Lecture 4 Class Notes:
Last Week's Lecture: Resource-Based View * Valuable, Rare, Imitable, Organizational Structure * Value Chain analysis - closely related to the resource-based view * Used as an instrument to pinpoint what functions of the firm have resources or capabilities that can potentially explain the performance (or competitive advantage) of the firm * Building Blocks of Competitive Advantage (another way of identifying resources and capabilities): * Does the firm have resources or capabilities that explain one of the following building blocks? * Superior Efficiency * Superior Innovation * Superior Quality * Superior Customer Responsiveness * If so, then they are distinctive and create a COMPETITIVE ADVANTAGE (either differentiation or low cost) * Quality divided into two components: excellence & reliability * Quality as excellence - features, functions or services that support the "excellence" perception * Quality as reliable - rarely breaks down and performs intended function This Week's Lecture:
Chapter 5 NOTE: product offering--> can refer to actual product, advertising, features, quality, etc. * Economies of Scale - producing more units reduces unit costs * Driven from fixed costs and division of labour (more specialized --> efficient at performing their tasks) * Unit Cost = (Variable Costs + FC) / Total # of products * Learning Effect (very different from Economies of Scale) * Process innovation drives the learning effect * As workers become more experienced at producing a product, they learn/identify a better way of producing the product * Identify a better process * Porter argues there are only two generic business strategies 1. Low Cost Structure 2. Differentiation 1.