Sustainable Competitive Advantage

Topics: Strategic management, Michael Porter, Management Pages: 11 (1713 words) Published: January 27, 2014
Strategy & International Business

Introduction
There has been a rapid modification in the business environment in the past decade as a result of privatization and globalization leading to difference in company’s strategies. A strategy can be defined in many ways and has many different viewpoints. This article aims to explain and critically evaluate the approaches of Jay Barney and Michael E. Porter, two leading strategy theorists, in-turn explaining the basis leading to the difference.


What is Strategy & Competitive Advantage?
Strategy is the creation of unique and valuable position involving a different set of activities.1
 

A firm is said to have competitive advantage when it is implementing a strategy which is not is being implemented by it’s current or potential competitors and also sustains profits that exceed the average for it’s industry.

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Is Competitive Advantage enough?
The goal of much of business strategy is to achieve a sustainable competitive advantage which is the same as competitive advantage but the advantages of the strategy cannot be duplicated by the competitors. (Barney, 1989). Different authors have different viewpoint in regard to sustainable competitive advantage. A sustained competitive advantage is simply a competitive advantage that lasts for a longer period of calendar time (Porter, 1985). A competitive advantage is sustained only after the efforts to duplicate the advantages of the strategy have been ceased (Lippman and Rumelt,1982).

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Michael Porter’s Viewpoint
Sustainable competitive advantage is when a strategy is implemented and the same strategy is not being implemented by the current or potential competitor and that advantage lasts for a longer period of time. For example, BIC, the pen manufacturing company, has over the years manufactured and sold narrow line of standard and economical pens to virtually all the consumer markets via all available channels, thus it’s strategy is focused on consistency, reinforcement and is operationally and optimally effective and efficient. Whereas, Pilot, a japanese pen manufacturer, has been selling

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Porter, M.E., (1996). What is Strategy? Harvard Business Review !1

Strategy & International Business

pens which are a bit expensive than BIC. It has not been able to imitate or duplicate BIC’s strategy in that area resulting in lesser sales, consistency and reinforcement.

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Two basic types of competitive advantages recognized by Porter are:a)Cost advantage - When a firm is able to deliver same benefits as the competitor but at a lower cost.
b)Differentiation advantage - When a firm is able to deliver benefits that exceed those of

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competing products.

These two advantages (positional advantages) are the basis for profit (company) and value (customer) creation. (Fig.1)2
 

In addition to these advantages, a resource based view can also be applied leading to the usage of both resources and capabilities (distinctive competencies) in order to gain competitive advantage. This ‘Value Chain’ is only applicable to a single firm.

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Fig.1: Creation of Value using Distinctive Competencies

Porter, Michael E., (1998) Competitive Advantage Creating and Sustaining Superior Performance, Free Press !2

Strategy & International Business

According to Porter, Fit drives both competitive advantage and sustainability. Operational effectiveness and positioning choices are an important part of constructing strategy but are of no use in gaining competitive advantage without Fit. More and more time is being devoted to the ‘core competencies’, ‘critical resources’ and ‘key success factors’ rather than looking at the company as a whole. Fit is a core part because discrete activities like the one’s stated above affect one another.

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There are three types of Fits, which are not mutually exclusive. The first-order Fit is related to consistency between each...


Bibliography: - Barney, J. (1991). Firm resources and Sustained Competitive Advantage, Journal of
Management.
- Porter, Michael E. (1998) Competitive Advantage Creating and Sustaining Superior
Performance, Free Press.
- Johnson, G., Whittington, R., Scholes, K. (2011) Exploring Strategy, Ninth Edition,
Prentice Hall.
- Hoffman, N.P. (2000) An Examination of the "Sustainable Competitive Advantage"
Concept: Past, Present, and Future .
- Peteraf, M.A., Barney, J.B. (2003) Unraveling the resource-based tangle, Wiley
InterScience .
- Allen, P. (2011) Lecture slides distributed, Queen’s Campus, Durham University.
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