Summary Business Level Strategy

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• 2 WEEK 1

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• According to Michael Porter, what is the fundamental basis of above-average performance in the long run?

  • Sustainable competitive advantage is the basis
  • Essential for achieving above-average performance

• How is competitive advantage created in a firm according to the concept of activities and value systems (value chain)?

  • Competitive advantage is created through activities and value systems (value chain)
  • A firm consists of discrete, but interrelated economic activities such as assembling products, making sales visits, and processing orders

• What is the concept of competitive advantage for a firm?

  • Refers to the ability of a firm to create more economic value than its competitors.
  • Dependent on the difference between the benefits customers perceive and the full economic cost of the products or services offered.

• What is the role of drivers in creating competitive advantage in a firm based on the concept of discrete activities?

  • Drivers explain why some firms can perform particular activities at lower cost or in ways that create superior value compared to others
  • Important drivers of competitive advantage include scale, cumulative learning, linkages, sharing with other units, capacity utilization pattern, location, timing of investment choices

• How is economic value defined in the context of competitive advantage?

  - Economic value is the gap between the perceived benefits a customer gains from purchasing a firm's products or services and the full economic cost of these offerings.

• What do drivers represent in terms of competitive advantage and its operationalization through activities?

  • Drivers are the underlying sources of competitive advantage in an activity
  • They make competitive advantage operational by helping to perform activities at lower cost or in a way that creates superior value compared to others

• What does the graph titled "Regression towards the mean" suggest about competitive advantages?

  • Indicates that most competitive advantages are transitory, as seen in the convergence of the return on investment (ROI) of companies over time.
  • The graph categorizes companies into top, middle, and bottom thirds, illustrating changes in ROI from 1972 to 1980.

• What factors are important in achieving success in strategy according to the information provided?

  • Relatively attractive position given industry structure, firm's circumstances, and competitors’ positions
  • Consistency of all firm's activities with the chosen position

• What drives profitability according to Michael Porter and Jay Barney?

  • M. Porter (1979):
  • - Attractive industry + favorable competitive positioning → superior profitability

  1. Locate within attractive industries
  2. Adopt strategies to modify industry conditions and competitor behavior
  

  • J. Barney (1991):
  • - Resources and capabilities of a firm may be more reliable sources of competitive advantage than market focus.

• What does the focus of research revolve around regarding industry attractiveness and strategy selection?

  • Factors determining attractiveness of industries and positions within them
  • Understanding factors that underpin a desirable position