Competitive Advantage

Topics: Strategic management, Management, Business Pages: 10 (3464 words) Published: August 13, 2007
Competitive advantages are strengths and strategies that keep a company ahead of its competitors. It is hard to measure competitive advantage and harder to maintain it. Some competitive advantages are fleeting. The successful companies are those that leverage their competitive advantage successfully and repeatedly. As understood by us in the above example the competitive advantage that the cyrptoses enjoy is a direct outcome of its natural habitat and hence the circumstantial gain over its rivals. Cryptoses has strategically positioned and tactically planned its competitive advantage that even though its fleeting, its competitive advantage is repetitive and successful. The other name for this sort of competitive advantage could be opportunistic competitive advantage. In the case of business firms also it cannot be denied that there are many opportunistic organizations that ride piggyback on a more powerful organization and enjoy many advantages merely because they are in some way associated with the parent firm. However many times if such firms adhere to the crpytoses methodology, then they endanger their tenacity to maintain their profile if the parent firm fails. A classic example to this could be of Saturn and GM. Saturn has a competitive advantage over others cars by being associated with GM, this gives Saturn the opportunity to rely on only one source (GM) for its resources (Suppliers, Technology, Management) and hence it is the only American car which has fixed price. Years of repetitive and successful competitive advantage of this partnership may stand a threat to Saturn's existence on failure of GM. Contradictory the competitive advantage, enjoyed by cryptoses by affiliating with sloth does not seem to create any threat for survival or existence on extinction of sloth. It is one of the best type of competitive advantage a business could achieve, short live yet repetitive, dependent yet independent. But exact replication of such a competitive advantage is rare. A sustainable competitive advantage usually has one of three characteristics: 1. Privileged access to customers.

2. Size or momentum within the market.
3. Restraints on competition.

An excellent example for use of information technology for competitive advantage would be airline reservation systems. Today, most airlines make more money from their reservation systems than they do from actually flying passengers. For example, American Airlines' reservation system consistently accounts for more than 50 percent of the company's total revenues. Sabre, American's reservation system, was the first its kind. It was expensive to develop and when it came on-line, competitors filed lawsuits claiming that it gave American an unfair advantage; it also sent them scrambling to develop their own systems. The initial competitive edge that Sabre provided has continued into the 1990s – roughly three out of five tickets issued to air travelers are booked through Sabre. Sabre system had competitive advantage as it exhibited restraints on competition by being early player in the market, the market size was big and with deregulation the momentum was high. Sources of Competitive Advantage

·External Sources:
·Customer Relations:
·Brand loyal customers
·Long-term relationships
·Barriers to brand switching
·Patents & trademarks
·Tax advantages
·Zoning laws
·Global trade restrictions
·Supplier Relations:
·Agreements & relationships
·Internal Sources:
·Product Related:
·Brand equity; Exclusivity
·Quality & features
·Price Related:
·Costs/economies of scale
·Promotion Related:
·Image, budget, salesforce
·Distribution Related:
·JIT, EDI, location
·Management; R&D
The nature and period of competitive advantage can be well explained by Diffusion Theory
The figure explains that a business enjoys maximum competitive advantage when the base of competition is low. The more one meets the customers...
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