Competitive Advantage and Strategic Management

Definition of Competitive Advantage

• Resources: Assets, capabilities, processes, employee time, information, knowledge controlled by the organization.
• Use of Resources: Improves organizational effectiveness and efficiency.
• Competitive Advantage: Providing greater value for customers than competitors.
• Sustainable Competitive Advantage: When competitors cannot duplicate the value provided to customers.

Characteristics of Valuable Resources

• Valuable: Improves efficiency and effectiveness.
• Rare: Not possessed by many firms; crucial for sustainability.
• Imperfectly Imitatable: Difficult or costly for others to duplicate.
• Non-substitutable: No alternatives can provide the same value.

Strategic Change

• Need for Strategic Change: Identify when strategy needs to change to maintain competitive advantage.
• Strategic Dissonance: Difference between intended strategy and actual actions taken.
• Situational Analysis/SWOT: Analyzes internal strengths/weaknesses and external opportunities/threats.

Distinctive Competence and Core Capabilities

• Distinctive Competence: Superior performance aspects of a company.
• Core Capabilities: Internal processes and cultures leading to distinctive competence.

Environmental Scanning

• Strategic Groups: Competitors closely followed for benchmarking.
• Shadow Strategy Task Force: Identifies threats and opportunities.

Strategic Alternatives

• Conservative Risk-Avoiding Strategy: Protect existing advantage.
• Aggressive Risk-Seeking Strategy: Extend or create new advantage.

Corporate, Industry, and Firm Level Strategies

• Corporate Level Strategy: Overall strategy for business scope.
  • Diversification: Own stocks in different industries to reduce risk.
  • Portfolio Strategy: Investment diversification among businesses.
  • Boston Consulting Group (BCG) Matrix: Categorize businesses by growth rate/market share.
• Industry Level Strategy: How to compete in the industry.
  • Porter's Five Forces: Rivalry, new entrants, substitutes, supplier and buyer power.
  • Positioning Strategies: Cost leadership, differentiation, focus.
  • Adaptive Strategies: Defenders, prospectors, analyzers, reactors.
• Firm Level Strategy: Competing against particular firms.
  • Direct Competition: Rivalry between companies with overlapping markets.
  • Strategic Moves: Attack and response in competitive dynamics.

Key Questions for Strategy Formulation

1. What business are we in?
2. How should we compete in this industry?
3. Who are our competitors and how should we respond to them?

Conclusion

• Companies should frequently revise strategies to adapt to new challenges and opportunities.
• Effective strategic management involves understanding and leveraging competitive forces and resources.