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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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. See the top half of Figure 4.

Creating Competitive Advantage P. Ghemawat & J. Rivkin

Each is so complicated that it would be unwieldy to deal with both at once. Email required Address never made public.

Some have argued that dual advantages are rare and are typically based on operational differences across firms that are 14 easily copied. As Figure 7 shows, although Collins sold the typical package of snack cakes ghemawzt retailers for 72? Now they are prepared to take the final step, the analysis of different strategic options.

Think of the Harnischfeger example. Steel performed far worse than many other steel producers. Free Press, especially Chapters Industry analysis is crucial to creating competitive advantage for several reasons. Posted by Patrick Bertschy on October 3, In fact, it was possible to calculate the customer benefits reasonably precisely.

John Wiley,Chapter In our experience, firms that identify segments pinpoint between two and twelve clusters of customers. Ramon Casadesus-Masanell and Jan Rivkin. Once activities have been cataloged, they must be analyzed in terms of cost and willingness to pay relative to the competition.

Then the value left over for the remaining participants is less than the value that creatinf others could generate by arranging a deal amongst themselves.

In conceptual terms, the managers of a firm operate in a high-dimensional space of decisions. Betsy Baking packed its product with preservatives so that deliveries could be made less frequently, kept its product line very simple, rivkon benefited from growing market share. In essence, it is the value that would be lost to the world if the firm disappeared. The firm must ensure that, were it to disappear, someone in its network of suppliers, customers, and complementors would miss it and no one could replace it perfectly.


More subtly, a firm can boost willingness to competjtive through activities associated with sales or delivery—the ease of purchase, speed of delivery, availability and terms of credit, convenience of the seller, quality of presale advice, etc. Competitivw, 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.

Also, Betsy Baking did not run promotions. Kauffman, The Origins of Order, Oxford: A crane was also less expensive to operate than a forklift fleet; it required less labor, fuel, and maintenance, for instance.

Support activities include procurement of inputs, development of technology and human resources, and general firm infrastructure.

Creating Competitive Advantage

Either establishes the wider wedge that defines competitive advantage. Finance Globalization Health Care. Such large differences in economic performance are commonplace.

Rarely do they consider the full range of ways in which all of their activities can create a wedge between willingness to pay and costs. Thus, Blinds to Go receives up to 20, custom orders for window blinds and shades per day, and it promises to process each order within 48 hours.

By continuing to use this website, you agree to their use. In crafting crreating, managers tend to fixate on physical product characteristics and think too narrowly about benefits to buyers.

It also tells the analyst how confident he or she can be in the results. Moreover, activities can creahing willingness to pay in complicated i. Consequently, manufacturing location was not considered as a cost driver. Many pharmaceuticals ghemawa made from commodities with little labor input, while unions exercise such power in the steel industry that labor costs often account for a quarter of total revenue.


Strategy scholars debate, however, how common dual advantages are. Savory Pastries delivers the freshest product, reflected in its high manufacturing and raw materials cost.

In the final step of exploring options, however, the management team must work vigilantly to build a vision of the whole. Each interaction implies that a choice made on one dimension affects the cost and willingness-to-pay impact of another choice. By adding preservatives to creatinng physical product, it could reduce its delivery costs substantially. In reality, the two issues are married: In practice, it is often efficient and effective to reverse this process: Differences in activities account for differences in willingness to pay and hence for ghemaeat advantage and differences in profitability.

Harnischfeger, based in Milwaukee, Wisconsin, manufactured equipment for industrial customers. The analysis helps us understand both the statics and the dynamics of the marketplace.

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Activity Analysis of Cost and Willingness to Pay The Tension Between Cost and Willingness to Pay 10 Widening the wedge is difficult because, often, a firm must incur higher costs in order to deliver a product or service for which customers are willing to pay more.

Types of competitive a Finally, since the analysis of relative costs inevitably involves a large number of assumptions, sensitivity analysis is crucial. A major challenge in analyzing willingness to pay is narrowing the long list of customer needs down to a manageable roster. While fleet management had the potential to significantly improve the customer experience, Hilti was already a successful firm under its extant model and had to decide whether the restructuring of its business model was worth the risk.

Among those customers who want J. It is also common, but dangerous, to mix together recurring costs and one-time investments. Finally, support activities can have a surprisingly large, if indirect, impact on willingness to pay.