Overview[ edit ] Competitive advantage is the leverage that a business has over its competitors. This can be gained by offering clients better and greater value. Advertising products or services with lower prices or higher quality interests consumers.
The key component for business success. Definition Competitive advantage means superior performance relative to other competitors in the same industry or superior performance relative to the industry average.
There is no one answer about what is competitive advantage or one way to measure it, and for the right reason. Nearly everything can be considered as competitive edge, e. Every company must have at least one advantage to successfully compete in the market.
There are many ways to achieve the advantage but only two basic types of it: A company that is able to achieve superiority in cost or differentiation is able to offer consumers the products at lower costs or with higher degree of differentiation and most importantly, is able to compete with its rivals.
An organization that is capable of outperforming its competitors over a long period of time has sustainable competitive advantage. The following diagram illustrates the basic competitive advantage model, which is explained below in the article: How a company can achieve it?
An organization can achieve an edge over its competitors in the following two ways: When PEST factors change, many opportunities can appear that, if seized upon, could provide many benefits for an organization.
A company can also gain an upper hand over its competitors when its capable to respond to external changes faster than other organizations. By developing them inside the company. A firm can achieve cost or differentiation advantage when it develops VRIO resources, unique competences or through innovative processes and products.
When these factors change many opportunities arise that can be exploited by an organization to achieve superiority over its rivals. For example, new superior machinery, which is manufactured and sold only in South Korea, would result in lower production costs for Korean companies and they would gain cost advantage against competitors in a global environment.
For example, Subway and KFC. If opportunities appear due to changes in external environment why not all companies are able to profit from that? The advantage can also be gained when a company is the first one to exploit the external change.
Otherwise, if a company is slow to respond to changes it may never benefit from the arising opportunities. A company that possesses VRIO valuable, rare, hard to imitate and organized resources has an edge over its competitors due to superiority of such resources.
If one company has gained VRIO resource, no other company can acquire it at least temporarily.
The following resources have VRIO attributes: Intellectual property patents, copyrights, trademarks Brand equity Know-how Reputation Unique competences. Competence is an ability to perform tasks successfully and is a cluster of related skills, knowledge, capabilities and processes.
A company that has developed a competence in producing miniaturized electronics would get at least temporary advantage as other companies would find it very hard to replicate the processes, skills, knowledge and capabilities needed for that competence.
Most often, a company gains superiority through innovation. Innovative products, processes or new business models provide strong competitive edge due to the first mover advantage. Two basic types M. Porter has identified 2 basic types of competitive advantage: Porter argued that a company could achieve superior performance by producing similar quality products or services but at lower costs.
In this case, company sells products at the same price as competitors but reaps higher profit margins because of lower production costs. The company that tries to achieve cost advantage like Amazon.
Higher profit margins lead to further price reductions, more investments in process innovation and ultimately greater value for customers.
Differentiation advantage is achieved by offering unique products and services and charging premium price for that. Differentiation strategy is used in this situation and company positions itself more on branding, advertising, design, quality and new product development like Apple Inc.
Customers are willing to pay higher price only for unique features and the best quality. The cost leadership and differentiation strategies are not the only strategies used to gain competitive advantage.
Innovation strategy is used to develop new or better products, processes or business models that grant competitive edge over competitors.
Looking inside for Comp. Academy of Management Executive, Vol.Jun 14, · 1. Meaning and concept of International competitive advantage IN HINDI: Competitive advantage are capabilities that are difficult to replicate or imitate and are non trad-able.
determined to be a source of competitive advantage for a firm over its rivals. Source: Porter, A global strategy – one of views •The startegy is a combination of a planed and emergency ones. •The competitive advantage comes from development of internal competencies and changing conditions in the business’environmet.
What is 'Competitive Advantage'? Competitive advantages are conditions that allow a company or country to produce a good or service of equal value at a lower price or in a more desirable fashion.
Resource Based Sources of Competitive Advantage Words | 9 Pages. importance of resource-based sources of competitive advantage in one of the industries studied on this module. You should discuss a range of companies. ‘Competitive advantage’ is when a firm sustains profits that exceed the average for its industry.
Intangible Assets as a Source of Competitive Advantage Look No Further Managing Intangibles seems to be a smart idea.
But to bet on it, one has to create a whole new organization. But to bet on it, one has to create a whole new organization. Competitive Advantage: Creating and Sustaining Superior Performance - Kindle edition by Michael E. Porter. Download it once and read it on your Kindle device, PC, phones or tablets.
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