Competitive strategy

Published on May 30, 2013 Reviewed on April 27, 2016   36 min
Hello! My name is Robert Grant. And as part of the series of talks on strategic management, I'm talking about Competitive Strategy.
So let me just briefly outline what I'm gonna be talking about. Let me start off with my objectives for this session: To spend some time outlining what it is that we mean by competitive strategy. And then, to develop a framework for analyzing competitive strategy, which starts off where the industry drills down into the sources of competitive advantage and ends up, in even more detail, looking at the specific activities of firms.
So what I want to achieve in this talk is very straightforward. First of all, I'd like to introduce the main concepts and frameworks used for the analysis of competitive strategy. And then I would like to show how these concepts and frameworks could be applied in order to formulate strategies that will enhance the firm's prospects of achieving superior performance. So let me start by saying a little bit about what I mean by competitive strategy.
One of the basic distinctions in strategic management is between corporate strategy and competitive strategy. In order to explain the difference between those two, let's go back to what is the basic purpose of strategy. The basic purpose of strategy is to enhance a firm's performance over the long term. Performance we typically identified with profit, that for a firm to survive, it has to make a rate of profit that is greater than its cost of capital. In simple terms, the purpose of strategy is to help the firm to make money. How does the firm do this? One way is by locating within an attractive industry, or in simple terms, we can define that by answer to the question, which businesses should the firm be in? However, whatever business a firm finds itself in, it could also earn a superior rate of profit by achieving a competitive advantage over its rivals. This is defined by the answer to the question, how should the firm compete? What those two basic sources of superior profitability define these two major areas of strategy? Corporate strategy is about the question of which businesses should the firm be competing in? The issue of competitive strategy is within a specific business, how should the firm compete? We can summarize this by saying that corporate strategy is about what should the scope of the firm be? Whereas competitive strategy, the key concern there is how does the firm establish a competitive advantage, within its business?