Hill PPT 12e ch03
Hill PPT 12e ch03
Hill PPT 12e ch03
LEARNING OBJECTIVE
Discuss the source of competitive
advantage.
Identify and explore the role of
efficiency, quality, innovation, and
customer responsiveness in building
and maintaining a competitive
advantage.
Explain the concept of the value chain.
Understand the link between
competitive advantage and profitability.
Explain what impacts the durability of a
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COMPETITIVE ADVANTAGE
Exists when a companys profitability is
greater than the average profitability of
all companies in its industry.
Sustained competitive advantage Exists when a company maintains its
competitive advantage over a number
of years.
Primary objective of strategy
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DISTINCTIVE COMPETENCIES
Firm- Specific strengths that allow a
company to differentiate its products
and/or achieve lower costs than its
rivals.
Arise from resources and capabilities
DISTINCTIVE COMPETENCIES
Capabilities- Companys skills at
coordinating its resources and putting
them to productive use:
reside in an organizations rules, routines,
and procedures.
Intangible.
lead to sustained competitive advantage if
they are rare and protected from copying.
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DISTINCTIVE COMPETENCIES
Requirements
Firm-specific and valuable resource, and the
capabilities to take advantage of that
resource.
Firm-specific capability to manage resources.
Distinctive competency is strongest when a
company possesses both.
2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
PRIMARY ACTIVITIES
Relate to a products design, creation,
delivery, marketing, support, and aftersales service.
Research and development
Design of products and production
processes.
Superior product design increases a
products functionality and add value.
Production
Creation process of a good or service.
Helps lower cost structure and leads to
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PRIMARY ACTIVITIES
Marketing and sales
Brand positioning and advertising - increase
customers perceived value of a product.
Help create value by discovering customers
needs.
Customer service
Provide after-sales service and support.
Create superior utility by solving customer
problems and supporting customers after a
purchase.
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SUPPORT ACTIVITIES
Provide inputs that allow the primary
activities to take place.
Materials management
Controls the transmission of physical
materials through the value chain.
Lowers cost and creates more profit .
Human resources
Ensures value creation by making sure that
the company has the right combination of
skilled people.
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SUPPORT ACTIVITIES
Information systems
Electronic systems to improve efficiency and
effectiveness of a companys value creation
activities.
Company infrastructure
Companywide context within which all the
other value creation activities occur.
Organizational structure, control system and
company culture
2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
BUILDING BLOCKS OF
COMPETITIVE ADVANTAGE
Efficiency
Measured by the quantity of inputs that it
takes to produce a given output.
Employee productivity - Output produced
per employee
Helps attain competitive advantage through a
lower cost structure.
Quality
Superior quality - Customers perception that
a products attributes provide them with
higher utility than those sold by rivals.
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BUILDING BLOCKS OF
COMPETITIVE ADVANTAGE
Quality as excellence - Product features and
functions, and level of service associated
with its delivery.
Quality as reliability - Occurs when a product
consistently performs the function it was
designed for, and seldom breaks down.
Innovation
Product innovation: Development of
products that are new to the world or have
superior attributes to existing products.
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BUILDING BLOCKS OF
COMPETITIVE ADVANTAGE
Process innovation: Development of a new
process for producing products and
delivering them to customers.
Customer responsiveness
Superior responsiveness - Achieved by
identifying and satisfying customer needs
better than ones rivals.
Customer response time: Time that it takes
for a good to be delivered or a service to be
performed.
Other sources - Superior design, service, and
after-sales service and support.
2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
DEFINITIONS OF BASIC
ACCOUNTING TERMS
Term
Definition
Source
Cost of Goods
Sold (COGS)
Income
statemen
t
Sales, General,
and
Administrative
Expenses
( SG&A)
Income
statemen
t
R&D Expenses
(R&D)
Income
statemen
t
Working Capital
Balance
sheet
DEFINITIONS OF BASIC
ACCOUNTING TERMS
Term
Definition
Source
Return on Sales
(ROS)
Ratio
Capital Turnover
Ratio
Return on
Invested Capital
(ROIC)
Ratio
Net Profit
Income
stateme
nt
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BARRIERS TO IMITATION
Make it difficult for a competitor to
copy a companys distinctive
competencies.
Greater the barrier, more sustainable a
companys competitive advantage.
Imitating resources
Firm-specific and value tangible resources
are the easiest to imitate.
Intangible resources
Brand names - Imitating them is prohibited by
law.
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BARRIERS TO IMITATION
Marketing and technical knowhow - Easy to
imitate owing to movement of skilled personnel
between companies and visibility of strategies to
competitors.
Technological knowhow - Easy to imitate as
patents do not provide complete protection.
CAPABILITY OF COMPETITORS
AND INDUSTRY DYNAMISM
Capability of competitors is determined
by the:
nature of the competitors prior strategic
commitments.
strategic commitment - companys commitment
to a particular way of doing business.
2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.