competitive advantage

Examples of competitive advantage in the following topics:

• The Resource-Based View

  • To transform a short-run competitive advantage into a sustained competitive advantage requires that these resources are heterogeneous in nature and not perfectly mobile.
  • In many ways, business strategy aims to achieve competitive advantage through the proper use of organizational resources.
  • In achieving a competitive advantage, the resource-based view defines characteristics which make a competitive process sustainable.
  • Inimitable – If a valuable resource is controlled by only one firm, it can be a source of competitive advantage.
  • Describe the intrinsic competitive advantage defined by the resource-based view strategy

• Combining Internal and External Analyses

  • Using combined external and internal analyses, companies are able to generate strategies in pursuit of competitive advantage.
  • Organizations must carefully consider what internal assets will differentiate them from the competition, within the same competitive environment.
  • Similarly, organizations must understand the context in which they operate if they aspire to acquire competitive advantage over other incumbents.
  • Using context analysis, alongside the necessary external and internal inputs, companies are able to generate strategies which actively capitalize on this knowledge in pursuit of competitive advantage.
  • This melding of internal and external factors in pursuit of competitive advantage is an ongoing process, as the company must evolve and change in concert with the environment.

• The Challenge of Competition

  • Managers must understand a company's competitive advantage and build a strategy that takes into account the competitive landscape.
  • Avoiding the risks of competitive factors demands a strong understanding of operational efficiency (low cost), quality production, differentiation, and competitive advantage—or who you target and whether or not you have a cost or quality advantage (see figure below).
  • Managers must understand their own competitive advantage (what they do better than the competition) to adopt the appropriate competitive strategy to gain market share and remain profitable.
  • Companies generally achieve either a cost or a quality advantage (very rarely, both).
  • Describe competitive strategies such as low cost, differentiation, and internal competition and the role of the external competitive landscape in developing them

• The Importance of Fringe Benefits

  • As the search for high-quality workers becomes more difficult and health care costs increase, it has become important to offer fringe benefits to gain a competitive advantage.
  • While the cost negatively impacts businesses, it also offers an opportunity through competitive advantage.

• Compensation and Competition

  • Good compensation helps organizations stay competitive in their industry by retaining high-quality employees.
  • This is not only an internal consideration but also a competitive one.
  • Compensation must therefore be both competitive and well-designed to meet the needs of the customer (in this case, the employee).
  • By looking at these factors an organization can attract the employees it needs to maintain a competitive advantage and keep employee turnover low.
  • Assess the intrinsic value of strong compensation packages relative to deriving competitive advantage

• The Impact of External and Internal Factors on Strategy

  • Strategic management is the managerial responsibility to achieve competitive advantage through optimizing internal resources while capturing external opportunities and avoiding external threats.
  • The achievement of synergy in this process derives competitive advantage.
  • Competition: Knowing who else is competing and how they are strategically poised is also key to success.
  • With both the internal value chain and external environment in mind, upper management can reasonably derive a set of strategic principles that internally leverage strengths while externally capturing opportunities to create profits—and hopefully advantages over the competition.
  • This model, created by Michael Porter, demonstrates how support and primary activities add up to potential margins (and potential competitive advantage).

• The Financial Value of Social Responsibility

  • Some CSR actions, such as investing in renewable energy, can provide tax benefits or lead to technology innovations that create competitive advantage.
  • CSV is based on an idea that the competitiveness of a company and the health of the communities around it are mutually dependent.
  • By focusing on creating shared value, an organization helps to shape the context in which it competes to its advantage.
  • Proponents of these funds point to competitive returns for socially responsible indices, such as the Domini 400 (now the MSCI KLD 400).

• Benefits of Innovation

  • Innovation may be linked to positive changes in efficiency, productivity, quality, competitiveness, and market share, among other factors.
  • Innovative employees increase productivity through by creating and executing new processes, which in turn may increase competitive advantage and provide meaningful differentiation.

• Porter's Competitive Strategies

  • Michael Porter classifies competitive strategies as cost leadership, differentiation, or market segmentation.
  • Michael Porter described a category scheme consisting of three general types of strategies commonly used by businesses to achieve and maintain competitive advantage.
  • Cost leaders include organizations like Procter & Gamble, Walmart, McDonald's and other large firms generating a high volume of goods that are distributed at a relatively low cost (compared to the competition).
  • Discuss the value of using Porter's competitive strategies of cost leadership, differentiation, and market segmentation

• Considering the Environment

  • Considerations of the external environment—including uncertainty, competition, and resources—are key in determining organizational design.
  • Another environmental factor that shapes organization design is competition.
  • Higher levels of competition require different organizational structures to offset competitors' advantages while emphasizing the company's own strengths.
  • Porter's five-forces analysis: This analysis identifies factors of the industry's competitive environment that may substantially influence a company's strategic design.
  • The five forces include power of buyers, power of suppliers, rivalry (competition), substitutes, and barriers to entry (how difficult it is for new firms to enter the industry).