Sustaining Competitive Advantage Message 2 (GC0415)

Sustaining Competitive Advantage

(Message 2)

According to Amadeo (2017), competitive advantage is the way of making better than competitors in the mind of target customers. The main objectives of competitive advantage are to be unique in the competitive market. Before describing competitive advantages, it is essential for a business to three key determinants that are profits/benefits, competition, and target market.

Michael Porter in 1985 defined three key ways for businesses to achieve sustainable competitive advantages. These are the cost leadership strategies, differentiation strategies, and focus strategies (Amadeo, 2017). This means if a business can effectively develop these three strategies, it is able to use economies of scale to buy in bulk, gain a higher profit margin, and choose a specific target market. According to Coplin (2012), to gain competitive advantages organizations need to own unique resources and capabilities so that the competitors feel difficult to imitate and are incapable to rapidly develop, and other resources and capabilities cannot substitute. According to Robert (2013), the profit-earning potential of a resource or capability depends on the potential of establishing a competitive advantage, the sustainability of competitive advantages, appropriability.

Diagram: appraising the strategic importance of resources and capabilities. Source: Rober (2013)

According to ensure competitive advantage for a resource or capability two conditions must be present that is scarcity and relevance. In addition, to ensure sustainable competitive advantage three characteristics must be considered that are durability, transferability, and replicability (Robert, 2013).  A business can gain a competitive advantage through cost advantage, product differentiation, service differentiation, people differentiation, image differentiation, quality differentiation, quality difference, innovation differentiation, sustainable competitiveness (Dess, Lumpkin and Alan, 2016).

According to Ramasodi (2017), competitive advantage can be diagnosed by building up a continuum in mutual connection and forming a continuous corrugated track.  In addition, effective co-operation between functional areas, communication strategies, strategy-structure fit price strategy can set the businesses apart from their competitors. Olsen (2017) said, to diagnose the competitive advantages the first step for the business is to define the competitive advantages by assessing the best point of business in the competitive market. Then, customer feedback is essential to evaluate whether there are consistent differences in products and services among competitors. If the business finds out the consistent difference, it can be considered that it has been able to gain a competitive advantage. Second, if the competitors face difficulties to imitate the competitive advantage, it can be considered that the competitive advantage is sustainable. Third, if the businesses are able to constantly improve, nurture, and maintain a competitive advantage, the competitive advantage can be considered sustainable.

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References

Amadeo, K. (2017) What is competitive advantages? Three Strategies That Work. Available at: https://www.thebalance.com/what-is-competitive-advantage-3-strategies-that-work-3305828. [Accessed on 10 January 2018]

Coplin, L. C. (2012) Competitive Advantages and the SMEs. Ph.D. Thesis. University  Autonoma de Barcelona, Barcelona, Spain.

Dess, G., Lumpkin, T. and Alan, B. (2016) Strategic Management: Text and Cases. Boston: McGraw-Hill Irwin

Olsen, E. (2017) Competitive advantage-building a lasting organization. Available at: https://www.thebalance.com/competitive-advantage-building-a-lasting-organization-1794329. [Accessed on 10 January 2018]

Ramasodi, S.  (2017) A Way to Sustainable Competitive Advantage, International Marketing Journal, Vol. 12 (4), P.124-164

Robert, M. G. (2013) Contemporary Strategy Analysis. Edinburg: the University of the West of Scotland.

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