Building Competitive Advantage Through Market Based Management Practices

Topics: Strategic management, Porter generic strategies, Management Pages: 14 (4260 words) Published: November 4, 2011
Building Competitive Advantage Through Market Based Management Practices

In 21st Century Management practices, firms and corporations are constantly seeking the leg-up on the competition to increase profits and long-term value creation. In an increasingly global environment, competition remains stiff if not more competitive than ever before. Representing indirect forces on competitive advantage for companies, globalization and national and international business/trade laws have an increasing impact on competitive measures that firms may take.

In Contemporary Management by Jones and George, Competitive Advantage is defined as “the ability of one organization to outperform other organizations because it produces desired goods or services more efficiently and effectively than its competition” (2009). Competitive Advantage is a vast concept that encompasses many ideas and concepts into the overall paradigm in creating value and advantage for a company. It is important to note however that competitive advantage should not be utilized alone as a means for merely creating immediate profit. However, in todayʼs competitive and global environment, competitive advantage is often inner-twined with value creation and market based management principles for “creating long-term profits 2

when specializing in activities that create the most value for customers at the least cost” (Koch 1993).

Within any market or industry, it is outwardly apparent that some firms/companies often outperform others. For instance, Wal-Mart has been very successful in strategically outmaneuvering numerous companies throughout the years and gaining a competitive advantage over companies that are now long-gone or dwindling. When a company sustains profits that exceed the average for the industry, the company is said to possess a competitive advantage (Jones & George 2009).

Competitive advantages exist within a market due to the appropriate application of the core competencies possessed by the enterprise and an appropriate positioning of the enterprise in the relevant industries or market segment (Colin, 2004). In their text, Jones and George identify four building blocks (core competencies) of competitive advantage. These core competencies include: offering superior efficiency, creating quality in total quality management practices, innovation and speed. However, In order to achieve a competitive advantage in todayʼs global economy, a firm needs to pursue strategies that build on its existing resources and capabilities by creating new strategies that build additional resources and capabilities (develop new competencies). Adaptability is an example of a new competitive advantage concept that companies are implementing in todayʼs current management environment.

Porter argues that competitive advantage means “taking offensive or defensive to create a defendable position in an industry, to cope with competitive forces, thereby yield a superior return for the firm“ (Porter 1980). The best strategy for a firm should reflect its particular circumstances.

What is Competitive Advantage?

It is well known that the ultimate objective/challenge is for a firm to implement strategies that generate a competitive advantage. A firm is said to have gained a competitive advantage “when it is able to create more economic value than rival firms” (Barney and Hesterly 2006). Economic value is simple the difference between the percieved benefits gained by a customer that purchases a firms products or services and the full economic cost of these products or services. Thus the size of a firmsʼ competitive advantage is the difference between the economic value a firm is able to create and the economic value its rivals are able to create (Barney and Hesterly 2006).

Although most companies seek to develop a sustained “long-lasting” competitive advantage, often times this doesnʼt occur. A firmʼs competitive advantage can be temporary or sustained. A temporary competitive advantage...
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