Competitive Advantage in Strategic Management
A business without strategy is a business without direction. A strategy
without a competitive advantage is a business without a precondition of
success. Managing strategically is to make decisions and implement strategies
that allow an organization to develop and maintain competitive advantage.
Competitive advantage is a concept that motivates strategists to replicate the
strategies that make most successful companies successful. According to this,
we can learn that competitive advantage is a very important concept in
strategic management. Next, I will look deeper into ¡°what¡¯s competitive
advantage¡±.
Competitive advantage is what sets and organization apart. When a firm
sustains profits that exceed the average for its industry, it has something that
other competitors don¡¯t does something better than other firms do, or does
something that others can¡¯t, the firm is said to possess a competitive
advantage over its rivals. The goal of much of business strategy is to achieve a
sustainable competitive advantage. Getting and keeping it is what managing
strategically is all about. It¡¯s tough to do, and getting tougher.1
There are 2 major views of alternative model of superior returns. Industrial
organization (I/O) view and resource-based view. The industrial organization
view focuses on the structural forces within an industry, the competitive
environment of firms and how these influence competitive advantage. The
external environment determines the potential for profits. Firms within the
same industry have similar resources and pursuer similar strategies.
Resources are mobile across firms (because of this, seemingly unique
differences among firms in the same industry will quickly vanish, competing
firms will adopt or purchase similar resources. Resource-based view takes the
approach that a firm¡¯s resources are more important than industry structure in
getting and keeping competitive advantage. It sees firms as very different
collections of assets and capabilities. The internal resources and capabilities
are the source of a firm¡¯s profitability, not the external environment. Firms each
have unique resources and capabilities. Resources are not necessarily mobile
across firms.2 Although the resource-based view focuses on analyzing
internal organizational factors, it doesn¡¯t ignore important external factors. It
links an organization¡¯s internal capabilities with its external environment.
Competitive advantage will accrue to the firm that possesses unique assets or
capabilities. A resource-based view emphasizes that a firm utilizes its
resources and capabilities to create a competitive advantage that ultimately
results in superior value creation. According to the resource-based view, in
order to develop a competitive advantage the firm must have resources and
A competitive advantage exists when the firm is able to deliver the same benefits as competitors but at a lower cost (cost advantage), or deliver benefits that exceed those of competitors products (differentiation advantage). (QuickMBA, 2007) Creating this competitive advantage is produced using the organizations resources and capabilities b either a cost advantage or differentiated. Porter identified three basic strategies one of which is the cost leadership strategy. This strategy intends for the organization being the low cost producer in the industry. Such ways to lower prices include; improving process efficiency, vertical integration, and avoiding some cost for example.
a. Basically, corporation strategy demonstrates a corporation’s overall direction in the light of its general mindset toward growth and the management of its businesses and product portfolios. There are three crucial categories, which are stability, growth, and retrenchment, that involve within corporation strategy. Additionally, business strategy often occurs at the business unit or product level, and it highlights the improvement of the competitive position of a company’s products and service in the particular market segment served by the business unit. Competitive and cooperative strategies are two main categories that match within business strategy. Furthermore, functional strategy is the method that through a functional area to
....” When choosing a strategy one must consider how it would benefit the business, an individual, make profits, and most importantly know the competitors and their weaknesses. My chosen strategies have all of these qualities which are vital in any business venture.
Business strategy is the means by which firm’s plans to achieve its goals and objectives. It can also be termed as organization long-term planning. The strategy covers periods between 3-5 years and sometimes longer. Businesses use two major types of strategy, general or generic and competitive strategies. The overall strategy involves strategies of growth, globalization and retrenchment. The competitive advantage includes low pricing, product and customer differentiation. We will look at the business strategy used by Marks and Spenser (Cole, 1997). The company is a British multinational located at Westminster London and specializes in clothes and luxurious food products.
New businesses will take longer to thrive with the United States falling economy. The faltering job market and the deepening slump in housing threaten to hurt consumer spending. Consumers are becoming more conscious of their spending and therefore using cash to pay for smaller necessary purchases. The cost of entertainment and other presumed luxuries may be pushed to the background by most families, when having to choose whether to pay for a bill or treat the family out. Thriving businesses will understand the need to provide a service or product at affordable prices.
What is the relationship between a firm’s customers and its business-level strategy in terms of who, what, and how? Why is this relationship important?
Focusing on the benefits to the business organisation, this is a very important concept for them to gain their maximum potential profits and the success of the business as a whole.
Porter, Michael E. "From competitive advantage to corporate strategy." Harvard Business Review (1987): 43-59. Print. May 2014.
A marketer doesn’t just have a plan. Marketers now open up to a wider strategic plan and it’s based on steps that balance out what the market is offering consumers. These marketers must analyze their production with these steps, then make a portfolio of the growth and even their down falls therefore this keeps these marketers to continuously innovate and create even a greater amount of value for their customers. Marketing management functions are discussed along with the marketing mix and strategy.
Thompson, A.A., Strickland, A.J., & Gamble, J. E. (2010). Crafting and executing strategy: The quest for competitive advantage: Concepts and cases: 2009 custom edition (17th ed.). New York: McGraw-Hill-Irwin
From the A12 redesign proposal, it shows that the current standard cost system is unable to link the reduction in the number of parts to activity reductions and cost savings. The labor-direct-based standard cost system reflects the cost of A12 is distorted. Using the ABC system, according to the activities of A12 allocate the overhead cost to A12 that could find that the current overhead cost of A12 was overstated by the standard cost system. At last, A12 Junction Box could be identified it is an attractive and profitable product, at the same time, it demonstrates the value of ABC.
Microsoft has always been known as a software company, and not well known for its hardware. In fact, the only hardware that Microsoft sells to the retail market is branded peripherals. In its heyday, Microsoft was a market leader, bring an operating system to the masses, and leading in internet search. In recent years, however, most of the moves that Microsoft has made have not been in a market leader position, but have been in response to competitors threatening Microsoft’s positions.
...ompletes an analytical assessment of a firm. A firm establishes its competitive building by investing scarce resources again and again in its value-added activities. By doing this the organizations will be able to give rise superior products and services that the buyer's desire and continue to grow the business and adhere to its strategic plan once implemented.
A successful business strategy will identify changes in the external trends in the market place. Plan out what the company’s future direction is. Set out the goals for the management team. It will identify a vision of where the company wants to be in the future. Keep all employees informed of the direction of the company.
Before starting any business you should consider its objectives, in order to develop a strategy. It is the strategy that lays out how the objectives will be achieved and determines deadlines for achieving them. If and when the goals are reached the business will be successful.