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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Others relate to differences in firm location, functional policies, timing e.

Creating Competitive Advantage The landscape metaphor reminds us that the creation of competitive advantage involves choice. The note separates the challenge of creating competitive advantage at a point in time from the problem of sustaining advantage over time.

To make this website work, we log user data and share it with processors. Explore Options and Make Choices When exploring options, the management team must work vigilantly to build a vision of the whole Competitive advantage comes from an integrated set of choices about activities A firm must usually consider changing many of its activities in unison in order to improve long-term prospects When considering changes in activities, it is crucial to consider competitors reactions.

Finally, it emphasizes the importance of internal consistency. Imagine that Harnischfeger is bargaining with International Paper, one of the largest paper manufacturers, over the price of a portal crane. Primary rivkij are broken down further ghmeawat inbound logistics, operations, outbound logistics, marketing and sales, and after-sales service.

Types of competitive a Also, Betsy Baking did not run promotions. A firm is said to have a competitive advantage over its rivals if it has driven a wide wedge between the willingness to pay it generates among buyers and the costs it incurs—indeed, a wider wedge than its 4 competitors have achieved.


One usual response is market segmentation. Operation of automated baking, filling, and packaging production crearing, largely depreciation, maintenance, and labor costs, amounted to 15?.

Creating Competitive Advantage P. Ghemawat & J. Rivkin

This type of disparity, in which different customers rank products differently, is known as horizontal differentiation. They also understand how activities alter costs.

And even when broader is better, there tend to be a variety of ways in which a firm can expand its reach, some of which such as licensing, franchises, or strategic alliances fall short of an outright expansion of scope.

Ramon Casadesus-Masanell and Jan Rivkin. Creating Competitive Advantage industry. Each point in this space represents a different set of choices, a different configuration of activities. Managers determine the set of cost drivers associate with each activity, i.

No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School. A firm establishes added value by making sure that it is unique in some valuable way—that the network of suppliers, customers, and complementors within which it operates is more productive with it than without it and that it is not readily replaced.

Second, the firm can devise a way to reduce supplier opportunity cost without sacrificing commensurate willingness to pay. Some examples illustrate the possibilities: But even in industries that are not pure commodities, differences in cost often wield a large influence on differences in profitability. Of course, this alternative process 37 works best when managers start with a good grasp of the options available to them.

Finance Globalization Health Care.

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We then link added value to competitive advantage. It is the smallest amount that a supplier will accept for the services and resources required to produce a good or service. Once Kranco enters, it is not surprising that Harnischfeger captures little value and is barely profitable. It is important that such research identifies not only what customers want, but also what they are willing adfantage pay for. Creting of the rivals manufactured their snack cakes in western Canada, however, and manufacturing elsewhere was not an option because shipping was costly and goods had to be delivered quickly.


Or a Ghemaat Claiborne perceives huge pent-up demand for a collection of medium- to high20 end work clothes for female professionals. Many relate to the size of the firm: So far, we have treated all customers as identical. In conceptual terms, the managers of a firm operate in a high-dimensional space of decisions.

Explore Options and Make Choices Some decisions affect comletitive the opportunity cost and the willingness to pay e. These differences in activities, and their effects on relative cost and relative willingness to pay, fivkin be analyzed in detail.

Posted by Patrick Bertschy on October 3, Who is the real buyer? Accenture has historically earned returns significantly higher than most other large IT services companies. The tension between cost and willingness to pay is not absolute: By shipping clothes on the proper hangers and in certain containers, the manufacturers can greatly reduce the labor and time required to get clothes from the department store loading dock to the sales floor.

Nalebuff, Coopetition, New York: