Building Blocks Of Competitive Advantage

Textbook Site for:
	Strategic Direction , Sixth Edition
Affiliate Summaries Affiliate iii: Internal Analysis: Distinctive Competencies, Competitive Reward, and Profitability Distinctive competencies are the house-specific strengths of a visitor. Valuable distinctive competencies enable a company to earn a profit rate that is above the industry average. The distinctive competencies of an organization arise from its resources (its financial, physical, human being, technological, and organizational assets) and capabilities (its skills at analogous resource and putting them to productive use). In lodge to reach a competitive reward, a company needs to pursue strategies that build on its existing resources and capabilities and formulate strategies that build additional resource and capabilities (develop new competencies). The source of a competitive reward is superior value creation. To create superior value, a company must lower its costs or differentiate its product then that it creates more than value and can charge a higher price, or practise both simultaneously. Managers must sympathize how value creation and pricing decisions bear upon demand and how costs change with increases in volume. They must have a good grasp of the demand weather in the visitor'south market and the cost construction of the company at unlike levels of output if they are to make decisions that maximize the profitability of their enterprise. The four generic building blocks of competitive advantage are efficiency, quality, innovation, and responsiveness to customers. Superior efficiency enables a company to lower its costs; superior quality allows it to accuse a college toll and lower its costs; and superior client service lets information technology charge a college price. Superior innovation tin can lead to college prices, especially in the example of product innovations, or lower unit costs, particularly in the case of process innovations. If a visitor's managers are to perform a adept internal assay, they need to be able to analyze the financial performance of their visitor, identifying how the strategies of the company relate to its profitability, as measured past the return on invested capital. The durability of a visitor'due south competitive advantage depends on the height of barriers to imitation, the capability of competitors, and ecology dynamism. Failing companies typically earn low or negative profits. Three factors seem to contribute to failure: organizational inertia in the confront of environmental modify, the nature of a company's prior strategic commitments, and the Icarus paradox. Avoiding failure requires a constant focus on the basic building blocks of competitive advantage, continuous improvement, identification and adoption of all-time industrial practice, and victory over inertia.

Building Blocks Of Competitive Advantage,

Source: https://college.cengage.com/business/hill/strategic/6e/students/summaries/ch03.html

Posted by: richertwrout1956.blogspot.com

Share this post