Competitive Advantage: Is It Sustainable or Temporary in Today’s Dynamic Environment?

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Competitive Advantage: Sustainable or Temporary in Today’s Dynamic Environment?

Reginald M. Beal School of Business and Industry Florida A&M University Tallahassee, FL 32307 Tel: (850) 561-2339 Fax: (850) 599-3533 E-mail: rbeal@nettally.com

Competitive Advantage: Sustainable or Temporary in Today’s Dynamic Environment?

Spirited debate in the field of strategic management wages as to whether competitive advantage is sustainable or merely temporary in today’s highly dynamic environments. The objectivity of the debate, however, suffers from a lack of specificity regarding the terms “sustainable” and “temporary.” That is, the amount of time or duration of a sustained or temporary competitive advantage is never specified by a writer. This presentation offers an approach for determining the period of time that distinguishes sustained competitive advantage from temporary competitive advantage. The approach entails determining whether a competitive advantage denoted by a competitive strategy yields above-average returns in one or more industry life cycle stages – introduction, growth, maturity, and decline. Competitive strategies providing above-average returns in only one stage are classified as temporary advantages while competitive strategies providing such returns in more than one stage are classified as sustained competitive advantages. Generic and combination competitive strategies are examined.

Competitive Advantage: Sustainable or Temporary in Today’s Dynamic Environment? Introduction Is competitive advantage sustainable or merely temporary in today’s dynamic, hypercompetive environments as many strategy researchers proclaim? Although this question is important to strategy researchers and managers, alike, we have no clear answer to it. Two major obstacles stand in the way of arriving at a definitive answer. First, there is no common definition of the concept of competitive advantage. Traditionally in the field of strategic management, competitive advantage has been defined as a firm consistently earning a higher rate of return than its competitors (Grant, 1991; Schoemaker, 1990). Recently, however, with the advent of the resource-based view (RBV) as an influential theoretical framework in the strategic management field, alternative definitions of competitive advantage have gained acceptance, introducing ambiguity. Second, the terms, “sustainable” and “temporary,” lack specificity. That is, the amount of time or duration of a sustained or temporary competitive advantage is never specified by proponents of the traditional view or the RBV. Supporters of the traditional view use such ambiguous terms as “long-term” and “fleeting” to describe sustained and temporary, respectively, leaving the reader to guess, for example, how long is “long term” – one year, two years, or more? Proponents of the RBV avoid the issue of the time duration of sustainability altogether by asserting that a sustained competitive advantage exists only so long as another firm is not able to replicate a firm’s competitive advantage (Barney, 1991). This proposition assumes that a particular competitive advantage is idiosyncratic (i.e., that it can only be possessed by a single firm). However, as Eisenhardt and Martin (2001) point out multiple firms possess effective dynamic capabilities that have common features. Effective dynamic capabilities as resources are sources of competitive advantage. The commonality of dynamic resources across

firms suggests that “there are multiple paths (equifinality) to the same dynamic capabilities….Equifinality renders inimitability irrelevant …to sustained advantage” (2001:11091110). I concur with their argument. To overcome the aforementioned problems, I propose an approach that determines whether competitive advantages are sustainable or temporary by assessing the performance of competitive strategies in each of four industry life cycle stages – introduction, growth, maturity, and decline. In this...
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