1️⃣
General framework to generate competitive
advantage
Inside the firm
This image depicts the framework of a firm’s environment, structured into multiple layers:
Inside the Firm: At the core, the firm focuses on its core competencies (unique strenght and capabilities), resources,
and capabilities, which form its foundation for competitive advantage.
Strategic Group: Surrounding the firm are its immediate competitors within the industry, forming the strategic group. A
strategic group refers to a group of firms within an industry that have similar business models or strategies, and
operate in similar ways. These companies often compete directly with each other because they target similar customer
segments, use similar distribution channels, or offer comparable products or services.
Industry (5 forces): The broader industry context in which the firm operates, including all competitors and market
dynamics.
External Environment (PESTEL): The outermost layer, representing the macroenvironment factors influencing the firm.
These include:
Political: Government policies, regulations, and political stability.
Economic: Market conditions, economic growth, inflation, and interest rates.
Sociocultural: Social trends, cultural attitudes, and consumer behaviors.
Technological: Technological advancements and innovation.
Ecological: Environmental and sustainability concerns.
Legal: Laws and legal systems that affect business operations.
This framework highlights how internal resources and capabilities interact with external environmental factors to shape a
firm’s strategic positioning.
General framework to generate competitive advantage
General framework to generate competitive advantage 1
, This image illustrates a general framework to generate and sustain competitive advantage, involving the following
components:
Resources: Tangible and intangible assets that the firm owns, which form the building blocks for developing capabilities
and competencies. (resoruces reinvorce core conpetencies)
Capabilities: The firm’s ability to deploy resources effectively to perform specific activities. These are orchestrated to
support core competencies. (capabilities organize core competencies)
Core Competencies: Unique strengths embedded within the firm that reinforce competitive positioning. They enable
the firm to differentiate its offerings or operate more efficiently.
Activities: The business processes and tasks that leverage the firm’s core competencies to deliver value to customers.
(activities bring competitive advantage)
Competitive Advantage: The result of leveraging resources, capabilities, and core competencies effectively. This leads
to superior performance relative to competitors.
Reinvest, Hone, & Upgrade: A feedback loop ensures the firm continuously reinvests in and upgrades its resources,
capabilities, and competencies to maintain or enhance competitive advantage over time.
This dynamic system emphasizes that achieving and sustaining a competitive advantage requires constant reinforcement
and improvement of internal strengths.
Why are core competences needed?
we need to either increase the value percived or lower costs of production
Core competiencies allow a firm to differentiate its products and service from rivals or lower costs of production since
they are unique capabilities of the firm
Five Guys example
Faundend 40 years ago by Jorwil Marwell. He had 4 sons, so they where the five guys
He wanted to produce the best hamburgers possible. That’s why differently from other competitiors for the first 17 years
they only had 5 stores in their town. Owned just by family members. They wanted to find the perfect recepit before going
franchisng.
Every ingredients had to be perfect. They tried 17 varieties of mayo.
General framework to generate competitive advantage 2
General framework to generate competitive
advantage
Inside the firm
This image depicts the framework of a firm’s environment, structured into multiple layers:
Inside the Firm: At the core, the firm focuses on its core competencies (unique strenght and capabilities), resources,
and capabilities, which form its foundation for competitive advantage.
Strategic Group: Surrounding the firm are its immediate competitors within the industry, forming the strategic group. A
strategic group refers to a group of firms within an industry that have similar business models or strategies, and
operate in similar ways. These companies often compete directly with each other because they target similar customer
segments, use similar distribution channels, or offer comparable products or services.
Industry (5 forces): The broader industry context in which the firm operates, including all competitors and market
dynamics.
External Environment (PESTEL): The outermost layer, representing the macroenvironment factors influencing the firm.
These include:
Political: Government policies, regulations, and political stability.
Economic: Market conditions, economic growth, inflation, and interest rates.
Sociocultural: Social trends, cultural attitudes, and consumer behaviors.
Technological: Technological advancements and innovation.
Ecological: Environmental and sustainability concerns.
Legal: Laws and legal systems that affect business operations.
This framework highlights how internal resources and capabilities interact with external environmental factors to shape a
firm’s strategic positioning.
General framework to generate competitive advantage
General framework to generate competitive advantage 1
, This image illustrates a general framework to generate and sustain competitive advantage, involving the following
components:
Resources: Tangible and intangible assets that the firm owns, which form the building blocks for developing capabilities
and competencies. (resoruces reinvorce core conpetencies)
Capabilities: The firm’s ability to deploy resources effectively to perform specific activities. These are orchestrated to
support core competencies. (capabilities organize core competencies)
Core Competencies: Unique strengths embedded within the firm that reinforce competitive positioning. They enable
the firm to differentiate its offerings or operate more efficiently.
Activities: The business processes and tasks that leverage the firm’s core competencies to deliver value to customers.
(activities bring competitive advantage)
Competitive Advantage: The result of leveraging resources, capabilities, and core competencies effectively. This leads
to superior performance relative to competitors.
Reinvest, Hone, & Upgrade: A feedback loop ensures the firm continuously reinvests in and upgrades its resources,
capabilities, and competencies to maintain or enhance competitive advantage over time.
This dynamic system emphasizes that achieving and sustaining a competitive advantage requires constant reinforcement
and improvement of internal strengths.
Why are core competences needed?
we need to either increase the value percived or lower costs of production
Core competiencies allow a firm to differentiate its products and service from rivals or lower costs of production since
they are unique capabilities of the firm
Five Guys example
Faundend 40 years ago by Jorwil Marwell. He had 4 sons, so they where the five guys
He wanted to produce the best hamburgers possible. That’s why differently from other competitiors for the first 17 years
they only had 5 stores in their town. Owned just by family members. They wanted to find the perfect recepit before going
franchisng.
Every ingredients had to be perfect. They tried 17 varieties of mayo.
General framework to generate competitive advantage 2
