TITLE:

CREATING & SUSTAINING COMPETITIVE

ADVANTAGES
Course Title: Strategic Management
Course Code: MF 616

Submitted By-

Nazim Nazmul, Roll – 573

EMBA, Session-2019-2020
Batch-23rd (Executive for Engineers)
Major: Finance

Date of Submission- 01 st February 2021

I declare that this assignment is entirely my own work and I have

acknowledged all the materials used from the published or unpublished works
of other people. All references have been duly cited

Faculty of Business Administration

University of Science and Technology Chittagong
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 TABLE OF CONTENTS
Page

ILLUSTRATIONS.............................................................................................................2

ABSTRACT.......................................................................................................................3

1 INTRODUCTION...........................................................................................................4
2 SUSTAINABLE COMPETITIVE ADVANTAGE (SCA) – MEANING......................5

3 REVIEW OF LITERATURE..........................................................................................6

4. a. Innovation………………………...............................................................................8

b. Technology.................................................................................................................8

c. Cost Leadership………………..................................................................................9

d. Supply Chain Management........................................................................................9

e. Outsourcing……………………...............................................................................10

f. Merger……………………………............................................................................10

g. Differentiation…………………………...................................................................11

5. CONCLUSION………………………….....................................................................11

6. REFERANCES……………………………………………………………………….12

2
 ILLUSTRATIONS

Page

Figure 1. Strategies, Resources, Capabilities and Competitive Advantage..................................5

3
Abstract

The corporate world is incredibly complex today. Customers expect products/services that are

affordable. Companies are supposed to be attentive to consumers and exceptionally agile.

Companies conduct external analysis to identify their opportunities/threats and also perform

internal analysis to assess their core competency in order to retain their place in the market. This

is accompanied by the creation and execution of tactics that are perceived to be their basis of

sustained competitive advantage around their core competency. Sustainable Competitive

Advantage (SCA) sources include low-cost leadership, efficiency, speed, concentrating on

particular segments of the market, creativity, human asset growth, outsourcing, strategic

alliances, and creation of a virtual entity, management of information, development of a learning

organization, etc. Today, "Bigger the Better" is the slogan to succeed. In addition to leveraging

the unique competency of the individual business, businesses also enter into mergers and

strategic partnerships to boost their competition in their market. This report examines the

numerous sources of competitive advantage for chosen businesses that have successfully

employed them. The tactics implemented by individual firms to retain the marketplace will be

examined and companies that are active in combining or entering into a strategic partnership

with other businesses will also be addressed.

Keywords: Competitive Advantage; Strategy; Mergers; Strategic Alliances

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1. Introduction:

Regardless of the industry, the profitability of businesses is due to the manner in which

their capital and skills are understood, nurtured and used. Companies usually pursue any

of the following two methods to devise a plan and execute it.

One-The approach for the consumer emphasis and

Two-Resource-based Rao Approach (2013); clarifies that businesses review the

Consumer Focus Strategy. Companies investigate the external environment; locate an

industry with the capacity for above average returns and use the power of the company to

seize the opportunity. In the resource-based approach, however, the organization first

defines and evaluates the value of its resources and skills, discovers an industry that can

be targeted by the capabilities of the company and then uses them to take advantage of

the opportunity.

The secret to the company's performance with each of the methods is to recognize their

core competency that acts as a source of SCA (Sustainable Competitive Advantages).

This article explores how top strategists from different businesses have established,

nurtured/developed and exploited the core competencies of their market to maximize

their success. capabilities of the company and then uses them to take advantage of the

opportunity. This paper acts as a roadmap to understand and discover the different

sources of SCA by capturing the different sources of core competency and referencing

industrial illustration in a nutshell. The key aims of the research are 1. In order to define

the key competencies that function as SCA origins, 2. To explain and speak about

profitable firms that use multiple core competencies as their sources of SCA, as well as 3.

Describing how each organization should use its core competency as a source of SCA.

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2. Sustainable Competitive Advantage (SCA) - Meaning

Competitive Advantage is a distinctive competence that sets a company apart from its

rivals (Tiwana, 2002). The firm's capital and skills are known to be the source of the

competitive advantage (Figure 1). Resource based view (RBV) is a term commonly used

to conduct an internal review of an organization and to define its competitive Advantage

(Wang, 2014). It is formulated on the assumption that companies have a pool of capital

and skills (Wernerfelt, 1984) that provide the basis for SCA and higher profitability as

seen below. Sustainable competitive advantage is proclaimed to be available to an

organization if its capital and capacity is important, uncommon, unlimitable and

unsubstituted, as set forth in the VRIO system for efficient use of resources (Barney,

1991). Using the RBV as the general guideline to help strategy analyses and describe

their strategic tactics in Value Chain Analysis (VCA) or SWOT Analysis.

Figure 1 Strategies, Resources, Capabilities and Competitive Advantage

Source: Pearce and Robinson (2005) “Strategic Management – Formulation,

Implementation & Control”

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 Value Chain Analysis can analyze the company's different market practices and

recognizes key activities that improve the customer's value and equally appreciate them.

One of the conventional methods of evaluating strength, weakness, risks and

opportunities is SWOT analysis. Companies achieve competitive advantages by

concentrating and creating momentum and leveraging the marketplace prospects.

Value Chain Research & SWOT Analysis both allow companies to define their expertise.

Following this, businesses can gain continuous competitiveness benefits by improving

their expertise and leverage their skills in a creative way.

3. Review of Literature

Soliman (2013) examined the critical role of „innovations‟ as a driver for sustainable

competitive advantages and has introduced a new model of global strategy based on

Innovation, which was an addition to the other three well-known perspectives of global

strategy (industry-based, resource-based, and institution-based views). He advocates that

the four perspectives of strategy could lead to a complete set of factors that need to be

analyzed for the formulation of global strategy. The model could assist organizations in

sustaining their competitive advantages.

Gaya, Struwig, & Smith (2013) examined the role of resource based and activity based

view of the firm in creating a sustainable competitive advantage and has conducted a case

study on a consistently high performing firm in motor service industry in Kenya. The key

findings of this study are that tangible resources should possess the characteristics of

rarity, valuability, inimitability and nonsubstitutability which create sustainable

competitive advantage.

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Mnjala (2014) analyzed how a firm can create a competitive advantage that enables it to

be on the forefront in the market and in its general operations. In this article the

importance of tangible resources and its role in creating sustainable competitive

advantage is well analyzed and discussed in detail. In their discussion, they highlight that

„sustainability‟ is increasingly seen as an important element in responding to core

strategic challenges of companies.

Competitive advantage is an important concept because it defines the uniqueness‟ of an

Organization vis-à-vis its competitors. The strategy by which the sustainable competitive

advantage is gained is known as business level strategy of the organization. The internal

resources capabilities of the organization that are a source of competitive advantage over

rival firms are collectively known as the core competency of the organization (Zekiri, &

Nedelea, 2012)

Figure 2 Source of Competitive Advantage

Source: Rao, V.S.P. (2013), “Strategic Management- Text and Cases”, Excel Books

In the Contemporary contributions to Strategic Management, several sources of

competitive advantage were identified and companies are already utilizing them to

succeed in their market (Rao, 2013). The various sources of Sustainable Competitive

advantage are shown below:

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4. a. Innovation

Any business that cannot innovate in the competitive market cannot maintain itself. The

minimum pre-requirement for the global market has been "Innovation." Amazon, 3M,

Cadbury's, Intel, Apple, Toyota, etc. are some of the businesses that benefit from

Constant Creativity.

Rao (2013) listed Cadbury is capable, by innovating and regularly launching products, of

maintaining its leadership in the apparel industry.

As a Risk-Averse business that focuses on "Toyota" processes it has now evolved as a

company that focuses on creative technologies produced and developed.

Amazon, the industry leader in "e-commerce" has been a consumer of constant creativity.

b. Technology

The globe has become very small and people will get their products/services in no time.

This is possible by "Technology" (Technology). SCA should be used as a basis of

manufacturing technologies in an organization's processes. Adobe, McDonalds, Wal-

Mart, Intel are some of the businesses that make the most use of technology.

All transactions at “Wal-Mart" are tracked by electronic information systems and are

very effectively handled by technology.

Microsoft and Intel are well-known for their excellent production, administration and use

of consumer value technologies.

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c. Cost Leadership

In a cost leadership strategy, the objective is to become the lowest-cost producer. This is

achieved through large-scale production where companies can exploit economies of

scale.

If a company is able to utilize economies of scale and produce products at a cost lower

than that of its competitors, the company is then able to establish a selling price that is

unable to be replicated by other companies. Therefore, a company adopting a cost

leadership strategy would be able to reap profits due to its significant cost advantage over

its competitors. “Cost Leadership” is one of the generic strategies adopted by companies

to attract mass customers (Thompson, Peteraf, Gamble, Strickland, & Jain, 2013). Some

of the companies excelling in this regard including Wal-Mart, Dell, Southwest Airlines,

Nike, etc.

Wal-Mart adopts cost leadership by having enormous power over its suppliers. Even big

companies like P&G are forced to offer great discounts to Wal-Mart which has become

the destination for low price products. Similarly, South west airlines are positioned as

low fare, short-haul and high frequency point to point carrier.

d. Supply Chain Management

The supply chain administration is used as a supplier of SCA by DTC, Amazon, Wal-

Mart, Pepsi, Coca Cola, Star bound. Starbucks, renowned for its coffee shop chain,

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 operates a good supplies chain and guarantees a fair price for delivery. By creating the

global distribution chain, Pepsi and Coca-Cola, the major giants in the drinks industry

will compete. In the mid-1980s, Dell centered on the distribution system and eliminated

the middleman by fully merging the company's logistics with its vendors, delivered goods

to its clients. This added to PC industry's competitive advantage.

e. Outsourcing

Drucker (1989) said "Do what you do best and outsource the rest," the new management

father said. "Outsourcing" requires hiring third parties out of a corporate operation.

Modular organization was generated through outsourcing. A modular enterprise is an

organization that depends on many businesses' self-contained expertise and capacities to

integrate the final product and service (Pearce and Robinson, 2007). Boeing, pioneer in

airline business, is collaborating with an Indian Tech Firms to improve their cockpit

automation software. Cisco is one of the companies that are implementing scalable

organizations. P&G's outsourcing policy for R&D is introduced. Outsourcing works as

SCA by minimizing prices, focusing on main critical tasks and leveraging vendor sector

skills (Pearce and Robinson, 2005).

f. Merger

By using 'Mergers & Acquisition' as a growth plan, businesses will increase their

business. Merger happens when two companies become one corporation and when a big

company takes over a small company, it happens the other way around (David, 2008).

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 Merger happens as two companies plan to co-operate as one organization. The integrated

big company has many comparative advantages including acquiring bargain bulk sizes,

storing of a large stock, mass processing facilities, favorable pricing, etc. Examples of

mergers include P&G, Reebok-Adidas, Vodafone-Idea, and Airtel-Telenor. It helps to

ensure that their services are used to the utmost degree possible, that aggressive

marketing can be carried out and that operational expenses can be reduced. R&D should

be improved and more power and energy can deal with them than ever.

g. Differentiation

Michael Porter advocates „Strategy is about setting yourself apart from the competition.

It’s not just a matter of being better at what you do – it’s a matter of being different at

what you do‟. Mintzberg, Ahlstrand, Lampel (1998). Offering unique products/services

than the competitors is a source of SCA. Companies adopting Differentiation include

Rolex, Mercedes, FedEx, Apple, etc. Differentiation is adopted to serve customers who

are ready to pay additional amount for the advantages they expect. Customers are ready

to pay extra to Rolex for its Style, Mercedes for its Engineering Design and Performance,

LG for its superior service. The drivers for Differentiation include unique product

features, performance, technology, services, etc.

5. Conclusion

This paper provided a snapshot of the various sources of competitive advantage and cited

several industrial examples by adopting secondary research. It focused on „Red Oceans‟

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 – the industries in existence today – the known market (Kim and Mauborgne, 2005). In

Red oceans, boundary is known and competitive rules are known. Here, businesses

outperform their rivals in order to acquire a significant portion of the market by

employing the multiple sources of advantage for sustainable competition, as discussed

above. It is evident from the above discussion that the Important, Rare, Inimitable and

Non-Substitutable opportunities provide SCA for companies to gain a large market share

in their current competitive environment.

With the emergence of Blue oceans – the industries that are not in existence today – the

unknown market space where competition becomes irrelevant and opportunity to grow is

abundant, it is suggested to explore the various sources of competitive advantage in Blue

Ocean market as scope for further research. Blue Ocean strategy focuses on Value

Innovation – a blend of Cost and Differentiation, strives to increase the boundary of the

market and emphasizes the role of fairness and Leadership. These three themes form the

core of blue ocean strategy and a research focused on identifying the key sources of

competitive advantage in this area is suggested.

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