Strategic Business Frameworks for Competitive Advantage

Four Elements of a Successful Strategy

• Simple, consistent, and long-term goals
• Deep understanding of the competitive environment
• Objective appraisal of internal resources
• Effective implementation of these three elements

PESTEL Analysis

A framework for analyzing the external macro-environmental factors that impact an organization:

• Political: Tax policy, labor law
• Economic: Interest rates, inflation
• Sociological: Population growth, demographics
• Technological: Automation, innovation
• Environmental: Climate change, sustainability
• Legal: Discrimination and employment law

Porter's Five Forces Model

A framework for analyzing industry attractiveness and competitive intensity:

• Threat of new entrants
• Threat of substitute products or services
• Bargaining power of buyers
• Bargaining power of suppliers
• Competitive rivalry

Organizational Resources

Assets that can be measured, but also intangible ones. They can be:

• Tangible (e.g., physical assets, financial capital)
• Intangible (e.g., brand reputation, patents)
• Human (e.g., employee skills, knowledge)

Organizational Capabilities

The ability to perform actions or deploy resources effectively. The steps involved in managing both Resources and Capabilities (R&C) are:

• Identify the main R&C
• Evaluate those R&C
• Develop strategic implications

Porter's Two Generic Strategies

Approaches to achieving competitive advantage:

• Cost Advantage: Leads to supplying an identical product at a lower cost.
• Differentiation Advantage: Leads to supplying a product that is differentiated, for which the customer will pay a premium price.

Seven Drivers of Cost Advantage

• Economies of scale
• Economies of learning
• Production techniques
• Product design
• Input costs
• Capacity utilization
• Residual efficiency

Differentiation Advantages

• Builds brand loyalty
• Provides entry barriers
• Can mitigate buyer power
• Helps deal with supplier power
• Positions the company better against substitutes

Bowman's Strategy Clock

Provides a framework for analyzing competitive positions within an industry based on two key dimensions: price and perceived value.

Blue Ocean Strategy

Proposes the creation of new markets through innovation, seeking to move away from competition by expanding the market and creating markets that do not yet exist.

Benefits of Global Strategy

• Cost benefits of scale and replication
• Serving global customers
• Exploiting national resources
• Learning benefits
• Competing strategically across borders

Internationalization

Mechanisms:

• Trade: Exploiting market opportunities in other countries.
• Direct Investment: Building productive assets located in other countries.

As a:

• Threat: Opens domestic markets to competitors from other countries.
• Opportunity: Allows companies to grow and become world leaders.

Porter's National Diamond Framework

These are four determinants for international competitiveness:

• Factor Conditions (home-grown): Cannot be easily given to others.
• Demand Conditions: Local customers push companies to innovate.
• Related and Supporting Industries: Internationally competitive local supplier industries create high quality.
• Strategy, Structure, and Rivalry: Leads to increased production and the development of technological innovations.