Develop a Competitive Strategy

Competitive Advantage definition

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Competing through disruption

1. Disruption Strategy 1:
   • Dramatically reengineer the value chain without much changing products and services (Amazon 1994)
2. Disruption Strategy 2:
   • Dramatically redefine what products or service you will offer. Generally, this will also require a significant redesign of the value chain but may not call for a rethink about the targeted customers. (Starbuck offers a larger seating area and free wifi)
3. Disruption Strategy 3:
   • Radically rethink all three elements of the business model (Apple):
     • Target customer
     • Products and services offer
     • Design of value chain

Competitive advantage is never permanent. Four types of competitive disruption:

1. Type 1: Occur because of a structural change in the demand-side environment. Customer may become more or less affluent (for ex: population becoming older or having fewer children). It leads changes in the demand-side environment, and change the relative importance of dimension along which competitive advantage matters. (toothpaste in China: younger want more functionalities: gums healthy, teeth whiter)
2. Type 2: Occur because of more determined, smarter and faster improvement in key capabilities by one or more competitors. (Kmart vs Wmart)
3. Type 3: Occur because of new or more capable competitors from another market decide to enter your territory. (GM, Ford: Japanese started entering US Car market)
4. Type 4: Occur when there is radical change in technology (Nokia vs Apple, Samsung: 3G – 4G)

In analyzing your competitive advantage relative to one or more competitors, there are two phase of competitive advantage, onstage and backstage.

1. Onstage competitive advantage or disadvantage refer to the perception of target customer about how your products and services compare with those of competitors along the criteria that are important to them in making their buying decisions.
   • Identify the four most important buying criteria. Along these criteria, how do these customer perceive your products, services and prices relative to your competitors:
     • Understand industry dynamic
     • Managing complementors
     • Deep customer alignment
     • Focus on the entire purchase and consumption cycle
   • These above answers will give you a sense for your company’s onstage competitive advantages and disadvantages
2. Backstage competitive advantage refer what enable the company to create and sustain onstage advantages.
   • Most important enabling resource and capabilities for any supplier of these products and services. How does your company relative to your competitors.
     • Superior value-chain architecture
     • Relationship advantage: Sticky relationship – high cost change, loyalty (branding, advertising), customer alignment, ecosystem
     • Competing through innovation
     • Scale and scope advantage: Scale in size, scope expand diversification
     • Finding your alpha: (outsource all gamma, consider outsource beta, strengthen alpha, develop strategies to expand size of alpha, leverage alpha to diversify into new market opportunities)
       • Alpha: resources that a company has better than competitors
       • Beta: good resource but neither better nor worse than its competitors
       • Gamma: resource weaker than competitors
   • The above answer will give you a sense for your company’s backstage competitive advantage and disadvantages.

From Strategy to action

2 Teams (including key information, key implementation, key resource)

1. Identify the company’s current status in terms of onstage and backstage advantages and disadvantages
2. Develop a set of action plans regarding what the company should do to eliminate weaknesses and become stronger
   • Depth of customer alignment
   • Competitive advantages along multiple points: in purchase and consumption cycle, value chain architecture, stakeholder relationship, innovation, scale and scope.
3. Which above is alpha, beta, gamma
4. Develop action plan for 12 months