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An explanation of competitive advantage and its sources

They are supported by considerable data, research and experience; the data sources are included in a bibliography below for your reference. With so many options, how do you know the right competitive advantage for your business? It is only real competitive advantage when it accomplishes this. Feel free to contact us to determine and possibly assist with the implementation of the most effective differentiator for your firm. Localization in Global Markets Implementing simultaneous strategies of localization and globalization in global market returned Panasonic to a profitable growth path.

In 2000, the company suffered its first loss due to Chinese competitors effectively exporting to the US, Europe and South Asia. In response, Panasonic shifted from a US-based to a global view. It also found a need to sterilize laundry. Panasonic was the first major player to bring this capability to market.

  • Production System Implementing an effective production system can bring companies competitive advantage;
  • Bibliography Michael Porter, Competitive Advantage, 1985 http:

Strategic Alliance or Acquisition Strategic Alliances are an important source of capabilities a firm may not otherwise possess. Few firms have all the capabilities needed to compete effectively in our world of fast-paced change.

Five Sources of Competitive Advantage

Another option is to purchase the capability. At Sonoco Retail Packaging, we could see that our ability to pack retail products would be complemented by the ability to design, manufacture and pack out popular point-of-purchase displays. As a result, we acquired a premier POP display company, yielding an important capability that customers needed, and so generating additional sales and profits. Competitive attacks that are difficult to respond to draw less reaction, as demonstrated by considerable airline data in the study.

Attacks that are difficult to respond to include those that demand a costly response, significant organizational change, or sophisticated coordination among different departments. These are the competitive actions companies will want to make.

  • Journal of Management, 27 6 , 777-803;
  • Sources of Competitive Advantage 14;
  • Honing and then maximizing your competitive advantages are perhaps the most effective ways to increase market share and maximize sales and profits;
  • Porter formed a matrix using cost advantage, differentiation advantage, and a broad or narrow focus to identify a set of generic strategies that the firm can pursue to create and sustain a competitive advantage;
  • Winter 1993 January 15, 1993 Hall, R;
  • For example, Toyota added product value due to the Six Sigma and product design processes.

Still, effective competitive actions can vary by environment. In nascent markets, plenty of ambiguity exists and investors prefer companies with more predictable and simple competitive moves. This encourages improved investor valuation and so offers competitive advantage.

  • Another competitive advantage touted by some companies is being the first business to capture a market;
  • While being first-to-market can provide an early competitive advantage, this advantage will only be short term;
  • Still, effective competitive actions can vary by environment;
  • Emergence of the human capital resource;
  • Customer Clusters Research has shown that firms located near customers cluster innovate more quickly;
  • Strategic Alliance or Acquisition Strategic Alliances are an important source of capabilities a firm may not otherwise possess.

Customer Clusters Research has shown that firms located near customers cluster innovate more quickly. Far flung customers makes it more difficult to assess and maintain satisfaction. Company-Wide Market Orientation Too many companies merely give lip service to focusing on the market and customers. A real market orientation involves offering more customer value due to an outstanding understanding of the customer and competitors that permeates the organization.

At the beginning of the 9 year period, a company with a market orientation had an advantage. Later on, the nature of competition changed and a market orientation was necessary to compete successfully. Still, the study finds that under highly competitive pressure, a company can gain advantage with a market orientation.

Initially, the company produced the plethora of products the equipment could produce. As a result, the company was mediocre in most markets, and poorly performing in some, having suffered a significant loss the previous year. I coached the management team to explore market options, utilizing the extensive knowledge in Sales, Production and market analyst assistance.

The company pulled together to pursue high quality packaging accounts and to move into a new, higher end product line. The new business added considerable profits to our bottom line, returning the company to profitability. Misalignments need to be identified and transformed into strategic fit. The best-networked ones usually do. Implementation of Strategy It is possible to compete successfully with superior implementation of strategy rather than superior strategy.

Consequently, superior implementation can win the day. Sources of Competitive Advantage 8. Human Capital Human capital in the form of a highly trained workforce can be the source of competitive advantage, particularly if employees do not take their skills to competitors. An explanation of competitive advantage and its sources Engagement Many studies demonstrate that employee engagement can be a source of competitive advantage. Sources of Competitive Advantage 10.

Technological Change In this time of great technological advances, there are many opportunities for gaining competitive advantage through technological innovation. However, a company needs to create a culture that is open to adopting new technology effectively. One study concerning adopting electronic data interchange EDI in the automotive industry notes that the company benefited from: Consequently, customer satisfaction and performance level has been dramatically increased.

  1. In 2000, the company suffered its first loss due to Chinese competitors effectively exporting to the US, Europe and South Asia. In addition to the firm's own value-creating activities, the firm operates in a value system of vertical activities including those of upstream suppliers and downstream channel members.
  2. One study shows that industrial companies in Jordan who implemented Just-In-Time JIT attained positive and statistically significant advantages in costs, quality and financial results.
  3. Winter 1993 January 15, 1993 Hall, R.
  4. Strategic Management Journal, Vol. Still, effective competitive actions can vary by environment.
  5. Value Creation The firm creates value by performing a series of activities that Porter identified as the value chain.

However, creating this culture can be difficult. Those early in business analytic implementation find these issues most difficult. Sources of Competitive Advantage 12. Production System Implementing an effective production system can bring companies competitive advantage.

  1. I coached the management team to explore market options, utilizing the extensive knowledge in Sales, Production and market analyst assistance. Now Amazon and eBay are two of the most successful examples of new-economy businesses.
  2. Implementation of Strategy It is possible to compete successfully with superior implementation of strategy rather than superior strategy. The resource based view and marketing.
  3. Now Amazon and eBay are two of the most successful examples of new-economy businesses. To achieve a competitive advantage, the firm must perform one or more value creating activities in a way that creates more overall value than do competitors.
  4. This landmark work covers. An example of a capability is the ability to bring a product to market faster than competitors.

One study shows that industrial companies in Jordan who implemented Just-In-Time JIT attained positive and statistically significant advantages in costs, quality and financial results. It yielded considerable customer satisfaction and maintained sales in a highly competitive market.

14 Sources of Competitive Advantage

Business Processes Managing consistent business process seamlessly is another source of competitive advantage. For example, Toyota added product value due to the Six Sigma and product design processes.

Business process improvement can be a cost-effective strategy as it can occur without technological change. However, it is critical that the processes are tied closely to the business strategy and objectives. Sources of Competitive Advantage 14. National Export Promotion Countries adopting specific export promotion programs can offer companies competitive advantages in products, services and costs. This has a stronger positive effect on smaller firms and those less experienced in exporting. As mentioned, the key is that the chosen advantage would provide value to your market.

Bibliography Michael Porter, Competitive Advantage, 1985 http: An Overview of Strategic Alliance: Competitive Attack, Retaliation And Performance: Strategic Management Journal, Vol. Ferrier, and Robert Wiltbank. Moorman, Christine and Anne S. Journal of Marketing, Vol. The resource based view and marketing: The role of market-based assets in gaining competitive advantage. Journal of Management, 27 6777-803. Winter 1993 January 15, 1993 Hall, R.

A framework linking intangible resources and capabilities to sustainable competitive advantage. Strategic Management Journal, 14: Firm resources and sustained competitive advantage.

Journal of Management, 17: Towards a strategic theory of the firm. Emergence of the human capital resource: Academy of Management Review, 36: Human assets and management dilemmas: Coping with hazards on the road to resource-based theory.

Academy of Management Review, 22: Farai Ncube and Steven Jerie. The New Competitive Advantage: Leonidou, Dayananda Palihawadana, and Marios Theodosiou.