Professional Documents
Culture Documents
OBJECTIVES
1 Identify the challenges to sustainable competitive advantage in dynamic contexts 2 Understand the fundamental dynamics of competition Evaluate l t th the advantages d t and d di disadvantages d t of f 3 E choosing a first-mover strategy 4 Analyze and develop strategies for managing industry evolution 5 Analyze and develop strategies for technological discontinuities high-speed speed 6 Analyze and develop strategies for high environmental change 7 Explain the implications of a dynamic strategy for the strategy diamond and strategy implementation
A la carte
Roxio
Software
Subscription
Streaming
Sonic solutions
Real-network's Rhapsody lets music lovers listen as much as they want for one monthly fee
Software
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Industry evolution l ti
As industries evolve and competition shifts from diff differentiation i i to price/low-cost, i /l advantages shift between rivals
Arm and Hammer almost lost its lead position when baking soda b became commoditized di i d
Technological change
When technological change is discontinuous, it does not s stain existing sustain e isting leaders advantages
The shift to digital photography favors the strengths of Sony not photograph incumbent photography inc mbent like Kodak
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Source: Adapted from K.G. Smith, W.J. Ferrier, and C.M. Grimm, King of the Hill: Dethroning the Industry Leader, Academy of Management Executive 15:2 (2001), 59-70
Ease with thre eat can be e controll led Great t Limited Scope of response
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Difficult D
Extensive
CONTAINMENT
Containment
Neutralization
Limit the extent to which the new entrants innovation impacts p y your business For example: American Airlines can partially contain Southwest by using its bargaining power to secure more exclusive airport gates
Shaping
Absorption
Annulment
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NEUTRALIZATION
Containment
Neutralization
Try to short-circuit the moves of innovators or new entrants before they y make them For example: The Recording Industry Association of America launched such a fierce legal attack on Napster that it forced even smaller Napster-like firms to stay out of the fray
Shaping
Absorption
Annulment
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SHAPING
Containment
Neutralization
Shape the innovation so it becomes something g the incumbent can live with or even benefit from For example: For years the American Medical Association used regulators to attack chiropractors; now they shape chiropractic medicine to become a complement to traditional medicine
Shaping
Absorption
Annulment
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ABSORPTION
Containment
Neutralization
Minimize the risks entailed by being either a first mover or an imitator For example: In the late 1980s Microsoft purchased Intuit, the maker of Quicken and QuickBooks; because it identified money-management software as a highgrowth opportunity.
Shaping
Absorption
Annulment
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ANNULMENT
Containment
Neutralization
Improve incumbent products and services to annul an innovation or new entrants offering For example: Kodak has improved the quality of its film-based prints so that they are superior to many digital-based alternatives
Shaping
Absorption
Annulment
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Ballpoint pens
Commercial jets
Credit cards
Visa/MasterCard (1966) A American i Express (1968) Pepsis Patio Cola (1963) C k T Cokes Tab b (1964) Diet Pepsi (1964) Diet Coke (1982)
Diet soda
PC operating systems
CP/M (1974)
Video games
Source: Adapted from S. Schnaars, Managing Imitation Strategies (New York Free Press, 1994), 37-43
Value will go either to first mover or to party with the most bargaining power
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K-mart and KB Toys both reduced number of customers when they restructured
Disruption Growth
Embryonic
Embryonic y Time
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The key to discovering a new value curve lies in answering four basic questions
Eliminate What factors that the industry has taken for granted should be eliminated? Creating new markets: A new value curve
Create/Add What factors that the industry has never offered should be created or added?
Raise What factors should be raised well above th i the industry d t standard? t d d?
Source: Adapted from W.C. Kim and R. Mauborgne, Blue Ocean Strategy, California Management Review 47:3 (2005), 105-121 17
Strategy that may result in huge new markets in which new players redefine industry rules to unseat the largest incumbents
High-end
Strategy that appears at the low end of industry offerings, targeting the least desirable of incumbents customers
Low-end
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High
Low Price Above-the-line g marketing Aging quality Vineyard prestige p g Wine complexity Wine range g Ease of selection Fun and adventure
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Easy drinkability
Time
Atari grew from $50 million to $1.6billion over 5 years doubling every year years,
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Tactical probing
Horizon 2 Drives growth in emerging new business Horizon 1 Defend and extend current business Time
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Just as Jazz musicians can improvise p when they play together because they follow a set of simple rules ...
... corporations p can become more flexible by allowing improvisation under a set of simple rules Simple rules
Never
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Tactical initiatives
Charles Schwab
Though some initiatives failed, several enabled Charles S h bt Schwab to f further th differentiate itself from its bare-bones competition p
E* Trade E
Outline mortgage
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British Airways
Emerson Electric
Intel
Gillette
3M
Source: S. Brown and K. Eisenhardt, Competing on the Edge: Strategy as Structure Chaos (Boston: Harvard Business School Press, 1998)25
26
Source: L.E.K. Consulting LLC, Shareholder Value Added: Making Real Decisions with Real Options (Accessed September 12, 2005), www.lek.com/ideas/publications/sva 16.pdf.
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SUMMARY
1 Identify the challenges to sustainable competitive advantage in dynamic contexts 2 Understand the fundamental dynamics of competition Evaluate l t th the advantages d t and d di disadvantages d t of f 3 E choosing a first-mover strategy 4 Analyze and develop strategies for managing industry evolution 5 Analyze and develop strategies for technological discontinuities high-speed speed 6 Analyze and develop strategies for high environmental change 7 Explain the implications of a dynamic strategy for the strategy diamond and strategy implementation
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