Definition of competitive advantage
something that places a company or a person above the competition
Examples of competitive advantage in the following topics:
- Resource-Based View The resource-based view (RBV) is that a basis for a competitive advantage of a firm lies primarily in the application of the bundle of valuable resources at the firm's disposal.
- To transform a short-run competitive advantage into a sustained competitive advantage requires that these resources are heterogeneous in nature and not perfectly mobile.
- Inimitable – If a valuable resource is controlled by only one firm it could be a source of a competitive advantage This advantage could be sustainable if competitors are not able to duplicate this strategic asset perfectly.
- An important underlying factor of inimitability is causal ambiguity, which occurs if the source from which a firm’s competitive advantage stems is unknown.
- The VRIN characteristics mentioned are individually necessary, but not sufficient conditions for a sustained competitive advantage.
- In the resource-based view (RBV), the basis for competitive advantage lies primarily in the application of the firm's bundle of resources.
- Melding Internal and External Analyses Internal Inputs: Core mission Overall strategy Porter's competitive strategies SWOT analysis Forecasts Resource Based View External Inputs: Porter's five forces (and limitations) PESTEL and SCP Competitive Dynamics Internal and External Analyses The above inputs generally outline each of the specific analyses a company should conduct to understand it's internal and external environments.
- The SWOT (Strengths, Weaknesses, Opportunities, and Threats) matrix helps identify issues that will be resolved by formulating an objective and a plan to reach that objective (a strategy).StrategyAs a result of understanding the concept of 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.
- Through understanding the relationship between the internal and external factors, companies can piece together the ideal way in which their strengths can capture opportunities while offsetting threats and rectifying weaknesses.These 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.
- As a result, strategic management is the process of constantly assessing both environments to ensure that the company retains a unique competitive position in which to generate value for stakeholders and customers.
- Increasingly competitive advantage also requires the integration of external activities and technologies, for example, in the form of alliances and the virtual corporation.
- Through combing external and internal analyses, companies are able to generate strategies in pursuit of competitive advantage.
- As a manager, understanding the external competitive landscape is a critical factor in assessing company strategies and bench-marking appropriately to ensure the competitiveness of the firm.
- Avoiding the risks of competitive factors requires a strong understanding of operational efficiency (low-cost), quality production, differentiation, and competitive advantage—or who you target and whether or not you have the cost or quality advantage (see ).
- Managers must understand their own competitive advantage (what they do better than the competition) in order to implement the appropriate competitive strategy to gain market share and remain profitable.
- Managers must understand a company's competitive advantage, and translate this into a strategy that incorporates the competitive landscape.
- Technological Technological innovation arises from companies trying to gain a competitive advantage either by reducing costs or introducing a new technology.
- The SWOT analysis helps the company evaluate where they can achieve competitive advantage, such as in areas where there is little or no competition in the market.
- Talent development, part of human resource development, is the process of changing an organization, its employees, its stakeholders, and groups of people within it, using planned and unplanned learning, in order to achieve and maintain a competitive advantage for the organization.
- How to turn a global presence into global competitive advantage?
- Nevertheless, these firms are able to take advantage of scale economies (cost advantages that an enterprise obtains due to expansion) and learning curve effects, because they are able to mass produce a standard product that can be exported (providing that demand is greater than the costs involved).
- Porter's Competitive Strategies Strategic Scope and Strategic Strength Michael Porter has described a category scheme consisting of three general types of strategies that are commonly used by businesses to achieve and maintain competitive advantage.
- Cost Leadership, Differentiation, and Market Segmentation In his 1980 classic, Competitive Strategy: Techniques for Analyzing Industries and Competitors, Porter simplifies the scheme by reducing it down to the three best strategies.
- Michael Porter has described competitive strategies including those of cost leadership, differentiation, and market segmentation.
- For example, the field of technology management is aimed at allowing organizations to manage their technological fundamentals to create competitive advantage.
- Additionally, achieving high levels of employee satisfaction is an enormous competitive advantage, as satisfied employees are motivated and efficient.