Seven Sources Of Competitive Advantage Model example essay topic

Part 1. What commonalities were observed across the strategic situations in the six cases in the course? While the six cases appeared to be very different in terms of product offerings, competitive environment, relative market position, and product lifecycles there were a surprising number of similarities in strategic concepts that cut across all of the cases. In fact, upon careful examination of these concepts, many of them appear to be universal in nature and can be applied to many strategic settings. It is these universal strategic concepts that we will focus on in this essay.

One of the most unconventional concepts covered in the cases was how the laws of physics can apply to business strategy: in particular, that size counts. This was a factor in each of the cases to one degree or another whether it applied to research and development resources, distribution channels, capital, existing market share, or leverage from a powerful parent company. Size often equates to resources and companies that enlist more resources will inevitably gain a significant advantage over their competitors. The concept of a first mover advantage, as well as a latecomer disadvantage, was well illustrated in many of the cases. Bernard Mathews, Guidant and Xerox are all examples of this. A first mover can often establish itself as the leader in "mind share" of a product category as well as set the standards to which the followers must conform.

Moreover, being a first mover puts a company in the position of defending rather than attacking. Attacking an entrenched competitor can be quite difficult as both Wilmington and International Systems found out. The Xerox case in particular presented the interesting problem of how to best take advantage of a fleeting first mover opportunity. The flip side of the first mover advantage is the latecomer disadvantage, a dilemma that was faced by Wilmington, Bayer and International Systems. Each of these cases illustrate that without a unique source of advantage, or the ability shake up the status quo, it is difficult to attack entrenched competition. The only real option in such situations is to attempt to radically change the value equation by pushing the border of the product market, compressing the supply chain, increasing accessibility or reducing distribution and manufacturing costs.

All easier said than done, especially when you can fully expect the competition to react to your attempts to alter the playing field. The cases of Wilmington and International Systems were especially challenging situations. Both companies were latecomers and their disadvantage was further compounded by a lack of a clearly identifiable source of competitive advantage. Trying to compete without a clear competitive advantage is almost impossible in the long run. Customers will not be attracted to an offering that does not present superior value (price and / or functionality) and the competition will quickly realize this and exploit their own advantages. Another key concept from each of these case studies is that the marketplace is dynamic.

In the case of Bernard Mathews and Guidant both companies had credible sources of competitive advantage but the question was whether the advantages were sustainable. Capturing value is a problem in itself but to sustain it over time is even more challenging. Companies must evolve or die, or in the words of Andy Grove "only the paranoid survive". The development of the value proposition of an offering is vital for marketplace success. It is important to be able to understand the customer's utility function, that is, the combination of price and performance that is most valued by the customer. Additionally, it is critical to fully comprehend where in the commodity-specialty continuum an offering lies in order to properly position it in the marketplace.

In the case of International Systems it was unclear what combination of features and attributes provided the most added value for the customer. This created a situation where conjoint analysis would have been valuable. If an offering does not squarely address a customer's needs then it is hamstrung from the beginning. The situation with Guidant was also illustrative of these critical decisions of how to design and position a product. A variation on this theme occurred with Xerox, where a key decision by the commercialization team hinged on identifying where in the value chain the new technology provided the most value, and hence, provided the strongest position for the new product. Another important theme was the power and profit generated by sustainable competitive advantage.

In the cases, there were two specific sources of sustainable competitive advantage. The first was the presence of proprietary technology, as in the cases of Bernard Mathews, Wilmington-Corning Ware patent, and Xerox. The presence of a protected technological advantage is powerful and sustainable, albeit for a limited amount of time. In general, all of the cases had a strong technological component to them whether it related to the creation of new products, the enhancement of existing products or the reduction of costs. Undoubtedly, the technological prowess of a company greatly impacts its ability to compete and successful strategists should always attempt to match technological strengths with competitive strategies. The second source of sustainable competitive advantage was the power of the brand.

The power of the brand was evident in several cases, most notably the Bayer and Wilmington cases. The power of the Corning Ware brand showed how difficult it is to launch an assault on a product that has established "mind share" in its category. This example approached the ideal situation where, in the consumer's mind, the social meaning of a product was more important than its functional meaning. At best Wilmington could squeeze out a tenuous 2nd position in the market and that too relied on Corning deciding not to react and collapse the price umbrella. In the Bayer case one has to admire the success of Tylenol's advertising campaign in terms of building its brand while systematically destroying a competitor's brand. By tagging aspirin with a scientifically dubious side effect Tylenol, assisted by Sterling's neglect, shifted millions of dollars of value from Bayer aspirin to itself.

This is an excellent example of "people believe what you tell them". Branding power can provide competitive advantage when there is nothing else but price to compete on. This is especially important as growth starts to mature and eventually decline, a powerful brand can be an important source of cash flow at this stage This brings us to a common dilemma that was faced in most of the cases - how to fight the tendency for all products to become commodities over time. It is like entropy, if you do not constantly put energy into the system it collapses to a minimal state.

If you crush your opponents in the marketplace yet in the process you let the consumer capture all of the value then you have won a Pyrrhic victory. One striking commonality of the cases was the role that external constraints played in shaping companies's strategies. Excellent examples of this were the Guidant and International Systems cases where industry structural constraints in the form of HMO and insurance policies, as well as governmental regulations, combined to significantly shape the battlefield. Obviously the strategist must be sensitive to these constraints and account for them when developing strategy.

Another interesting aspect of the cases was the significance of understanding your competition. In order to develop a successful strategy you have to know how your competitor thinks and acts. Taking this a step further is the notion that one can actually shape the competition's thinking. This is a powerful concept because in the attempt to try to shape your competition's actions it forces you to consider all of their possible options and how they impact your strategic position from a more dynamic perspective. Moreover, it forces you to think about how the competition will most likely counter punch and how you can best be prepared for it.

While the case presentations which showed some understanding of the competition were interesting, the superior presentations were the ones that actually attempted to influence the thinking of the competition whether it was through signaling a competitive strength to forestall new entrants, bluffing a move to buy time, or attempting to coerce a competitor into cooperation. A good example was the Wilmington case presentation. Wilmington was in a difficult situation and the presentation team did not have much substance to work with. Yet, by including tactics aimed at shaping their competitor's actions they came up with a rather impressive strategic recommendation. An important concept that emerged from the cases is that the strategic process is best viewed as an interactive rather than a static process.

Too often we think of the creation of strategy as being a one-time decision when, if done correctly, it is more like game of chess. Each move has a counter move. The best players are always thinking several moves ahead. Another lesson learned is that often it is best to walk away from an opportunity where the odds are stacked against you. If we were the CEOs in charge of Wilmington, International Systems and Bayer, we would have likely considered other projects to invest in rather than tackle what was being proposed in the cases.

2. Which analytic tools and topics gave the best insight? One of the most beneficial aspects of the course was the exposure to the wide range of analytical tools and concepts that we encountered during the process of studying each of the six cases. We feel that the analytical tools are one "take away" from this course that we can immediately apply in our jobs.

One useful high-level tool was Porter's Five Forces model. Porter's model provides a coherent framework for understanding the primary economic drivers for a particular industry. Porter contends that the level of rivalry within an industry is the result of the interaction of buyer power, barriers to entry, the threat of substitutes, and supplier power. We found this model useful in all of the cases for understanding the industry context in which the companies operated. Its power became apparent to us as we studied cases in industries that were unfamiliar to us. By first using the Porter model to identify which forces were shaping competition it was easy to become "oriented" and grasp the essential issues at hand whether the industry was the European turkey products market or medical diagnostic equipment.

The Boston Consulting Group's venerable product portfolio model is one of the stalwarts of strategic planning. The longevity of the BCS model stems from its ability to quickly illuminate complex product portfolios in a useful way. The model does have its limitations, such as subtly implying that market share growth is always good, but it has been proven by the test by time, as well as empirical study. A good example of the value of the BCG model was the Guidant case. The underlying concepts behind the BCS model were instrumental for us in analyzing the potential synergies of the various T achy / Brady strategies while also shedding light on the relative positions of the competition. Strengths-Weaknesses-Opportunities-Threats (SWOT) analysis was a valuable tool for rapidly framing the competitive environment of specific cases.

One thing we learned, however, was the importance of realizing that competitive situations evolve, sometimes very quickly, and that SWOT analyses should be continuously updated. The commodity-specialty continuum concept helped us understand where we should look for potential sources of market power and how products should be positioned. This drove home the idea that specialty products and commodity products often have different sources of market power and should be managed differently. A fascinating corollary to the commodity-specialty continuum concept is the idea that products tend to become commodities over time. This implies that strategies must also evolve over time or one seriously risks being out maneuvered as products and markets mature. The seven sources of competitive advantage model proved to be very helpful for evaluating a company's competitive position.

If a company does not have significant competitive advantage in at least one of these seven sources then it is in a very precarious situation. Both Wilmington and International Systems were at fault for not visiting and revisiting this model. Both of these companies simply did not have any competitive power when viewed through the lens of the seven sources model. Additionally, the seven sources model can help a strategist "take off the blinders" and fully examine the entire range of opportunities to obtain and maintain competitive strength. On the product level, the relative price-performance matrix proved to be a useful tool for evaluating the value proposition of an offering. In many of the cases, the first step entailed determining the value posture of an offering prior to developing forward-looking strategy.

Additionally, the value matrix was useful for conceptualizing the result of different potential price versus performance strategies. Decision-making is one of the most important tasks of an executive. However, it is an area where most managers receive little or no training. The decision tree is a simple yet powerful tool for facilitating rational and logical decision-making. By diagramming and appropriately weighting the various "what ifs", it is possible to visualize and evaluate the impact of a whole range of possible actions for a particular situation.

The decision tree proved to be an excellent tool for bringing clarity to otherwise bewildering situations in many of the cases. There were also analytical tools and concepts from allied disciplines that were useful in the strategic analysis process. Competency in a wide range of skills ranging from business valuation to applied microeconomics was necessary to successfully tackle the issues in all six cases. Therefore, a skilled strategist needs to be a true multi disciplinarian in order to operate at maximum effectiveness. Along this line of thought, it might have been better to have the Strategy course later in the curriculum, perhaps as a capstone course immediately prior to the final project. In conclusion, we found the analytical tools and concepts presented in this course to be very useful for providing structure and clarity in the analysis of disparate and complex strategic situations.

Unfortunately, many of these tools appear to be underutilized in practice. Several of us have experienced a less structured and more haphazard approach to strategy in our own companies. This is an area where we can take TRIUM learning back to our organizations and realize benefit right away. 3. What did you learn personally from doing and observing the case process? Our group did the board review for the Wilmington case and presented the Xerox case.

Preparing for the Wilmington case was arduous and frustrating. It was a difficult case simply because as much as we tried we could not find any clear way for Wilmington to take advantage of the pressed ceramic opportunity. Xerox on the other hand was a very upbeat case. The entire group was excited by the Xerox case and we jumped into it as if Just-In-Time printing was our very own idea.

Preparing the board member case, while challenging since we were focused on the Wilmington predicament, turned out to be a very worthwhile activity. After delving into the textbook and the case material, we became aware of how important it is for a company to break down, in great detail, exactly what its purpose is, who the customer is, the strengths of the business vis-a-vis technology and culture, and the nature of the competition and the competitive environment. It would be difficult to develop a credible strategy without first comprehending all of these various facets of a business. One wonders what happens to companies that at one point were very focused and successful and a number of years later are being dissolved. Why do some companies perpetuate their competitive advantages while others become obsolete?

This led us to the important topic of dealing with change. The role of change and how companies adapt is something that left a profound impression on us. Adapting to change was common to all of the cases. Even the great Hannibal was finally defeated by his inability to continuously adapt. The Roman general Scipio Africanus studied Hannibal's strategies and used this insight to defeat him once and for all at the Battle of Zama. As a great philosopher once said "change is the only constant in the world".

Polaroid is a good example of the inability to adapt that we discussed within our group. Polaroid had all of the attributes of a world-class company with a sustainable competitive advantage: protected superior technology, superb market access, great operational skill, and a loyal customer base. The profits were obscene. Yet, the company collapsed like a train wreck in slow motion.

Why couldn't they adapt to the changing technological and business environment? This highlights the importance of strategy. It strikes us that the true role of the strategic process is to enable a company to successfully initiate and adapt to change. At the core of this process of adaptation must be the never-ending endeavor to "avoid fair fights" through the constant maneuvering for advantage.

This strategic process must be organic to an organization. It should be a dynamic continuous process, not something that is discussed once per year at the annual executive retreat. Lastly, it is our impression that today's strategy is tomorrow's destiny. If a company wants to control its future then it needs to heed the universal principles and concepts of strategy, to do otherwise would, at best, leave one's future in the hands of fate, or at worst, in the hands of the competition...