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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And the Southwest example reminds us that overserved customers can offer an opportunity as well.

Creating Competitive Advantage P. Ghemawat & J. Rivkin

By reverse-engineering the analyses they do from the options they have, managers can focus on the analyses that truly matter. Hyundai is certainly different from Toyota, but it is not differentiated with respect to Toyota.

In actuality, many of the greatest advantages come not from analysis, but from entrepreneurial insight and trial-and-error. This note takes an analytical approach to competitive advantage. How does a firm identify opportunities to create competitive advantage Dumb or smart competltive Entrepreneurial insight Analysis can hone insight Activities undertaken to: Managers should work on widening the wedge between opportunity copmetitive and willingness to pay.

Consumers pay a premium for New Balance athletic shoes in part because the firm offers durable shoes in hard-to-find sizes.

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.

Then the value left over for the remaining participants is less than the value that those others could generate by arranging a deal amongst themselves. Under any reasonable variation of the assumptions, Betsy Baking had a substantial cost advantage over Collins. Free Press,Chaptersand M. But the pivotal decision maker is probably the parent who chooses among the brands.


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Some have argued that dual advantages are rare and are typically based on operational differences across firms that are 14 easily copied. Notify me of new comments via email. About the Author Jan W. Imagine that Harnischfeger is bargaining with International Paper, one of the largest paper manufacturers, over the price of a portal crane.

In doing so, the management team must decompose the firm into parts, but also craft a vision of an integrated whole.

HBR: Creating Competitive Advantage

Differences in the resources possessed by a firm may also drive differences in activity costs. The associated case explores the strategic decision-making process of premium power tools manufacturer Hilti inwhen the company was considering implementing a fleet management system in the construction industry. Competiitve ruggedness of the landscape has a couple of vital implications.

In this approach, enabled by information and production technologies, companies begin to tailor their products to individual customers. Because Betsy Baking used inexpensive raw material, purchased in bulk, and tapped national scale economies, its operations costs totaled 21? Such a distillation process often suggests new ways to drive wedges.

Free Press,Chapter 1.

To use this website, you must agree to our Privacy Policyincluding cookie policy. Here, we have laid out a process in which a management team develops a comprehensive grasp of how its activities affect costs and willingness to pay, then considers options to widen the wedge between the two. Primary activities are broken down further into inbound logistics, operations, outbound logistics, marketing and sales, and after-sales service.

A firm has added value when the network of customers, suppliers, and complementors in which it operates is better off with the firm than without it; the firm offers something that is unique and valuable in the marketplace. To order copies or request permission to reproduce materials, callwrite Harvard Business School Publishing, Boston, MAor go to http: Sheer entrepreneurial insight certainly plays a large role in spotting such opportunities.


Harvard Business School Press, Savory Pastries, for instance, was tapping a willingness to pay for freshness.

The second section shows how managers can analyze the full range of activities to understand the sources of added value. Effective cost analyses usually break out in greatest detail and pay the most attention to cost categories that creatimg pick up on significant differences across competitors or strategic options, 2 correspond to technically separable activities, or 3 are large enough to influence the overall cost position significantly.

Procurement of inputs Development of technology Human ressources Infrastructure Activities must be analyzed relative to competition. The catalog of potential drivers is long.

Creating Competitive Advantage

And when a business sells to end-users through intermediaries rather than directly, willingness to pay depends on multiple parties. Technology and Operations Management.

Ramon Casadesus-Masanell and Jan Rivkin. An analysis of relative costs and willingness to pay shows why Betsy Baking and Collins fared so differently. Such contrasts in industry-level competitive forces are one reason that the profit levels of firms in different industries differ.

In general, a firm should scour its value chain for, and eliminate, activities that generate costs without creating commensurate willingness to pay.