MT3 – Some areas of Competitive Advantage to be considered are: Determinants of Competitive Advantage (Internal and External Perspectives) and the Fundamental Perspective versus the Dynamic Perspective (The External and Internal Dimensions of the Dynamic Perspective)
[NOTE: The subjects mentioned below in each Main Topic are suggestions only; you are free to explore any area of the Main Topic that interests you, particularly if there is some direct application of the MT to your present or past business experience]
You’ll all become experts in SSM at the determinants of competitive advantage via your analysis of your SSM competitors. Once you’ve identified your PRIMARY competitors, you must determine their characteristics. Specifically you must know their strategies, goals/objectives, strengths and weaknesses, even their possible reaction patterns. I’ve found that it helps to ask a number of questions like: What are your competitors trying to do in the marketplace? What are their apparent goals? What really “drives” (e.g., their distinctive competencies) each competitor’s behavior?
One can also think of many factors that might shape a competitor’s goals/objectives: their size, history, current management, and financial situation. If your competitor is a division of a larger organization, it’s important to know whether the parent is running it for growth, or to milk it (you’ll discuss this later in business portfolio planning, e.g., “cash cows”?). Of course, whether competitors can carry out their strategies and reach their goals depends on their resources and capabilities. We need to gather information on each competitor’s strengths and weaknesses a la the SWOT Analysis we’ll see in C&S, C3.
To help in all of this I like the Arthur D. Little consulting firm’s notion of an organization occupying one of six COMPETITIVE POSITIONS in the marketplace which some of you might know:
Dominant: This firm controls the behavior of other competitors and has a wide choice of strategic options.
Strong: This firm can take independent action without endangering its long-term position and can maintain its position regardless of competitors’ actions.
Favorable: This firm has an exploitable strength and a more-than-average opportunity to improve its position.
Tenable: This firm is performing at a sufficiently satisfactory level to warrant continuing in business, but it exists at the sufferance of the dominant company and has a less-than-average opportunity to improve its position.
Weak: This firm has unsatisfactory performance, but an opportunity exists for improvement. The firm must change or else exit.
Nonviable: This firm has unsatisfactory performance and no opportunity for improvement.
A frank assessment of “biting the bullet” to know where you are – really! – is absolutely essential – and do this sooner than later. Of course, these are all difficult to answer accurately without additional market research, but they are worthwhile areas to explore yourself, even if on an ad hoc basis.
In searching for weaknesses, we should identify any assumptions we might have of competitors that are no longer valid. Some companies believe they produce the best quality in industry when they do not. At Cummins Diesel we KNEW that we had superior quality, but sometimes forgot that our competitors Detroit Diesel (then GM) and Caterpillar made pretty good engines too. They weren’t of the same sophisticated design as Cummins, but they got the job done, at a reasonable price – they were good “value”.
Let’s continue on with any thoughts you might have on this vital question of how to deal with competition.