Transcript Chap. 6: Shifts in CompAdv (P&L/3e)

Chapter 6
Shifts in Competitive
Advantage: Responding
to Environmental Change
by Robert Pitts
& David Lei
Slides prepared by
John P. Orr
Cameron University
Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved.
Slide 6-1
What you will learn…
• How and why a firm’s competitive
advantage can change over time
• Some important sources or
triggers of change
• Strategies that firms can
undertake to respond
to change
Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved.
Slide 6-2
Ex. 6-1. The Rise of New
Music Platforms
Slide 1 of 2
CD-Based
• Captured in disc form
• Dependent on retailers
to sell
• Companies determine/
select offerings on CD
• Requires advanced
manufacturing to
produce disks
MP3-Variants
• Portable in digital code
form
• Downloadable directly
through the Internet
• Listeners choose what
they want to pay for
• Listener able to “burn”
disks through PC/other
device
Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved.
Slide 6-3
Ex. 6-1. The Rise of New
Music Platforms
Slide 2 of 2
CD-Based
• Pricing set by label
company
• Marketing and
promotion drive disk
sales
MP3-Variants
• Pricing varies by
demand/popularity
• Music “communities”
may evolve over chat
rooms on Web
Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved.
Slide 6-4
Eastman Kodak
and Digital Photography
• Semiconductors and digital
imaging
• Impact of new technology on
Kodak
• Searching for an
effective response
Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved.
Slide 6-5
Digital Photography Rivals
•
•
•
•
•
•
Canon
Toshiba
Ricoh
Sony
Epson
Sharp
•
•
•
•
•
•
Kodak
Hewlett-Packard
Polaroid
Motorola
IBM
Intel
Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved.
Slide 6-6
New Developments Affecting
Competitive Advantage
• New technology
• New distribution channels
• Shifts in economic variables
• Changes in related industries
• Changes in government regulation
Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved.
Slide 6-7
New Developments
Competence-Changing Technology
• A competence that markedly changes
or redefines the structure of an
industry
• Often, new processes or innovations
that disrupt and erode the
market for existing products
Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved.
Slide 6-8
Ex. 6-3. Emergence of New Technology
Industry
Old Technology
New Technology
Electronics
Transistors
Integrated circuits
Shoe materials
Leather
Engineered polymers
Appliances
Discrete controls
Fuzzy logic
Airframes
Steel, metal
Composite materials
Automotive bodies
Aluminum
Ceramics
Automobile body
frames
Welded parts
Unibody, single piece
construction
Computers
Mainframes
Personal computers
Networked systems
Medical equipment
Stand-alone x-ray
CAT scans, MRI
TV manufacturing
Handcrafted
Automated insertion
Cameras
Silver halide film
Flash memory cards
Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved.
Slide 6-9
Response Options
Slide 1 of 2
• Prospecting
An activity designed to help the firm search,
understand, and accommodate
environmental change; a proactive attempt
by the firm to make an environmental
change favorable to itself
• Defending
An activity designed to help the firm shield
or insulate itself from environmental
change
Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved.
Slide 6-10
Response Options
Slide 2 of 2
• Harvesting
The systematic removal
of cash and other
assets from slowgrowth or declining
business; may be
thought of as
“milking” a business
before it loses its
value
Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved.
Slide 6-11
Ex. 6-4. Implementing Strategic Response
Response
Option
Typical Implementing Actions
Develop new distinctive competence
Prospect Initiate R&D in new technology
Learn new manufacturing processes
Learn how to design/promote new product
Defend
Preserve existing distinctive competence
Reduce price on existing product
Increase promotion of existing product
Intensify R&D in existing technology
Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved.
Slide 6-12
Ex. 6-5. Major Response Options
Ability to Respond
Magnitude of Threat/Opportunity
High
High
Low
1
Prospect
3
Prospect
Defend
2
Prospect
Harvest
4
Defend
Low
Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved.
Slide 6-13
Response-Option Cells: Examples
1
Prospect
2
Prospect
Harvest
• Intel: The PC market
• Microsoft: Open-systems
software
• Boeing: Subsonic jets
• Timex: Electronic watches
• IBM: Beyond mainframes
• Steelmakers: Shifts in
technologies
Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved.
Slide 6-14
Response-Option Cells: Examples
3
Prospect
Defend
4
Defend
• Merrill Lynch: LBOs
• Music industry alliances
• AT&T: Cable acquisitions
• GE: Compressor
efficiency
• Big Three automakers:
alternative fuels
Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved.
Slide 6-15
Factors of Uncertainty
Impact of
Environmental
Development
Ability
to Adjust
Copyright ©2003 by south-Western, a division of Thomson Learning. All rights reserved.
Slide 6-16