Question 2: How can Gm Sustain its Competitive Advantage?

Competitive advantage is a theory that seeks to address some of the criticisms of

comparative advantage. Michael Porter proposed the theory in 1990. Competitive
advantage theory suggests that states and businesses should pursue policies that create
high-quality goods to sell at high prices in the market. Porter emphasizes productivity
growth as the focus of national strategies. Competitive advantage rests on the notion that
cheap labor is ubiquitous and natural resources are not necessary for a good economy.
The other theory, comparative advantage can lead countries to specialize in exporting
primary goods and raw materials that trap countries in low-wage economies due to terms
of trade. Competitive advantage attempts to correct for this issue by stressing maximizing
scale economies in goods and services that garner premium prices.
Competitive advantage occurs when an organization acquires or develops an attribute or
combination of attributes that allows it to outperform its competitors. These attributes can
include access to natural resources, such as high grade ores or inexpensive power, or
access to highly trained and skilled personnel human resources. New technologies such
as robotics and information technology either to be included as a part of the product, or to
assist making it. The term competitive advantage is the ability gained through attributes
and resources to perform at a higher level than others in the same industry or market. The
study of such advantage has attracted profound research interest due to contemporary
issues regarding superior performance levels of firms in the present competitive market
conditions. “A firm is said to have a competitive advantage when it is implementing a
value creating strategy not simultaneously being implemented by any current or potential
player”. Successfully implemented strategies will lift a firm to superior performance by
facilitating the firm with competitive advantage to outperform current or potential
players. To gain competitive advantage a business strategy of a firm manipulates the
various resources over which it has direct control and these resources have the ability to
generate competitive advantage. Superior performance outcomes and superiority in
production resources reflects competitive advantage.
Simply creating a competitive advantage does not guarantee that you will have it forever.
As an industry Spanish furniture manufacturers have to continuously to create
competitive advantages. As per our reading material we came to learn that sustaining a
competitive advantage depend on three factors, these are:
(a) Nature of Competitive Advantage

(b) Number of distinct sources of advantage

(c) Constant improvement and upgrading

(a) Nature of Source of Competitive Advantage

Nature of source of competitive advantage is classified into two factors:
(i) Lower Order Advantage

(ii) Higher Order Advantage

Lower Order Advantage

In the automobile industry, recent events have brought about an end to General
Motors corporation’s (GM) 77- year reign as the number one automobile
company with the highest sales as Toyota takes it’s place in 2008. A side from the
ubiquitous economic crisis, much blame as been put on the management of GM as
allowing the firm to fall into a trap of slow change by offering customers products
with slight changes for a long period of time there by neglecting earlier signs of
strategic inflection points. The lower order advantage factor, stand as those
sources which could easily be imitated by the competitors. An example of such
lower order advantage would be the purchasing strategy applied by the General
 Motors manufacturers to acquire the raw material for production from their
United Auto Workers (UAW) union which is their major supplier of labour is a
potential threat to GM’s financial viability and survival.

Higher Order Advantage

The higher order advantage factor, stand as those sources of competitive
advantages that are hard to replicate by the General Motors. An example of higher
order advantage of General Motors manufacturers would be their distinctive
design and esthetic features of their vehicles, which could not be replicated with
ease. While designing GM Cars designers take into consideration of the individual
elements such as pieces of cars. This experience could only be achieved through
the correct choice of colors, materials and shapes, and consequently this stand as
the triumph of the higher order advantage which could not be imitated.

(b) Number of Distinct Sources of Advantage

The number of distinct sources of advantage has to taken into by a General
Motors manufacture because if the company just has one source of competitive advantage
and its competitor copies it, it would be hard to for the company to survive. The instinct
to survive leads the General Motors manufacturers to have multiple advantages. As
General Motors manufacturers are indulged in having multiple advantages, its
competitors such as Japan, Germany, Sweden can imitate only one or two of their
features but not all of them. Thus in order to imitate General Motors manufacture’s
competitors would have to copy. Thus, having multiple numbers of competitive
advantages makes it become difficult for the competitors to copy. Due to a direct effect of
having multiple numbers of competitive advantages Japan, Sweden, Germany Motors
manufacturers cannot hold on to the equivalent brand image of that of General Motors
manufacturers, this in turn allows General Motors manufacturers to sustain.

(c) Constant Improvement and Upgrading

“Research and Development” has become an inevitable trend to pursue in any industry in
today’s world, therefore constant improvement and upgrading stand as the most
important determinate of sustaining competitive advantage. With constant improvement
and upgrading of products offered by General Motors manufacturers, they could
introduce these new and innovative designs through their investment in research and
development department. Unlike other countries General Motors manufacturers are using
research and development to develop their furniture industry product and manufacturing
process. Moving away form the traditional General Motors, the manufacturers’ latest
trend is to focus their inventions through product offerings which are durable, safe, and
comfortable cars. Without upgrading, General Motors manufacturers will not be able to
survive. As from the differ examples it was found out that it is always easy to become a
star but hard to survive. In the international market, General Motors manufacturers have
several competitors. Thereby even if General Motors manufacturers are the market leader
when it comes to prestigious and elegant cars, they cannot and should not rest peacefully
if they are to sustain and continuing withholding their competitive advantage.

In conclusion, a basic factor missing in most of the frame works is the element of
“chance”. The reality of this as experienced in recent times with the financial crisis
means General Motors as a firm has to be agile i.e. to cope with unexpected challenges to
survive unprecedented threats of business environment, and to take advantage of changes
as opportunities. General Motors needs to be sensitive enough to avoid competency traps
and pick strategic inceptions early to re-align their strategic intent to their actions.