Creating Competitive Advantage P. Ghemawat & J. Rivkin Cont’d. How does a firm identify opportunities to create competitive advantage Dumb (or smart) luck. Strategists Pankaj Ghemawat and Jan Rivkin appear in the HBR February edition. In it, they examine why large differences in economic performance exist, . Creating Competitive Advantage P. Ghemawat J. W. Rivkin December 22nd, Submitted By: Group A5 – Section A Ajay Bansal Alpesh Chaddha Aman.

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Creating Competitive Advantage

Dumb luck also plays a role. The logic laid out so far suggests that a firm can boost its added value by widening the wedge it achieves between customer willingness to pay and supplier opportunity cost beyond what rivals attain.

In practice, it is often efficient and effective to reverse this process: We remain leary, however, especially when the market research asks people to assess their willingness to pay for new products that they have never seen or for the satisfaction of needs that they themselves may not realize they have.

Activity Analysis Step 1: For example, it can estimate how much a customer will pay for a product that is one day fresher. In some settings, creative insight may have to replace analysis. Finance General Management Marketing. More subtly, a firm can boost willingness to pay through activities associated with sales or delivery—the ease of advantate, speed of delivery, availability and terms of credit, convenience of the seller, quality of presale advice, etc.

The cost analysis in Figure 8, for example, did not cover all the activities in the snack cake value chain. To make this website work, we log user data and share it with processors.

A crane was also less expensive to operate than a forklift fleet; it required less labor, fuel, and maintenance, for instance. As courses on management accounting point out, conventional accounting 13 This document is authorized for use only by Samantha Steinberg in Strategic Management Honors taught by Ggemawat.

CREATING COMPETITIVE ADVANTAGE (P. Ghemawat, J. Rivkin, HBR, ) « Readings and Learnings

Schering-Plough was far more effective at producing economic profits than were many drug makers during the period, while U. Despite this gap, Harnischfeger was making competirive profit on its sales of portal cranes by the late s. In practice, however, managers often examine actual costs, crating opportunity costs, because data on actual costs are concrete and available.


Its stripped-down offering may generate slightly less willingness to pay than the offering of a full-service airline, but it incurs far lower costs than a full-service rival. Third, managers assess how successful they and competitors are at fulfilling customer needs. Under any reasonable variation of the assumptions, Betsy Baking had a substantial cost advantage over Collins.

Such examples of dual competitive advantage are eye-catching 13 and well worth understanding. Many pharmaceuticals are made from commodities with little labor input, while unions exercise such power in the steel industry that labor costs often account for a quarter of total revenue. It also highlights the role of competition: And the Southwest crreating reminds us that overserved customers can offer an opportunity as well.

In the rikin of this note, competitivw focus on the analysis of actual costs. Readings and Learnings In the mind of Business. The Dynamic of Strategy, New York: Before we rivkkin on to that step, however, we should highlight some guidelines concerning the analysis of willingness to pay.

The authors recall that competitive advantages comes from an integrated set of choices about activities c. By widening the gap between willingness to pay and supplier opportunity cost, Harnischfeger increases the amount of value than it can potentially claim. In the retail brokerage business, for instance, both Merrill Lynch and Edward Jones succeed, but they do so in very different ways.

Firm resources and sus Under a condition known as unrestricted bargaining, the amount of value a firm can claim cannot exceed its added value.

In essence, it is the value that would be lost to the world if the firm disappeared. For example, American consumers may hesitate to buy a Fiat automobile because they fear that spare parts and service will be hard to obtain. Finally, market leaders often face a tension between managing industry structure and pursuing an advantage within that structure.

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Almost all customers would be willing to pay more for a Toyota automobile than for a Hyundai, but the costs of manufacturing a 7 This document is authorized for use only by Samantha Steinberg in Strategic Management Honors taught by Dr.

Create a free website or blog at WordPress. The ability to generate and capture profits in an industry derives from added value.

In it, they examine why large differences in economic performance exist, and how competitive advantage may be created. If the group of competing products plays a small role in satisfying a need relative to other products outside the group, the need can often be removed from the list.

Reflecting creaging in industry-level competitive forces, the pharmaceutical industry has been among the greatest generators of economic profit, while the steel industry as a whole has produced losses.

The note separates the challenge of creating competitive advantage at a point in time from the problem of sustaining advantage over time.

Consider the situation with Harnischfeger as the sole provider of cranes and International Paper as the only customer. A wide range of market research techniques—surveys, hedonic pricing, attribute ratings, conjoint analysis, etc. Free Press,Chapter 2.

One usual response is market segmentation. A particular driver should be modeled only if it is likely to vary across the competitors or the strategic options that will be considered.

Creating Competitive Advantage P. Ghemawat & J. Rivkin

Peaks are coherent bundles of mutually reinforcing choices. Types of competitive a Some examples illustrate the possibilities: You are commenting using your WordPress. YvesLongchamp has challenged me to post covers of 7 books that I love.

Steel performed far worse than many other steel producers. They also understand how activities alter costs. In doing so, the management team must decompose the firm into parts, advantagf also craft a vision of an integrated whole.