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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Creating Competitive Advantage P. Ghemawat & J. Rivkin

Fleet management would involve a shift from selling power tools to leasing them as a service. Marketing courses discuss ways to pinpoint such 30 customer needs and desires through formal or informal market research.

Effective cost analyses usually break out in greatest detail and pay the most attention to cost categories that 1 pick up on significant differences across competitors or strategic options, 2 correspond to technically separable activities, or 3 are large enough to influence the overall cost position significantly.

Its material handling equipment division served a range of customers, including forest products companies such as International Paper. The note separates the challenge of creating competitive advantage at a point in time from the problem of sustaining advantage over competitivf.

A crane was also less expensive to operate than a forklift fleet; it required less labor, fuel, and maintenance, for instance. The ultimate consumer is typically a hungry school child.

Creating Competitive Advantage

Creating Competitive Advantage immediate purchaser is a supermarket or convenience store executive. Most of the remainder can be assigned to effects that fluctuate from year to year. In essence, it is the value that would be lost to the world if the firm disappeared.

Managers should work on widening the wedge between opportunity cost and willingness to pay. Rivkkn, we have laid out a process in which a management team develops a comprehensive grasp rivikn how its activities affect costs and willingness to pay, then considers options to widen the wedge between the two.


In doing so, the management team must decompose the firm into parts, but also craft a vision of an integrated whole. Finally, it emphasizes the importance of internal consistency.

Creating Competitive Advantage industry. Each point in this space represents a different set of choices, a different configuration of activities. Either establishes the wider wedge that defines competitive advantage. The added value of a firm is the value created by all participants in a transaction minus the maximal value that could be created without the firm. 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.

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. For instance, the snack cake managers assigned several cost drivers to outbound logistics and explored these drivers in depth.

Creating Competitive Advantage P. Ghemawat & J. Rivkin – ppt download

The two firms occupy quite different peaks on the landscape of the financial services industry. MA as competitive adva Explore Options and Make Choices Some tivkin affect both the opportunity cost and the willingness to pay e. For Hilti, it represented an entirely new business model, which would substantially differentiate the company from its competitors. Steel performed far worse than many other steel producers. The two firms had different cost structures, however, and as we will discuss below, these differences reflected distinct competitive positions.

And the Southwest example reminds us that overserved customers can offer an opportunity as well. Finally, the nature of the product affected logistics costs: If the group of competing products plays a small role in satisfying a need relative to other products outside the group, the need can often be removed from the list. Such examples of dual competitive advantage are eye-catching 13 and well worth understanding. In the retail brokerage business, for instance, both Merrill Lynch and Edward Jones succeed, but they do so in very different ways.


No part of this publication may be reproduced, stored in a retrieval advantahe, 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.

In other industries e.

It is important that such research identifies not only what customers want, but also what they are willing to pay for. The cold, hard analysis described here is not intended to deny the importance of insight and trial-and-error. Finally, support activities can have a surprisingly large, if indirect, impact on willingness to pay. Ocmpetitive 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.

As noted above, a firm can achieve a competitive advantage by devising a way to 1 raise willingness to pay a great deal with only slight increases in costs or 2 reap large ghemmawat savings with only slight decreases in customer willingness to pay. We remain leary, however, especially when the market research asks people to assess their willingness to pay for new products that they have never seen or for the satisfaction of needs that they themselves may not realize they have.

Most obviously, the product design and manufacturing activities that influence physical product characteristics—quality, performance, features, aesthetics, durability—affect willingness to pay. Creating Competitive Advantage Figure 6: