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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The total value created by a transaction is the difference from the willingness to pay and the opportunity cost.

Third, managers assess how successful they and competitors gehmawat at fulfilling customer needs. Finance Globalization Health Care.

Altogether, the managers estimated, a package of Betsy Baking snack cakes cost only 34? After all, it has little or no added value.

This should not be misunderstood as a statement that price determines willingness to pay. Free Press,Chapter 3 and D. Over the same period, U.

Now consider what happens in the late s when Kranco, a management-buyout firm competigive by former Harnischfeger executives, enters the market for portal cranes. It is the smallest amount that a supplier will accept for the services and resources required to produce a good or service.

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

And when a business sells to end-users through intermediaries rather than directly, willingness to pay depends on multiple parties. It is important that such research identifies not only what customers want, but also what they are willing to pay for. In this approach, enabled by information and production technologies, companies begin to tailor their products to individual customers.


The supermarket or convenience store executive chooses a snack cake on fompetitive basis of trade margins, turnover, reliability of delivery, consumer recognition, merchandising support, and so forth.

The authors recall that competitive advantages comes from an integrated set of choices about activities c.

Creating Competitive Advantage P. Ghemawat & J. Rivkin

Think of the Harnischfeger example. It should also search for inexpensive ways to generate additional willingness to pay, at least among a segment of customers. Most obviously, the product design and manufacturing activities that influence physical product characteristics—quality, performance, features, aesthetics, durability—affect willingness to pay.

Support activities include procurement of inputs, development of technology and human resources, and general firm infrastructure. Accenture has historically compeyitive returns significantly higher than most other large IT services companies. An analysis of relative costs and advanage to pay shows why Betsy Baking and Collins fared so differently.

We have found a landscape metaphor helpful to describe the dilemma facing managers who are 38 searching for a favorable set of choices. To a certain extent, Schering-Plough has generated more economic cgeating than U.

To improve its long-run prospects, a firm may have to step down and tread through a valley. Hyundai is certainly different from Toyota, but it is not differentiated with respect to Toyota. In practice, however, managers often examine actual costs, not opportunity costs, because data on actual costs are concrete rivkln available. Of course, this is a general pattern that may or may not hold up in a particular setting.

Rather, a firm must usually consider changing many of its activities in unison in order to attain a higher peak. Firm resources and sus The goal of the senior management team is to guide rivkun firm to a high point on this landscape—a set of decisions that, together, generate a great deal of added value. In occupying one peak, a firm foregoes an alternative position. For now, suppose that Harnischfeger is the only company that can provide a portal crane and International Paper is the sole customer.


Some decisions affect both the opportunity cost and the willingness to pay e. In reality, of course, buyers differ in what they want and how badly they want it. By continuing to use this website, you adgantage to their use. All of the rivals manufactured their snack cakes in western Canada, however, and manufacturing elsewhere was not an option because shipping was costly and goods had to be delivered quickly.

The typical pharmaceutical maker is 2 far more profitable than the typical steel producer. The notion of added value highlights the fact that competitive advantage derives fundamentally from scarcity.

CREATING COMPETITIVE ADVANTAGE (P. Ghemawat, J. Rivkin, HBR, ) « Readings and Learnings

Willingness to pay often depends heavily on intangible factors and perceptions that are hard to measure. More subtly, a firm can boost willingness to pay through activities associated with sales or delivery—the ease of purchase, speed of delivery, availability and terms of credit, convenience of the seller, quality of presale advice, etc. For example, American consumers may hesitate to buy a Fiat automobile rvikin they fear that spare parts and service will be hard to obtain.

Porter, Competitive Advantage, New York: