COMPETITIVE STRATEGY

CREATING WINNING VALUES

Hadi Satyagraha, Ph.D.

 Factors Affecting Performance
◦ External factors
◦ Internal factors
 Types of Competitive Advantage
◦ Cost Advantage
◦ Differentiation Advantage
 Generic Strategies
◦ Cost Leadership
◦ Differentiation
 EXTERNAL:
◦ Macro-environment:
 Demographics: Indonesia’s big population
 Economics: Current economic crisis in EU
 Technology
 Legal-political: Middle East
◦ Industry environment
 The Five Competitive Forces
 INTERNAL:
◦ Goals and Values
◦ Resources and Capabilities
◦ Structure and Systems
 Organization Environment

Goals
Values
Macro

Resources
Capabilities
Strategy

Structure Industry:
Systems
Organization:

STRATEGY
Environment:
People
Macro
System
Industry
Resources
 UNIQUE VALUE PROPOSITION
 DIFFERENT value chain
 CLEAR trade-offs:
◦ What-to-do and what-not-to-do
◦ DELL best baseball, COMPAQ best basketball
 FIT-REINFORCING each other
 Strategic CONTINUITY
WHAT ARE THEIR NEEDS
HOW TO SATISFY
Creating
Valuable
Difference
 “BUILD COMPUTERS
O CUSTOMER SPECIFICATIONS.”
  A competitive advantage is
what distinguishes you from the
competition in the minds of your
customers.

Whether you are an employee,

a business, a B-School, or a
country, you need to have a
clear competitive advantage
and communicate it to your
customers.
Michael R. Porter
 “If you don’t have
a competitive
advantage,
don’t compete.”

Jack F. Welch
  COMPETITIVE STRATEGY is
◦ Taking offensive or defensive action
to create a defensible position against
the five competitive forces

◦ POSITIONING firm so capabilities can

deal with the five forces

◦ INFLUENCING the balance of forces

◦ ANTICIPATING SHIFTS in the factors

underlying the forces
Michael R. Porter
 COST ADVANTAGE:
◦ Similar product at a lower price

 DIFFERENTIATION ADVANTAGE:
◦ Better product at premium price
 Historically the preferred route to competitive
advantage
 In Indonesia, many firms still adopt this route

to advantage
 For some industries commodity-like- it is still

the strategy for success

 Economies of scale: input-output relationship,
indivisibilities, specialization
 Economies of learning: repetition, coordination
 Process technology: moving assembly line,
automation
 Product design: ease of assembly, parts commonality
 AirAsia
 Process design: business process re-engineering
(AirAsia)
 Capacity utilization: AirAsia
 Input costs: location, bargaining power, labor (AirAsia)
 Residual efficiency: organizational slack
 Providing something unique and valuable to
buyers beyond low price
 Obtaining price premium exceeding

differentiation cost
 Differentiation extends beyond product

features: even commodities could be

differentiated
 Differentiation should deliver superior

customer value leading to profit

 Product features and benefits: Apple, Harvard,
Coke
 Complementary services: Dell
 Marketing activities: Unilever, Dell
 Technology in design and manufacture: Apple
 Quality of input: Heinekens
 Procedures: high quality activities
 Employee skills: Apple, Dell
 Location: hotels, apartments, malls, etc
 Vertical integration: Coke
 After sales services: Dell
 It was too late to challenge the technical
standard and the dealer network had been
done already.

 Compaq was already very strong in retail.

 A new marketing and distribution strategy

was something new, however.