Competitive advantage(CA) is an advantage competitors gain by providing or offering customers or consumers greater value for their money through product and service differentiation or through lower prices. Maintaining competitive advantage is crucial to many businesses or organizations' success in order to survive in the market. Competitive advantage is characterized by superior performance which could be an attribute to outperform the competitors whether current or potential; or gaining a higher market share in a particular industry thereby ensuring market leadership; or ultimately, maximization of profit.(JOBBER 2010) This essay will critically analyze how competitive advantage is created i.e. Porter's 3 generic strategies: differentiation, cost leadership and focus: giving theories and practical examples. It will examine the essence of choosing a competitive strategy that best suits a business. Furthermore, the sources of CA and how to sustain it will be discussed. A company cannot just boast of providing superior performance or quality, it has to actually deliver the said quality and the customers or consumers have to be able to perceive and see it as well, which is what sets it apart from other products. (KOTLER and ARMSTRONG) Strategies For Creating Competitive Advantage
Jobber(2006)said that there are four generic strategies to achieving competitive advantage: differentiation, cost leadership, differentiation focus and cost focus. Closely related is Michael Porter's (1985) generic strategies which are differentiation, cost leadership and focus- which combines Jobber's differentiation focus and cost focus. For the purpose of this essay, Porter's strategies will be examined Differentiation
This is the establishment and delivery of a distinct and unique product which is of great value to consumers. Although the product or service is not cheaper than its competitors, the price is also not too high that the consumers are not willing to pay for it. The consumers value the product more than the competitors'. The certain thing here is that the consumers can see and appreciate the difference and are willing to pay extra for it. However, a differentiator has to put into consideration its prices relative to that of its rivals by cutting down costs such that they do not have an effect on differentiation. (PORTER 1985). An example of such firm that has achieved competitive advantage through differentiation is Apple Inc. Apple's products consist of iPod, iTunes, iPad, iPhone, MacBook Air laptop, MacBook Pro laptop, iMac desktop. The MacBook Air laptops are portable and relatively lightweight. The latest iPad which was released in March 2012 (Mintel) has up to 64 gigabytes of internal storage and over 85million iPhones and iPad touches are in existence (BURROW 2012). Apple's competitors are Microsoft, Google, Research in Motion and Nokia(a long time ago) which makes its customer bargaining power and threat of substitute high(NAIR and LANG 2012) . Apple achieved its CA through differentiation when it started its "apps" and continued its development. It competes on innovation and unique product differentiation. As a result of this, Apple has a strong brand loyalty from its millions of followers who are willing to pay extra for an Apple product. Cost Leadership
In this strategy, the company offers a matching product of its rivals, or an assortment of different products that consumers equally find attractive but at a lower cost. Cost Leadership results in superior performance as long as the achievable price for the products or services is about the industry average. It is important that cost is minimized at all fronts. The use of discount prices to get high sales. However, the cost advantage should not be used to counterbalance price discounts.(JOBBER) Examples of such companies are Easyjet, Ryanair and Southwest airlines. Easyjet is a Low Cost Carrier (LCC), is based in Luton and is the largest UK based airline in...
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