1. Strategic Management (MGT501)
Lecture 20
Dr Muhammad Mustafa Raziq

2. Topic Covered in the Previous Lecture
Norm of Strategy Making
Offensive strategies and defensive strategies
Exercise

3. Topics to be covered in this lecture
Benchmarking and Industry Standards
Resource-led Strategies
Strategic Advantage Analysis
Open Strategy

4. 5.10. Benchmarking and Industry Standards
Benchmarking is the process of seeking out, identifying and adapting outstanding practices and business processes from organizations anywhere in the world that helps an organization to improve its performance.
It is an activity in strategy formulation stage that looks outward to find best practices resulting in high performance in other firms which are then used by the firm as a strategic goal to achieve in actual operations.
It denotes a comparison with the business process and performance indicators from different organizations that are considered best in the class, well known for being a good model. It enables a company to learn from other’s success and mistakes.

5. 5.10. Benchmarking and Industry Standards (continued)
Industry standards provide an environment in which the best of breed technology, products and services flourish. Industry standard is the optimum criteria for any industry to function and carry out operation in their respective fields.
In the case of an automobile industry sizes and quality of tire serve as a means of standardization.
For each industry the standards are different and their functions are also different.

6. 5.11. Resource-led Strategies
Synergy and Dysergy: synergy or dysergy (negative synergy) evolve in an organization by the interplay of the resources and behaviors which leads to the development of strength and weakness in due course. Resource combine or add up to generate enhanced or less than its parts.
For example, when production and marketing resources and behaviors complement each other there will be operating synergy. Similarly, marketing inefficiency reduces the operating efficiency thereby dysergy results.
Within a functional area such as marketing, the four P’s support each other in synergy or pricing or distribution may make strengths in promotion and product ineffective in a dysergic relationship

7. 5.12. Strategic Advantage Analysis
What is strategy meant for can be answered easily with the answer that it is for gaining SCA.
Those researchers and consultants who focused on the word ‘competitive’ followed the school that external markets are to be looked into to gain CAs for a firm through constant innovation, organizational design for positioning, alliances for market strength, competitive intelligence, market share, differentiation etc.
Those who focused on the ‘advantages’ part follow the RBV considering the internal capabilities, core competences, etc.

8. 5.12.1. Sources and Factors of Competitive Advantage
The sources of CA may either be in the external environment or inside or in both or in unique relationships balancing the external environmental factors and the resources inside the firm.
CA of a firm is not based on the generic low cost or differentiation strategies alone. Some advantages are short term and some are long term and the short term advantages may also be strategic in sense that a short term gain in one aspect gives a slightly longer term advantage in another aspect of the organization’s performance.
The factors that offer both short term and long term CA to a firm are as follows:
Low cost

9. 5.12.1. Sources and Factors of Competitive Advantage (continued)
The factors that offer both short term and long term CA to a firm are as follows (continued):
Speed to market
Innovation or disruptive technologies
Service experience
Customization
Volume
Scale
Product quality perception (power of advertisements)
Influential stakeholder’s support
Product novelty
Strategic leadership

10. Durability of CA/SCA
All the factors of CAs of a firm are not necessarily durable or sustainable. A firm would like to retain its CA in perpetuity once acquired or developed. The sustainability or durability of CA depends on the following factors:
Uniqueness of resources that the firm possesses
Inimitability of capabilities
Non-substitutability of the unique resources
Rarity of the resource
Trust, loyalty and strength of relationships (Park and Lou, 2001)
Knowledge utilization ability of the firm/innovativeness (Hope and Hope, 1997)

11. 5.12.2. Durability of CA/SCA (continued)
The sustainability or durability of CA depends on the following factors:
Build-up of dynamic capabilities in the organizational processes
Emotionally engaged employees (HodgKinson and Sparrow, 2002)
Data analysis and effective information use orientation

12. 5.12.3. Organizational and Environmental Antecedents of Sustainable Competitive Advantage
CEOs with ‘know why’ and a sense of direction
Top management teams with ‘know how’
Dynamic governance structure with experience, multiple expertise, diversity
Culture of dynamism and innovation
Strategic objectives and long term thinking at different levels of the organization
Strategic alliances and networks propensity

13. Organizational and Environmental Antecedents of Sustainable Competitive Advantage (continued)
Industry relevance and growth rates
Globalization opportunity
Technology growth nature
Level of tacit knowledge and explicit knowledge
What factors give distinctive advantage to a firm and how they are evolved in a firm should ideally be a tacit knowledge for preventing imitation by other firms.

14. 5.12.4. Classification scheme of SCAs
Whether an advantage a company has today will remain an advantage in the next decade is not so certain and the naming of a current advantage as SCA is at the most a presumption or hope.
Nevertheless a hope or presumption by a company, the following classification may be applied. A particular company’s CA may be based on any one or a few of the following actions, capabilities or approaches.
Innovative capability
Market orientation: (customer or competitor orientation)
Inter-functional coordination

15. 5.12.4. Classification scheme of SCAs (continued)
A particular company’s CA may be based on any one or a few of the following actions, capabilities or approaches.
Aligned project management
Perspective of co-creating value with customers
Size advantages in the targeted market: either scale, scope, or experience based
Superior access to resources or raw material including know- how and information
Superior access to customers, customer segments, and channels
Restrictions on competitors' options
First mover advantage

16. Erosion of SCA
A factor of SCA today may not be an advantage in the next year for a company due to several reasons which are termed as SCA erosion. If companies identify these factors of SCA erosion, then adequate steps can be taken to mitigate the erosion: some SCA erosion reasons are as follows:
Defection of key personnel
Leakage of information through suppliers. Customers and patent documents
Reverse engineering by rivals
Change in technology
Change in customer demand or need
Slowness in scanning the environment
Loss of reputation due to mishaps, and mistakes
Change of public policy
Social changes

17. 5.13. Open Strategy
From 1990s many firms are experimenting with novel business models based on harnessing collective creativity through open innovation. Such a business is said to follow an open strategy
Open strategy balances the value creation forces that can be found in creative individuals, innovation communities, and collaborative initiatives with the need to capture value in order to sustain continued participation and support of those activities.
Open strategy is about leading through innovation with cooperation from many creative individuals not connected through any firm’s organizational structure. Examples: Linux Kernel, Wikipedia, Youtube, OpenSource, public library of science
It is a concept which encourages companies to acquire outside sources of innovation to order to improve product lines and shorten the time required to bring products to market.

18. Summary of the topics covered in this lecture
Benchmarking and Industry Standards
Resource-led Strategies
Strategic Advantage Analysis
Open Strategy

19. Topics for the next lecture
Strategies and Competitive Advantages in Diversified Companies and their Evaluation
Diversification and Integration Strategies