Competitive advantage: What is the best way to create it? Competitive advantage: What is the best way to create it?
Estefany P. Sánchez Méndez Estefany P. Sánchez Méndez It is well known that competition in an
It is well known that competition in any kind of industry is constant and it is growingy kind of industry is constant and it is growing more intense and fierce. Conseuently! since a successful firm does not simply participate in an more intense and fierce. Conseuently! since a successful firm does not simply participate in an attracti"e industry! it also stri"es to generate more economic
attracti"e industry! it also stri"es to generate more economic profits than the typical profits than the typical firm in itsfirm in its industry! it must #e aware of de"eloping
industry! it must #e aware of de"eloping competiti"e strategies. $he literature shows thatcompetiti"e strategies. $he literature shows that
industrial actors are #ecoming more professional! use outsourcing strategies and often glo#alize industrial actors are #ecoming more professional! use outsourcing strategies and often glo#alize their approaches to #ecome more competiti"e% #ut it also points out that technological changes! their approaches to #ecome more competiti"e% #ut it also points out that technological changes! the competition glo#alization and deregulation are
the competition glo#alization and deregulation are re"olutionizing markets &Céspedes! '(()%re"olutionizing markets &Céspedes! '(()% *+a"eni! '(()% ,o"elock! '((-. /or this reason! companies should create competiti"e ad"antage *+a"eni! '(()% ,o"elock! '((-. /or this reason! companies should create competiti"e ad"antage since it is known that the larger is a firm+s added "alue! the greater is its potential for profit and since it is known that the larger is a firm+s added "alue! the greater is its potential for profit and #ecause it will also allow them to #ecome a superior performer in it
#ecause it will also allow them to #ecome a superior performer in its market that not only has ans market that not only has an attracti"e position! #ut also a uniue and hard to imitate strategy and resources.
attracti"e position! #ut also a uniue and hard to imitate strategy and resources. $he purpose of this essay is to show the
$he purpose of this essay is to show the literature re"iew a#out competiti"e ad"antage!literature re"iew a#out competiti"e ad"antage! showing how to create it. 0ut as it e1ists many ways of doing so! this essay will determine what showing how to create it. 0ut as it e1ists many ways of doing so! this essay will determine what is the #est way to create competiti"e ad"an
is the #est way to create competiti"e ad"antage2 3s a hypothesis! competiti"e ad"antage cannottage2 3s a hypothesis! competiti"e ad"antage cannot #e created 4ust #y one way! rather
#e created 4ust #y one way! rather there e1ist a num#er of options% howe"er! to create the #estthere e1ist a num#er of options% howe"er! to create the #est one! companies ha"e to
one! companies ha"e to assess its own conditions and capa#ilities so as to find it.assess its own conditions and capa#ilities so as to find it. In order to support the hypothesis! this essay will show first! the concepts
In order to support the hypothesis! this essay will show first! the concepts of competiti"eof competiti"e ad"antage. $hen! the importance of ha"ing it will #e displayed.
ad"antage. $hen! the importance of ha"ing it will #e displayed. 3fter focusing on what it i3fter focusing on what it iss needed to #e con
ways of how to create competiti"e ad"antage. 3nd then! according to those ways it will pointed out what is the #est one to create it! so finally the conclusion will #e stated.
Competiti"e ad"antage means that the total "alue of the company should #e higher than the competition and in that way! the firm should co"er three #asic aspects5 &' increase customer #enefits% &6 reduce the firm+s cost% or &7 disco"er inno"ati"e transactions. &Porter! '(89.
3ccording to Matthyssens and :anden#empt &'((8 competiti"e ad"antage is related to the added "alue concept! which happens when the network of customers! suppliers! and complementors in which a company operates is #etter off with it than without it! meaning that the firm offers
something that is as uniue as "alua#le in the marketplace. /urthermore! competiti"e ad"antage is when a product or #rand has a superior and strategic attri#ute which is different from its ri"als in a competiti"e market! namely it is in which a company is #etter than its competitors and thus is a#le to offer a higher "alue to its customers &Pfeffer! '((9. It is also a#out doing different things than the competitors on a day;to;day #asis! and can #e measured #y the customer willingness to pay. <r as 0arney &'((= argued! competiti"e ad"antage is a#out offering products which ha"e a
higher added "alue as well as ha"ing processes and a customer ser"ice that cannot #e duplicated or imitated #y competitors. Competiti"e ad"antage! thus #ecomes the art of nurturing!
accumulating and deploying rent;yielding resources! rather than a sole focus on erecting entry #arriers or decei"ing one+s product;market competitors &/oss! '((-! p. '.
Some authors stated that! consciously de"elop it! is essential to any company that wants to stand out from the competition and attract more customers &0lack > 0oal! '((). Moreo"er! Porter &'((- affirmed that ha"ing a competiti"e ad"antage is ke y to the organizations since it aids to profita#ility increment! due to a #etter market positioning as w ell as other factors that might #e the company+s resources and the way of using those #y the company+s managers.
/irst of all! to create it! the industry analysis must #e taken into consideration for se"eral reasons5 &a companies that generate competiti"e ad"antages typically do so #y de"ising
strategies that neutralize the unattracti"e features of their industries and e1ploit the attracti"e ones% &# industry conditions has a strong influence on whether competiti"e ad"antages are e"en possi#le% &c market leaders tend to face a tension among managing industry structure and
pursuing and ad"antage within that structure! for instance! considering the new capacity on industry supply;demand conditions. &?hermawat > @i"kin! '(((.
<n the other hand! Mc?ahan and Porter &'((=% Powell &'((- argued that #efore the firm starts to create a competiti"e ad"antage! it must consider some crucial conditions! where it must assess not only the industry and the competiti"e conditions #ut! the company+s resources and competiti"e capa#ilities! its market position! its strengths and weaknesses as well as its
opportunities.
Anowing and analyzing all the conditions and features a#o"e mentioned! the firms now are a#le to choose and think! within the different options that they ha"e! how to create the desired competiti"e ad"antage! more importantly! they ha"e the chance to recognize ! according to the a#o"e conditions analysis! what would #e the #est way to create it according to its own capa#ility and position. Bence! as Peteraf &'((7% *ay and ensley &'(88 stated! competiti"e ad"antage is created when a firm wide the wedge #etween customer willingness to pay and supplier
opportunity cost! and it can do so in two #asic ways5 &' with a differentiation strategy! which means raising customer+s willingness to pay for tis products without incurring a proportional increase in supplier opportunity cost! or may#e 4ust with a slight increase on it. Bere firms should #e aware of creating customer loyalty! which is attained #y product e1cellent uality! high
e1ample the Cirue du Soleil% &6 with a low;cost strategy! that is a#out figuring out a way to decrease supplier opportunity cost without sacrificing commensurate willingness to pay! or 4ust in an slight amount. Companies should consider in which type of economy it is mo"ing and how that would affect to the cost strategy that means consider whether it is an economy of scale! scope! area! or a rapidly changing one! an e1ample of this is Southwest 3irlines! Easy Det.
3dditionally! 0arney &'((' esta#lished that although there are many ways to do so! there e1ist 7 main approaches through which a company can de"elop competiti"e ad"antage more effecti"ely5 &' #eing the most cheaper! which implies to diminish as much as possi#le the production and distri#ution costs as well as offering good uality! relia#le and easy low;price
access products than the competency so as to gain a greater size of the pie! which is the market% &6 offering the #est product! which is a#out offering a higher "alue than the ri"als with the most inno"ati"e products that allows the firm to #e the leader in its market! howe"er! to do so it is necessary not only to in"est in generation of ideas and searching for new solutions+ resources #ut to ha"e the enough capacity of a rapid and efficient new products+ commercialization% &7
adapting the customer+s offer! #y focusing all the endea"ors to satisfy #etter than any other company the specific segments! instead of meet the entire market! which also in"ol"es pinpoint the market as well as ad4ust the product or ser"ices to meet the customers+ needs in the segment.
/urthermore! according to ,ado and ilson &'(() superior "alue creation is the outcome of a #alanced and inspired management of the "alue dri"ers! which are the assets and uniue skills of a company. e"ertheless! there are another key factors needed to #e consider! for instance! the culture! organization and human resources management! since people are consider as a critical factor of a firm+s success.
$hen! there is an inno"ati"e wa y to create competiti"e ad"antage that is gaining world; wide acceptance and was stated #y Mollenkopf and Closs &6FF9 which consists in redefined the "alue chain strategy of the company including re"erse logistics acti"ities! where the key factor to succeed is cooperating with your trading partners as co mpanies such as Aodak! BP! I0M! and some others did and it seemed to work great for them. Bowe"er! it is worth mentioning that this way of creating competiti"e ad"antage is not applica#le for all industries! #ut the effecti"e use of the re"erse logistics system could increment profita#ility through the reduction of material
reuirement! as well as impro"e the market share "ia an en"ironmental image! conseuently ha"ing a #etter corporate image and increased le"els of customer satisfaction! may also add "a lue to any company that decided to put this into practice. <r! as the case of IAE3 which used as well this way of creating competiti"e ad"antage #y doing what they called business concept which consists in offer a "ariety of home products! with accessi#le price for an yone as well as letting the customer assem#le their own furniture! so the company does not ha"e to pay for the transport or the assem#ly.
/inally! there e1ist some other ways to create competiti"e ad"antage o#tained with the help of go"ernments and contractual aspects! such as su#"entions! patents! manufacturing or mid; term and long;term contracts! all of which allows some firms to stands out from the competency! #ut indeed! 4ust as long as they are a#le to manage those contracts or go"ernments deals. &@eed >
*e/illippi! '((F.
3s it can #e shown! the literature shows that there are a num#er of ways that organizations can create a competiti"e ad"antage! #ut what is the #est way2 3ccording to @umelt! Schendel and $eece! '(()% Porter! '(8F it is worth considering that de"eloping it takes time! it is not con"enient trying to #e the #est in all the ways &low;cost! differentiation! and others! it is far #etter to focus
in 4ust one way of creating competiti"e ad"antage! since generally companies that do not do so! sadly do not attain to #e the #est in any aspect and it is easier to #e o"erpassed #y a competitor which is focused in that 4ust one aspect.
/inally! there must #e taken into account! the analysis of the acti"ities that the compan y is a#le to perform such as5 the ones associated with the product+s characteristics! like dura#ility! uniue design% the ones associated with sales or de li"ery! like the ease of purchase! speed of deli"ery! a"aila#ility and terms of credit! uality of presale ad"ice% the ones associated with post; sale! such as customer training! consulting ser"ices spare parts! product warranties! repair ser"ice! compati#le products% the ones linked with ad"ertising! packaging! and #randing% or support
acti"ities such as! hiring! training and compensation practices which can create a competiti"e staff to manage the added "alue. 0ut! more importantly! consider those acti"ities+ effects on relati"e cost and relati"e customer willingness to pay! since the firm can use this analysis! to generate and e"aluate options for creating competiti"e ad"antage. In doing so! the management team ha"e to disaggregate the company into parts! as well as craft a "ision of an integrated whole. &Slater! '((-% 0haradwa4! :aradara4an > /ahy! '((7.
3s it was shown throughout the de"elopment of this essay! one of the main concerning issues that a company ha"e! is creating competiti"e ad"antage. $o conclude! there can #e said that it could #e created through a num#er of options such as low;cost strategy! either "ertical or
horizontal differentiation! segmentation! redesigning the "alue chain strategy of the compan y and some others. Bowe"er! there is not 4ust one way of creating the desired competiti"e ad"antage that could work for any kind of company! rather! companies ha"e to assess! indi"idually! its own performance! capa#ilities! resources! market position! and its a#ility to perform the types of
way to create competiti"e ad"antage! that may #e 4ust one way such as low;cost;strategy! of a com#ination of two of them! like low;cost strategy and redesign of the "alue chain! and so forth.
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