Competitive Advantage

An introduction

by David Elliott

Why is it important?

• Strategy needs to based on organisational strengths in a way that fits the organisation and aligns its competitive advantage with the opportunity.

• No strategy no long term success.

Strategy/Implementation.Good Poor

Good

Poor

Strategy

Implementation

Long termsuccess

Short term gain,Long term failure

Short term failure,Long term success

Failure

Choice of strategyFocus

Cost Differentiation

Middle of the road

Adapted from Porter (1980)

Choice of strategy

• Choose a generic strategy and stick to it.

• Select an approach that allows the Company to maximise its strengths relative to its competitors.

• Ensure it has macro and micro congruency.

• Even the mighty get this wrong.

Case Study

• Sainsbury’s.

Porter’s 5 forces

Rivalry betweenfirms

Threat of

substitutes

Barriers to entry

Supplier

Power

Buyer

Power

The Danger zone.

• Most SMEs diversify too early.

• Stick to the knitting.

• What is meant here?

• Some theory followed by a case study.

Ansoff matrix.Existing New

Existing

New

Product/Service

Market

1. Consolidation2. Penetration 3. Withdrawal

Product extension

Market extension Idiot box

Case study

• Seven Seas.

Barriers to growth.

Studies of many SMEs by Cranfield University

have revealed the following barriers to growth-:

• Lack of planning• Muddled marketing – those who have a differentiated approach,

develop a superior reputation and a better understanding of their customer needs are those that succeed.

• Mismanaged change.• The wrong objectives – profit sanity.• Meddling and misspent time.• No financial strategy and poor controls.

Exercise

• Strategists give their managers the tools to do the job and let them get on running today’s business whilst they plan for the future.

• Less than 5% of entrepreneurs have achieved the status of strategist.

• Where are you on this path?

Thank you.

Any Questions?