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In business, a competitive advantage is the attribute that allows an organization to outperform its competitors. A competitive advantage may include access to natural resources , such as high-grade ores or a low-cost power source, highly skilled labor, geographic location, high entry barriers, and access to new technology. The term competitive advantage refers to the ability gained through attributes and resources to perform at a higher level than others in the same industry or market Christensen and Fahey , Kay , Porter cited by Chacarbaghi and Lynch , p.
In business, a competitive advantage is the attribute that allows an organization to outperform its competitors. A competitive advantage may include access to natural resources , such as high-grade ores or a low-cost power source, highly skilled labor, geographic location, high entry barriers, and access to new technology.
The term competitive advantage refers to the ability gained through attributes and resources to perform at a higher level than others in the same industry or market Christensen and Fahey , Kay , Porter cited by Chacarbaghi and Lynch , p.
Competitive advantage is the leverage 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 piques the interest of consumers. Target markets recognize these unique products or services. This is the reason behind brand loyalty, or why customers prefer one particular product or service over another. Value proposition is important when understanding competitive advantage.
If the value proposition is effective, that is, if the value proposition offers clients better and greater value, it can produce a competitive advantage in either the product or service. The value proposition can increase customer expectations and choices. Competitive Strategy is defined as the long term plan of a particular company in order to gain competitive advantage over its competitors in the industry.
It is aimed at creating defensive position in an industry and generating a superior ROI Return on Investment. Michael Porter defined the two ways in which an organization can achieve competitive advantage over its rivals: cost advantage and differentiation advantage. Cost advantage is when a business provides the same products and services as its competitors, albeit at a lesser cost.
Differentiation advantage is when a business provides better products and services as its competitors. In Porter's view, strategic management should be concerned with building and sustaining competitive advantage.
Competitive advantage seeks to address some of the criticisms of comparative advantage. Competitive advantage rests on the notion that cheap labor is ubiquitous and natural resources are not necessary for a good economy.
The other theory, comparative advantage, can lead countries to specialize in exporting primary goods and raw materials that trap countries in low-wage economies due to terms of trade.
Competitive advantage attempts to correct this issue by stressing on maximizing scale economies in goods and services that garner premium prices Stutz and Warf Successfully implemented strategies will lift a firm to superior performance by facilitating the firm with competitive advantage to outperform current or potential players Passemard and Calantone , p.
The quotes above signify competitive advantage as the ability to stay ahead of present or potential competition. Also, it provides the understanding that resources held by a firm and the business strategy will have a profound impact on generating competitive advantage. Powell , p. Hence, viable business strategy may not be adequate unless it possesses control over unique resources that have the ability to create such a relatively unique advantage. Michael Porter, a graduate of Harvard University, wrote a book in which identified three strategies that businesses can use to tackle competition.
This book was named the ninth most influential management book of the 20th century. These approaches can be applied to all businesses whether they are product-based or service-based. He called these approaches generic strategies.
They include cost leadership, differentiation, and focus. These strategies have been created to improve and gain a competitive advantage over competitors. These strategies can also be recognized as the comparative advantage and the differential advantage. Cost leadership is a business's ability to produce a product or service that will be at a lower cost than other competitors.
If the business is able to produce the same quality product but sell it for less, this gives them a competitive advantage over other businesses. Therefore, this provides a price value to the customers. Lower costs will result in higher profits as businesses are still making a reasonable profit on each good or service sold.
If businesses are not making a large enough profit, Porter recommends finding a lower-cost base such as labor, materials, and facilities. This gives businesses a lower manufacturing cost over those of other competitors. A differential advantage is gained when a business's products or services are different from its competitors.
In his book, Michael Porter recommended making those goods or services attractive to stand out from their competitors. The business will need strong research, development, and design thinking to create innovative ideas. These improvements to the goods or service could include delivering high quality to customers.
If customers see a product or service as being different from other products, consumers are willing to pay more to receive these benefits. Focus strategy ideally tries to get businesses to aim at a few target markets rather than trying to target everyone.
This strategy is often used for smaller businesses since they may not have the appropriate resources or ability to target everyone. Businesses that use this method usually focus on the needs of the customer and how their products or services could improve their daily lives. In this method, some firms may even let consumers give their inputs for their product or service. This strategy can also be called the segmentation strategy, which includes geographic, demographic, behavioral, and physical segmentation.
By narrowing the market down to smaller segments, businesses are able to meet the needs of the consumer. Porter believes that once businesses have decided what groups they will target, it is essential to decide if they will take the cost leadership approach or differentiation approach. Focus strategy will not make a business successful. Porter mentions that it is important to not use all 3 generic strategies because there is a high chance that companies will come out achieving no strategies instead of achieving success.
This can be called "stuck in the middle", and the business won't be able to have a competitive advantage. When businesses can find the perfect balance between price and quality, it usually leads to a successful product or service. A product or service must offer value through price or quality to ensure the business is successful in the market.
To succeed, it's not enough to be "just as good as" another business. Success comes to firms that can deliver a product or service in a manner that is different, meaningful, and based on their customers' needs and desires. Deciding on the appropriate price and quality depends on the business's brand image and what they hope to achieve in relation to their competition.
Positioning is an important marketing concept. The main purpose of positioning is often to create the right perceptions in comparison to competitors. Thus, it creates competitive advantage.
This positioning, or competitive advantage, is based on creating the right "image" or "identity" in the minds of the target group. Therefore, both corporate identity and core competencies are underlying internal factors of competitive advantage. The operational model for managing corporate reputation and image of Gray and Balmer proposes that corporate identity , communication , image, and reputation are the fundamental components of the process of creating competitive advantage.
Corporate identity through corporate communication creates corporate image and reputation, with an end result of competitive advantage. Corporate identity is the reality of an organization. It refers to the distinct characteristics or core competencies of the organization. It is the mental picture of the company held by its audiences. Corporate communication refers to all the official and informal communication sources, through a variety of media, by which the company outsources its identity to its audiences or stakeholders.
Corporate communication is the bridge between corporate identity and corporate image or reputation. The above-stated process has two main objectives, namely to create the intended image in the minds of the company's principal constituents and managing the process to create a favourable reputation in the minds of the important stakeholders. A core competency is a concept introduced by Prahalad and Hamel Core competencies are part of the corporate identity; they form the foundation of corporate competitiveness.
Core competencies fit within the "resource-based view of the firm"   Resources can be tangible or intangible. A firm's knowledge assets are an important intangible source of competitive advantage. For firm knowledge to provide competitive advantage, it must be generated, codified, and diffused to others inside of the organization. Many different types of knowledge can serve as a resource based advantage: manufacturing processes, technology, or market based assets such as knowledge of customers or processes for new product development.
Those outsiders bring knowledge inside of a firm—e. Moreover, interactions with contingent workers can provoke the firm to codify knowledge that was tacit in order to communicate with the temporary employees. The competitiveness of a company is based on the ability to develop core competencies. In the end, real advantage can be created by the management's ability to unify corporate-wide technologies and production skills into competencies that capacitate individual businesses to adapt quickly to changing opportunities.
To sustain leadership in a chosen core competency area, companies should seek to maximize their competency factors in the core products like being important in positioning its values, distinctive differentiated , superior, communicable visibility , unique, affordable, and profitable. When a company achieves this goal, it allows it to shape the evolution of an end market. From Wikipedia, the free encyclopedia. Business concept that an organization outperforms competition in some regard.
Not to be confused with Comparative advantage. Major dimensions. Major thinkers. Frameworks and tools. Further information: Porter's generic strategies. Business and economics portal. Porter , p. Journal of European Industrial Training. Competitive Advantage. Free Press. Stutz, Barney Upper Saddle River: Pearson. Management Decision.
Jay B. Barney 61 Estimated H-index: View Paper. Add to Collection. Introduction: What Is Strategy? Barney 1 2. Barney 15 3.
This book develops a unified framework to explain the phenomena of competitive advantage and firm value creation in dynamic environments. Through a new strategic value creation theory, it explores how a firm can measure and sustain its competitive advantage through management incentives, capital market forces, organizational culture and structure, and social complexity. It also considers how management can utilize their resources and capabilities, shadow options, product market forces, customer needs, and organizational learning as a means to differentiate them from the competition. With an innovative approach to theory and research, it will be positioned to inform both scholars and practitioners in management, business strategy, and entrepreneurship on the process of competitive and sustainable value creation. Skip to main content Skip to table of contents. Advertisement Hide.
The Article analyses the concept of competitive advantages, creating competitive advantages, model competitive advantages. It is argued that competitive advantage is influenced by the factors such as infrastructure, the complexity of the business, labor and goods market efficiency, financial market complexity, innovation, technology, institutions of higher education and training, and macroeconomics. Competition has its theoretical models and competitive advantage in the development of strategies as part of the targeted helps companies gain a competitive advantage over the competition. It is important to regularly monitor and examine the target competitors' strategies to quickly respond to their actions in order to grasp how to overcome them and find themselves in the leadership position it so that to survive and conquer the market. Barney, J. Gaining and Sustaining Competitive Advantage.
PART I: The Logic of Strategic Analysis Chapter 1. Introduction: What Is Strategy? Chapter 2. Firm Performance and Competitive Advantage Chapter 3.
For the better part of a decade, strategy has been a business buzzword. Top executives ponder strategic objectives and missions. Mere planning has lost its glamor; the planners have all turned into […]. Mere planning has lost its glamor; the planners have all turned into strategists. All this may have blurred the concept of strategy, but it has also helped to shift the attention of managers from the technicalities of the planning process to substantive issues affecting the long-term well-being of their enterprises.
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Моя жена вовсе не подросток, - возмутился Бринкерхофф. - Она просто так себя ведет. Мидж посмотрела на него с удивлением. - Я вовсе не имела в виду твою жену. - Она невинно захлопала ресницами.
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Видите ли, я, честно говоря, очень спешу. - Он надеялся, что отказ представителю самого мощного разведывательного ведомства не слишком большая глупость с его стороны, но партия в сквош начиналась через сорок пять минут, а он дорожил своей репутацией: Дэвид Беккер никогда не опаздывает на партию в сквош… на лекцию - да, возможно, но на сквош -. - Постараюсь быть краткой, - улыбнулась Сьюзан Флетчер. - Пожалуйста. Через десять минут Беккер уже сидел в буфете АНБ, жуя сдобную булку и запивая ее клюквенным соком, в обществе очаровательной руководительницы Отделения криптографии АНБ.
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