THE GENERIC BUILDING BLOCKS OF

COMPETITIVE ADVANTAGE
The four factors build and sustain competitive
advantage

superior efficiency,
quality,
innovation and
customer responsiveness –

are the product of the company’s distinctive

competencies.
Competitive Advantages allow a company to

(1) differentiate its product offering, and hence

generate perceive (recognize) customer value,

(2) lower its cost structure.

EFFICIENCY.

 In one sense, a business is simply a device for

transforming inputs into outputs.

Inputs are basic factors of production such as

labor, land, capital, management, and technology.

Outputs are the goods and services that the

business produces.
The simplest measure of efficiency is the quantity
of inputs that it takes to produce a given output,

 i.e., EFFICIENCY = OUTPUT/INPUTS.

The more efficient a company is, the fewer the

inputs required to produce a given output.
For Example, if it takes general motors thirty hours of
employee time to assemble a car

it takes FORD twenty –five hours, we can say that

FORD is more efficient than GM.

And as long as other things are equal, such as wage

rates,

we can assume from this information that FORD will

have a lower cost structure than GM.
As this example suggest, two of most important
components of efficiency for companies are
employee productivity and capital productivity.

Employee productivity is usually measured by

output per employee and

 capital productivity is measured by output per

unit of invested capital.
The concept of productivity is not limited to
employee and capital productivity.

 Pharmaceutical companies, for example, often

talk about the productivity of their R&D spending,

by which they mean how many new drugs they

develop from their investment in R&D.
The important point to remember is that high
productivity leads to greater efficiency and lower
cost.
QUALITY: RELIABILITY & OTHER
ATTRIBUTES

A product can be thought of as a bundle of

attributes.

For example, the attributes of many physical

products include the form, features, performance,
durability, reliability, style and design of the
product.
A product is said to have superior quality when
customers perceive there to be greater value in the
attributes of a specific product,

compared to the same attributes in rival products.

 For Eg. A Rolex watch has attributes –such as
design, styling, performance and reliability

that customers perceive as being superior to the

same attributes in comparing many other watches.

Thus, we can refer to a Rolex as a high quality

product : Rolex has differentiated its watches by
these attributes.
Among the various attributes of products, one in
particular has be taken on special significance in
the last two decades: reliability.
A product can be said to be reliable when it
consistently does the job it was designed for,

 product reliability has been the central goal of an

influential management philosophy that came out
of Japan in the 1980’s and is commonly referred to
as TOTAL QUALITY MANAGEMENT.
INNOVATION
Innovation refers to the act of creating new
products or processes.

There are two main types of innovation:

product innovation and
process innovation.
Product Innovation is the development of
products that are new to the world or

add superior attributes to existing products.

Examples: INTEL’s Invention of micro processors
in early 1970’s

PALM’s development of the palm pilot, the first

commercially successfully hand-held computer in
the mid 1990’s
Product innovation created value by creating new
products or enhanced versions of existing
products,

that customers perceive (recognize) as more

desirable,

thus increasing the company’s pricing options.

PROCESS INNOVATION is the development of a
new process for producing product and delivering
them to customers.

Examples : Toyota , which developed a range of new

techniques collectively known as the Toyota lean
production system from making automobiles.

Just-in-time inventory systems, self –managing teams,

and reduced set up time for complex equipment.
In the long run, innovation of products and
processes is perhaps the most important building
block of competitive advantage.

Competition can be viewed as a process driven by

innovations.
Although not all innovations succeed,

innovations can be a major source of competitive

advantage because, by, definition, they give a
company something unique –something its
competitor’s lack.
Uniqueness can allow a company to differentiate
itself from its rivals and

charge a premium price for its product or

in the case of many process innovations, reduce its

unit’s costs far below those of competitors.
RESPONSIVENESS TO CUSTOMERS.
To achieve superior responsiveness, a company must give
customers

what they want,

when they want it, and

at a price they are willing to pay –

so long as the company’s long term profitability is not

compromised in the process.
 Customer responsiveness is an important
differentiating attribute that can help to build brand
loyalty.
 Strong product differentiation and brand loyalty
give a company more pricing options;

 it can charge a premium price for its products or

 keep low prices to sell more goods and services to

customers.
Achieving superior responsiveness to customers’
means giving customers’ value for money and

 steps taken to improve the efficiency of a

company’s production process and

the quality of its products should be consistent

with this aim.
Price: $25,500 in US
In addition, giving customers what they want may
require the development of new products with new
features.

In other words, achieving superior efficiency,

quality, and innovation are all part of achieving
superior responsiveness to customers.
CUSTOMER FOCUS
A company cannot be responsive to its customers’
needs unless it knows what those needs are.

Thus, the first step to building customer

responsiveness to customers is to motivate the
whole company to focus on the customer.
Customer focus can be accomplished by
demonstrating

leadership,

shaping employee attitudes, and

using mechanisms for bringing customers into the

company (employees have to listen to what the
customer says)
LEADERSHIP. Customer focus must start at the
top of the organization.

A commitment to superior responsiveness to

customers brings attitudinal change throughout a
company

that ultimately can be built only through strong

leadership.
A mission statement that puts customers first is
one way to send a clear message to employees
about the desired focus.
EMPLOYEE ATTITUDES. Leadership alone is
not enough to attain a customer focus.

All employees must see the customer as the focus

of their activity and

Employees must be trained to focus on the

customer, whether their function is marketing,
manufacturing, R&D, or accounting.
The objective should be to make employees think
of themselves as customers- to put themselves in
customers’ shoes.

At that point, employees will be able to identify

ways to improve the quality of customer’s
experience with the company.
Bringing in customers’ opinions by soliciting
feedback from customers on the company’s goods
and services and

by building information systems that communicate

the feedback to the relevant people.
BRINGING CUSTOMERS INTO THE
COMPANY.

“Know the customer” is one of the keys to

achieving superior responsiveness to customers.
Knowing the customer not only requires that
employees think like customer themselves;

it also demands that the employees listen to what

their customers have to say and,

as much as possible, implement them to the

company.
Porter’s Competitive strategies
Porter’s competitive strategies model examines
business or product strategies.
 Xiaomi Redmi Note 4G

Cost Leadership Strategy

 Seeks to operate at lower costs than competitors-

Screen 5.5 inch touch screen

OS Android V4. 4.2 (kit kat)

Processor 1.6 GHz + qualcom Snapdragon
Camera 13MP AF Rear and 5MP FF Front
Camera

Rs. 9999
Galaxy A7
 Screen: 5.5 inch touch screen
 OS: Android V4. 4.2 (kit kat)
 Processor: 1.5 GHz + qualcom
 Camera: 13MP AF Rear and 5MP FF Front Camera

 Price: Rs. 31,860/-

Focused low Cost Strategy
 uses cost leadership and target needs of a special market.-
 All -In Fares from Chennai

Destination Lowest Sale fare Last minute fare

Delhi Rs. 3675 Rs. 10098
Pune Rs. 2028 Rs. 7261
Portblair Rs. 3286 Rs. 9570
NOKIA LUMIA 1020

Porter’s Competitive Strategies

Differentiation Strategy
 Offers products and services that are uniquely different from
the competition –
 Focused Differentiation Strategy
 offers a unique product to a special market segment.- Niche
retailers – Gucci
273801 E5A0G 9613
$27000 (Rs.16 lakh)
240241 EIV0N 6017
$4600 (Rs. 2.76 lakh)