Define Competitive Advantage and Core Competencies

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Companies should strive to develop unique resources in order to gain a lasting competitive advantage. Competitive advantage, whatever is source, can ultimately be attributed to the ownership of valuable resources that enable the company to perform activities efficiently at comparatively lower costs than its competitors. Superior performance will therefore be based on developing a competitively distinct set of resources and deploying them in a well-conceived strategy. Companies should abandon the areas of operations and dispense with activities where they do not possess a competitive advantage and concentrate their resources where they could attain competitive strength, so as to focus on improving productivity and increased efficiency. The concept of competitive advantage has taken centre stage in discussions of business strategy. Statements about competitive advantage abound, but a precise definition is elusive. In reviewing the use of the term competitive advantage in the strategy literature, the common theme is value creation.

Various School of Thought: Competitive Advantage

Porter says “competitive advantage is at the heart of a firm’s performance in competitive markets” and goes on to say that purpose of his book on the subject is to show “how a firm can actually create and sustain a competitive advantage in an industry—how it can implement the broad generic strategies.” Thus, competitive advantage means having low costs, differentiation advantage, or a successful focus strategy. In addition, Porter argues that “competitive advantage grows fundamentally out of value a firm is able to create for its buyers that exceeds the firm’s cost of creating it.”

Peteraf defines competitive advantage as “sustained above normal returns.” She defines imperfectly mobile resources as those that are specialized to the firm and notes that such resources “can be a source of competitive advantage” because “any Ricardian or monopoly rents generated by the asset will...
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