Entrepreneurship &

Management functions

Session 4

Sep. 1, 2025
Dr Suresh Varadarajan
sureshv@[Link]
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Contents

Session -3 Recap

Competitive strategy and Competitive Advantage

Value Chain Analysis

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Strategy

• refers to the specific plan of action or set of actions a

company takes to achieve its goals, including the
vision.
• involves making deliberate choices on how to compete,
where to allocate resources, and how to respond to
market conditions.
• Strategy is about how to achieve the vision. It is more
concrete and actionable than vision, focusing on the
steps needed to gain a competitive advantage, grow
the business, and meet specific objectives.
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 Strategy
• Timeframe: can be short-term or long-term but usually focuses on a
3–5-year timeframe. It’s often broken down into more specific plans or
tactics.
• Example: “expand into emerging markets by developing affordable
solar power solutions tailored to local needs.”

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Vision
• is a forward-looking statement that defines what a company
wants to achieve in the long term. It is an aspirational
description of what the organization hopes to accomplish or
become in the future.
• provides direction and inspiration. It serves as a guide for all
future decisions, helping to align the organization’s efforts
towards a common goal. It’s often broad, idealistic, and
motivational.
• Timeframe: Vision typically has a long-term perspective, often
looking 5, 10, or even 20 years into the future.
• Example: A vision statement might be something like “To be the
global leader in sustainable energy solutions.”
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Contents

Session -3 Recap

Competitive strategy and Competitive Advantage

Value Chain Analysis

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Competitive Strategy
• A competitive strategy is a long-term plan that helps a firm gain a
sustainable advantage** over its competitors. It outlines how a company
will position itself in the market and differentiate its products or services.
• important because it affects the overall strategies of a business. If a
business doesn't have a competitive strategy, it may not find a unique
advantage against its competitors.
• crucial in finding and developing new ideas for products and services that
the company can offer.
• Other advantages of implementing a competitive strategy include:
• The exploration of new opportunities
• The retainment of customer loyalty with better products and services
• Innovation to stay current on technological changes in the market
** Competitive Advantage

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Competitive Advantage
• When a firm earns higher economic profit than the average in
its industry
• Profitability depends on
-market level economics (the 5-forces)
-firm’s value creation relative to competitors
• Value creation depends on
-cost position relative to competitors
-benefit position relative to competitors

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 Sources of Competitive Advantage

Positioning Perspective: Dynamic Capabilities View: Actors & Strategic Nets:

Sources of advantage lie in the

Sources of advantage lie in the Sources of advantage lie in the
unique configuration of value
unique capabilities that a firm unique manner in which a set
added activities that a firm
accumulates while performing of actors are orchestrated to
performs in response to a
value added activities generate value
chosen environment

Proponents of this view: Proponents of this view: Proponents of this view:

Michael Porter David Teece, CK Prahlad Gulati, Madhok, Hamel
Transaction Costs Theory Resource based theory Actor Network Theory

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 Generic Strategies (Porter)
Competitive Advantage
Differentiation:
Lower Cost Differentiation • focuses on uniqueness, setting a company apart through
innovation, quality, or brand.
• emphasizing factors like design, features, technology,
Broad
Competitive Scope

Cost Leadership Differentiation quality, or customer service, a company can offer superior
Target value, commanding premium prices and building customer
loyalty.
• Examples : Apple , Nike
Focus
Narrow Differentiation • targeting a specific market segment or niche and
Cost Focus
Target Focus tailoring products, services, or marketing efforts to
meet that segment’s unique needs.
• can be achieved through either cost focus or
Cost Leadership: differentiation focus, allowing companies to serve a
•aims to make a firm the most cost-efficient producer, not at
narrow customer base more effectively than broader
the expense of quality.
•effective in price-sensitive markets and can attract a large
competitors.
customer base, • Examples of Differentiation focus): Rolls Royce
•Examples : Low-cost airlines (Southwest) Walmart • Examples of Cost Focus: Dmart (tier 2 and 3 cities
Reference: Porter, Michael E., "Competitive Advantage".) 1985, Ch. 1, pp 11-15. The Free Press. New York.

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 Generic Strategies (Porter)
Cost Leadership Risk
• New technologies may render existing investments and
Competitive Advantage
processes outdated, eroding the cost advantage.
Lower Cost Differentiation • Rivals may copy cost-efficient methods, nullifying the
competitive edge.
• Rising inputs, labour, or resource costs can squeeze profit
margins and undermine the low-cost position.
Broad
Competitive Scope

Cost Leadership Differentiation

Target Differentiation Risk
• Customers may switch to cheaper alternatives if the price
premium for unique features becomes too high.
• Changing customer preferences or market trends can
reduce the appeal of distinguishing attributes.
Narrow Differentiation • Competitors may replicate differentiating features, diluting
Cost Focus
Target Focus the perceived uniqueness and value proposition.
Focus Risk
• Larger competitors may target the niche market with their
resources and economies of scale, challenging the focused
General recommendation: Firms must make a
firm’s position.
choice between one or the other. They cannot be in • If the preferences of the niche market converge with the
both places: “Stuck in the Middle conundrum” broader market, the focused firm may lose its specialization
advantage.

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Question

Can a firm pursue cost and benefit advantage, or

will it just be “Stuck in the middle”?

(HYBRID STRATEGY)

IKEA, Southwest Airlines, INDIGO, AMAZON, Decathlon

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Dynamic Capabilities Model for Strategy**
Build Capabilities to Sense, Seize and Transform in response to changes in the
business ecosystem
Capability Description Example
Sensing Foresight: (Using Data, Market Identifying Opportunities and Threats Recognized Mobile first future and
feedback, intuition) planned its product strategy accordingly

Seizing (Decisiveness-allocating Mobilizing Resources to act iPhone launch and App store
resources to respond quickly)
Transforming (Resilience: ability to Reconfiguring assets and Process to Constantly reconfigured its supply chain
reconfigure structures and capabilities adapt to changes and hardware design
for long term advantage

**David Teece

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Example of Dynamic Capabilities
Resources and capabilities are the basic building blocks that organizations use to create
strategies. These two building blocks are tightly linked—capabilities from using resources over
time.

Capabilities
(Ability to build, integrate and reconfigure internal
and external competencies to address rapidly
changing environments)

Competencies
(Processes/Routines that enable effective use of
resources)

Resources
(incl. Technologies) Source: Public Information

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VRIO Framework :4 Characteristics of Strategic Resources
The key to using the Resource Based View is to evaluate a firm’s resources and capabilities
using the VRIO framework decision tree.

No Competitive
Valuable
Disadvantage
Yes
No V Valuable
Rare Competitive Parity
R Rare
Yes
No I Difficult to Imitate
Temporary Competitive
Costly to Imitate Organized to
Advantage
O
Yes Capture Value
Organized to Capture No
Temporary Competitive
Value Advantage
Yes

Sustained Note that the decision tree is used to assess resources and capabilities,
Competitive NOT a firm’s products, services, or the firm itself. The evaluation occurs
Advantage within the industry of the firm being evaluated

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 Managing Firm Resources : Southwest Airlines

Why has Southwest succeeded while many other

airlines have failed?
• Southwest flies only one type of aircraft (Boeing 737)
• Potential discounts on large orders and only needing to train
staff on one type of aircraft for maintenance.
• gains efficiency by not offering seat assignments in advance,
unlike its competitor leading to faster Boarding process.
• Organizational culture- enjoys strong loyalty and teamwork
from employees
• Does not follow a Hub and spoke model like its competitors ,
only direct point to point flights
• Innovative Mar

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Actor Network Theory (ANT)
• can help in creating value by providing a framework for understanding the complex and
heterogeneous nature of value creation.
• views value as being created through the interactions of a variety of actors, including
humans, non-humans, ideas, and objects.
• These actors are linked together in networks of relationships, and the value that is created is
the result of these relationships
• ANT can create value by focusing on the following
• role of non-humans: ANT recognizes that non-humans can play a significant role in value creation. For
example, a new technology can create value by providing new capabilities or by making existing
processes more efficient.
• role of networks: The various actors can be humans, non-humans, ideas, or objects. The value that is
created is the result of these interactions.
• process of translation: Translation is a process involves persuading, negotiating, and coercing other
actors to join a network and contribute to the creation of value.
• role of circulation: Once actors are enrolled into a network, they become resources that can be used to
create value. These resources can then be circulated through the network, to other actors.

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 Actor Network Theory (ANT)
Example: Consider a Software Product Company whose Product are being launched on the cloud
Code for Software, interacting with the
Human Actors programming languages, libraries,
and frameworks.
1. Software Developers
2. Designers /UI and Customer experience UI Design Software Features
3. Cloud Service Providers/Third Party SI and benefits
Customer Feedback
4. Marketing and Communications during beta testing
5. Customers / Users of the product
6. Project Manager
coordinate efforts, ensuring timely
delivery and resolving conflicts.
Non-Human Actors
1. Software application (Central actor)
2. Cloud Infrastructure/Servers
3. User Devices
4. User Documentation

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Example of Strategic Networks

(Alliance network
structure across
industries)

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 Summary of questions to ask from 3 perspectives
Stakeholders & Goals Value Proposition Dynamic Capabilities Actors
•What are the elements of
•Who are the key •What capabilities has the
current value proposition?
stakeholders? organization accumulated •How many actors are
over time by delivering involved in creating value?
•How distinctive are these
•What stakeholder's certain value proposition?
elements?
goals are addressed by •Which actors help create,
the current value •How strong and distinctive sustain, protect value?
•What are the key
proposition? are these capabilities/assets?
assumptions guiding these?
•Are these internal or
•What is the bargaining •How well are they aligned to external (partners)?
•What is the cost involved in
power with respect to the value elements
delivering this value?
key stakeholders? •Strategic flexibility
•Is it possible to create new emerging from the choice
•Is it possible to configure the
•Is it possible to lock-in value elements from current of actors?
elements into a new value
key stakeholders? capabilities?
proposition?
Competitive Threat
•Who are the current and potential competitors?
•Which sources of strategic advantage cannot be easily replicated or diluted or disrupted by competitors?

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 • Industry analysis will tell you about the
After industry structure and its profitability

industry • Within an industry some firms are more

profitable than others – why?

analysis, • It is important to understand what

what next? differentiates firms’ performance – what

are the sources of competitive advantage
and why strategy makes a difference

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Introductory Session

Session -3 Recap

Competitive strategy and Competitive Advantage

Value Chain Analysis

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What is a Value Chain
Value chain refers to the various business activities and processes
involved in creating a product or performing a service

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 Value Chain Analysis: An important Technique in
the Positioning Perspective & widely used

Supplier Value Firm’s Value Channel Buyer Value

Chain Chain Value Chains Chains

Support Firm Infrastructure, Human Resources Management, Technology Development, Procurement

Activities

Primary Inbound Outbound Marketing

Operations Service
Activities Logistics Logistics & Sales

Understanding the Value that the buyers are willing to pay and the Cost of performing
each activity – where you can outperform competition

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Value Chain for Digital Product Companies

[Link]

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Example of value chain analysis
Dairy Farmer Agent/Co-op Dairy Processor Retailer Consumer

Produce Milk Procure Milk Process Milk Sell Milk Consume Milk
Selling Price=Rs.8.50 Selling Price=Rs.9.75 Selling Price=Rs.13.00 Selling Price=14.00 Price=Rs.14.00
Margin=Rs. 4.00 Margin=Rs. 0.50 Margin=Rs. 2.63 Margin=Rs. 1.00

Key Characteristics & Issues in Dairy Key Characteristics & Issues in Dairy Key Characteristics & Issues of
Farming Processing Consumers

Production: Production Availability:

•Inadequate attention to dairy farming. •Under-utilization of processing capacity •Limited penetration of organized sector
•Poor yield (800-1000 litre p.a. per cow) •Increased competition & disruption of supply
•Poor hygiene/quality standards chains Quality:
•Very few large organized farms •Marginal increase in productivity (12).
•Inadequate attention to quality. Significant •Perception of quality - ‘loose is fresh’
Marketing: traces of pesticides in branded milk (13) •Concern about adulteration

•Inadequate returns Marketing: Price:

•Weak seller power (Agents buy at Rs.6 a
litre while organized sector prices vary •Key differentiators are brand, product •Price sensitive consumers.
between Rs. 8-11(11)) variety, price •Overall consumer spending on milk and milk
•Inadequate access to dairy processors •Fortification with vitamins (upto 2000 IU per products increasing at the rate of 11% p.a. (15)
•Delayed payments from organized co- liter) has been initiated by a few processors (14)
operatives/dairy processors

Economics and Issues of Current Value Chain in Indian Dairy

 Management Trends over the decades reflect
importance of different parts of the value chain
1940s 1960s 1980s 2000s

Administration Business Policy Leadership Leadership Creating meaning in an

unstructured environment
Personnel Human Resource Managing People Engaging People

Sales Sales & Marketing Sales & Marketing Customer Value

Production Operations Adding Value Supply Chain Mgt Production chain -> Value Chain

Accounting Accounting Measuring Results Strategic Cost Extended view of accounting

Reduction
Finance Finance / M&A Shareholder Value
Economic Value Added
Exercise 4.1: Define
your industry & firm
value chain and identify
your advantages &
scope
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 What is a Good Strategy?
• A good strategy relies on two fundamentally important and
natural sources of strength
• A good strategy doesn’t just draw on existing strength; it
creates strength through the coherence of its design …
most organizations don’t do this… rather they pursue multiple
objectives that are unconnected with one another or worse
conflict with one another
• The creation of new strengths through subtle shifts in viewpoint.
An insightful framing of a competitive situation can create whole new
patterns of advantage and weaknesses. The most powerful
strategies arise from such game-changing insights

• Source: Richard Rumelt (Good Strategy, Bad Strategy)

Examples to be highlighted: Good strategy : Apple, Toyota :Bad strategy : Kodak, Yahoo Kingfisher Airlines, Tata Nano

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 Kaplan & Norton’s Strategy Map** & Balanced Scorecard

**Diagram that connects an organization’s strategic objectives across four key perspectives in a cause-and-effect chain

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Signs of Bad Strategy
• Failure to face the challenge … bad strategy fails to recognize or define the challenge
• Bad strategic objectives … when they fail to address critical issues or when they are
impracticable
• Mistaking goals for strategy … Many bad strategies are just statements of desire rather
than plans for overcoming obstacles. Example, “we want to be a billion dollar company”
• Fluff… use of abstruse and unnecessary words and concepts to create the illusion of
high-level thinking. Example:
• A quote from a major retail bank “Our fundamental strategy is one of customer-centric
intermediation”
• “An elastic execution environment of resources involving multiple stakeholders and providing a
metered service at multiple granularities for a specified level of quality of service”

Source: Richard Rumelt

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Paradoxical Challenges & Strategy Formulation
• arise when conflicting or seemingly contradictory objectives must be met
• challenges often stem from the complex interplay of internal and external
factors, such as organizational culture, market dynamics, technological
advancements, and societal expectation
• Short-term vs. Long-term objectives:
• Exploration of new products and services vs Exploitation of current
products and services
• Efficiency vs Effectiveness: Balancing the need for efficiency (doing things
right) with effectiveness (doing the right things) is crucial. Overemphasis
on efficiency can lead to suboptimal outcomes, while a focus on
effectiveness may result in inefficiencies.
• Risk vs Reward

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Paradoxical Challenges & Strategy Formulation

Revenue Growth
(Double every two years)

Increase Revenue Increase Revenue per

Generating Assets Consultant

Mix of Geo, Domain,

Adopt New Business
Inorganic Investments Service, Product
Models
Portfolio

Diversify into new Increase Market

high growth/high Share in Profitable
margin areas portfolio

Global Product Management

Brand Development
Alliance Ecosystem Practices

Global Academic & Investment in Global Knowledge

Research Alliances Innovation Management

1998 2004

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 Singapore Airlines and Silk Air: Strategic Integration
Challenges:
Market Saturation, Rising Fuel costs,(volatility), Regional
Demand, cost savings opportunities through synergies

Strategic Integration:
Network expansion, Cost synergies, Brand Equity, Customer
Experience

Success factors:
• Effective Integration: A smooth and well-planned integration
process ensured minimal disruption to operations.
• Customer Focus: Maintaining a strong focus on customer
satisfaction throughout the integration process.
• Strategic Alignment: Aligning the strategies of both airlines to
•SilkAir: A regional carrier established in 1989 to serve shorter-haul create a unified vision and direction.
routes in Southeast Asia. • Talent Management: Retaining and developing key talent to
•Singapore Airlines: A full-service flag carrier known for its premium support the integrated organization
service and extensive global network.
Class Activity:

Using the “Cab hailing Service example discussed in the

previous lecture , Formulate a suitable problem statement

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 Exercise 4.2: Formulate your
business strategy – creative
connection between Business-
Product-Technology-Science

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Last Slide

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Backup Slides

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Back up

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SWOT: A simple & popular technique
Internal External

Positive Strengths Opportunities

List the key points under

each category and make
an assessment

Negative Weaknesses Threats

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EXAMPLE OF A
VALUE
CONFIGURATION

• Identifying a set of inter-

related activities in the value
chain where a company can out
perform competitors

• Compare with Deccan

Airways

Source: Public Information

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Some of the key models of competitive strategy
• Porter’s Generic Strategies
• Cost Leadership: Walmart – By focusing on operational
efficiency, Walmart has become a leader in low-cost retailing,
offering products at lower prices than most competitors.
• Differentiation: Apple – Apple differentiates its products
through innovative design, premium quality, and a unique
ecosystem, allowing it to charge premium prices.
• Focus Strategy: Rolls-Royce – Rolls-Royce targets the luxury
automobile market, focusing on a niche of affluent customers
who value exclusivity and high-quality craftsmanship.

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Strategies for Differentiation
• Product Innovation: Developing new and unique products that
meet customer needs in ways that competitors do not.
• Branding: Building a strong brand that resonates with
customers and creates an emotional connection.
• Customer Service: Providing exceptional customer service that
enhances the overall customer experience.
• Quality: Offering superior quality products that justify a higher
price point.
Examples: Apple, Nike , Toyota

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VRIO Framework
• Valuable: A competitive advantage should offer customers tangible
benefits and real value. It should solve their problems, address their
needs, and improve their lives.
• Rare: A competitive advantage should be unique or difficult to
replicate. This uniqueness prevents competitors from easily copying
or imitating the advantage.
• Inimitable: A competitive advantage should be virtually impossible
to imitate, even if competitors understand its importance and want to
replicate it. Protection in the form of intellectual property, specialized
skills or knowledge, or unique resources can make an advantage
inimitable.
• Non-substitutable: A competitive advantage should make it difficult
for customers to switch to alternatives. Customer loyalty, brand
recognition, or network effects can make a competitive advantage
non-substitutable.
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Financial Industry Value Chain & Banking Models
Position along the value chain
(4) Payments (national, international)
Infra- (4) Clearing, Settlement Potential banking models
structure
(4) Exchanges Regional retail distributors (1)
(3)
(3) Insurance (3) M & A Global wholesale and investment bank (2)
Products Other1
(3) Asset (3) (3) (3) Pan-European product specialists (3)
management Credits Other1 Other1
Pan-European service providers (4)
(2) Global wholesale,
Distribution (1) Purely regional distribution
investment

Mass Affluent Private Small Midsize Multinational

Corporations
Retail SME2 1 Such as commercial insucrane and institutional asset management
2 Small and midsize enterprises
Type of banking customer Source: Hamoir et al. (2001), p. 123

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