateral change of
strategy if the strategies of the
others remain unchanged.
a tale of two keyboards
PRICE WARS
Prisoner’s dilemma revisited
business models
Describe a value
proposition for customers
and other participants, an
arrangement of activities
that produces this value,
and associated revenue
and cost structures.
BUSINESS MODEL COMPONENTS
Value Creation
What is offered to what segment?
Customer needs and problems: value and benefits
Target customer and market segments
Value for other participants

Value Configuration
How is the value proposition structured?
Resources and activities
Links between activity systems
Who does what

Value Capture
Why does the model generate a margin?
Revenue streams and payments
Cost structure and drivers
How value is apportioned to the organisation and stakeholders
BUSINESS MODEL PATTERNS

razor and blade

freemium multi-sided platforms

SUMMARY
• Business strategy is concerned with seeking competitive advantage in markets at the business rather
than corporate level.
• Porter’s framework and the Strategy Clock define various generic strategies, including cost leadership,
differentiation, focus and hybrid strategies.
• In hypercompetitive conditions sustainable competitive advantage is difficult to achieve and
competitors need to carefully consider moves and counter-moves.
• Cooperative strategies may offer alternatives to competitive strategies or may run in parallel.
• Game theory encourages managers to get in the mind of competitors and think forwards and reason
backwards.
• A business model describes the business logic of an enterprise including the domains of value creation,
value configuration and value capture.
9 Generic Activities

Technology
Inbound Logistics Marketing & Sales
Development

Operations Service HR Management

Outbound Logistics Procurement Infrastructure

The Value Chain

Value chain analysis

Source: after Competitive Advantage: Creating and Sustaining Superior Performance, Free Press (Porter, M.E. 1985) Copyright © 1985, 1998 by Michael E. Porter; all
rights reserved Reproduced with the permission of Simon & Schuster Publishing Group, a Division of Simon and Schuster, Inc.
The Value Chain

Since Porter introduced the value chain model in the mid-1980s,

strategic planners and consultants have used it extensively to map out
a company’s strengths and shortcomings. When strategic alliances
and merger and acquisition (M&A) deals are analysed, the value chain
is used frequently to gain a quick overview of a possible match. For
example, if one company is strong in logistics, and the other in sales
and service, together they would make an agile, highly commercial
competitor.
The Value Ecosystem

How What Who

+ Value Proposition
+ Customer