Lecture Mail: Lesson 2 Day 1
Hi All!
During the 1980’s Michael Porter
(he still teaches at Harvard) made a major contribution to our understanding
of how successful businesses strategize and compete. He argued that in addition
to developing a positioning strategy that successfully manages consumers’
image of a firm’s product(s), companies should also monitor the behavior
and strategies of their competitors. (More to come on that in Lesson mail 2.)
The point is that in order to survive and prosper, companies must find some
way to differentiate themselves from the competition along lines that are meaningful
to their customers. When they do, they have created a competitive advantage
that makes it hard for others, including new entrants, to take market share.
In addition to changing attributes of the product, firms can develop one or
more competitive advantages in lots of other ways. For example, maybe they can
find a cheaper way of securing resources or better ways to service clients.
Porter argues that companies should examine their entire value chain (the process
that starts with securing resources, producing “things”, distributing
them, and ultimately selling them to end users) to find ways to improve the
process.
Two important things to remember are (1) that firms must continually examine
and improve process, and (2) that these improvements must translate into strategies
that are valued by customers. Because their competitors are doing the same thing,
companies must constantly improve and/or innovate, but in ways that satisfy
customers. The authors make an interesting point that sometimes customers don’t
recognize the value of an improvement or innovation. Do you think the firm should
go ahead and implement the change? If it does, what problem(s) will it have
to overcome?
An interesting example of all this is Amazon.com. While it has successfully developed a competitive advantage that is profitable in the areas of books, music and videos, it is failing in many other areas it has added, such as baby supplies, housewares, and electronics among others. Amazon will have to either drop these lines or find some distinctive advantage that customers value (lower prices?) and that differentiates it from the competition. What would you recommend Amazon do?
The Magazine Publishers Association helps its members maintain a competitive advantage by arming them with research that includes detailed facts about their readers.