Sustaining Competitive Advantage

A competitive advantage could simply be defined as the advantage or power a firm has over its rivals in the industry; or the power a firm has to surpass its industry rivals.

A firm is said to have a competitive advantage when it has the capabilities or means to obtrude its rivals in nisus for the favour of clients. This applies internationally or locally besides as to both services and products.Thus, a property competitive advantage is the persistence the firm applies despite efforts by challengers or potential entrants to copy or overtake it. Sustainpower therefore, requires that strategic assets are not easily available to others and amiss mobile. This will be considered later.

  HOW MANY MARKETING MANAGERS ARE THERE IN THE US

Porter (1990) states that, though not all nations are in the forefront of competition, the home nation which shapes the competitive advantage is the starting point for a firm's competitive advantage and also from which it must be sustained. However, in any field of endeavor, competitive advantage creation must be a choice of direction and it must really fit to accomplish results. It must be noted here that competitive advantage can ordinarily be copied to one of three roots:

Superior imaginations, superior skills and superior positions.

Competitive scheme is one of the ways in which a business relates to its environment by competitive with other firms who are also trying to adapt inside the in operation environment. It is with this aspect- the competitive scheme which if befittingly chosen and enforced befittingly give the firm a competitive advantage over its rivals.

It must be noted here that the normative view of strategic preparation emphasizes the grandness of the organisational environment as a source of threats and opportunities and the need for effective responses by the organization if survival was to be assured and the winner accomplishd. The response is later developed into plan which formulates major decisions about entry into new markets or development of new products and services radio-controlled by set goals. Under the influence of Porter's Writings in the 1980s the emphasis shifted from the plan to the selection of an appropriate generic scheme to position the business unit in its competitive environment. Porter, disputation that the environment poses threats and brings opportunities than with trends and events, recommended that the environment could be analyzed exploitation the five forces analysis to identify the issues which affect the level of competition in an industry; after which a scheme is developed to combat it.

The resultant scheme, which he referred to as generic, distinguished some strategic options the firm can possess:

Cost leadership: the business could position itself as offering a low cost product as a standard price i.e. cost leadership scheme. Costs are reduced at every element of the value chain. Producers can exploit the benefits of a large margin than the challengers. Toyota is a example of an organization that produces quality cars at low price coupled with a brand and marketing skills to use a premium pricing policy.

It could offer a product that was different from that offered by rivals. I.e. differentiation. This allows companies to make prices less sensitive and revolve around value that generates a comparatively higher price and a better margin. Even though additive costs will be incurred following differentiation, it is possible that this will be offset by the enlarged revenue generated by the gross sales.

By focexploitation on a small but well-defined part of the market, for example a particular buying group or product area or geographical area. Also noted as niche, this is ordinarily suitable for a small company i.e. focus scheme.

Generic Competitive scheme, ordinarily used after competitive analysis or as a response to challengers advantage, is defined as the basis on which a strategic business unit (SBU) might accomplish or counter competitive advantage in its market. (Johnson and Scholes, 5th Edition.)

Building on Porter's (1980) generic competitive strategies, Bowman et al argues that organizations accomplish competitive advantage by providing their clients with what they want, or need better or more effectively than challengers and making it difficult for challengers to imitate. This was later developed into five generic strategies which would be used in that discussion. Thus, the generic competitive strategies are the fundamental activities on which an SBU seeks to accomplish a lasting advantageous position in its environment and gaining the favor of stakeholders by meeting the expectations of buyers, users or other stakeholders

The following are Bowman's five-generic competitive scheme options and examples of organizations who applied them to gain competitive advantage: no frills scheme, low price scheme, hybrid scheme, focused differentiation scheme and added value or differentiation scheme.

In brief, a no frills scheme combines a low price, low perceived added value and targets a price-sensitive market. No frills scheme is now a popular scheme with low-cos airlines Easy Jet and Ryanair quest to enter the airline industry to contend with likes of Virgin and is a determinant in the market. This, therefore, affords the firm the required competitive edge over its challengers who charge higher price. This scheme is a winner because there could possibly be a segment of the market that overlooks the inferiority of the good provided it fulfills the same purpose.

To obtain the competitive advantage exploitation no fills scheme revenues must increase and the product must really be price-sensitive. Easy Jet frills scheme seems to be going on well as a result of the cost nest egg techniques they are exploitation. For instance no ticketing, no ticket agents, no in-flight food or drink for clients besides as the short-haul flight. Now, nearly all supermarkets in the UK use no frills scheme by introducing own brands the price of which have been reduced to attract clients in order to gain a competitive advantage.

The next generic scheme is the low price scheme. This scheme pursues a lower price than pertains in the market whilst trying to maintain similar value of product or service as those offered by challenger alike. There is the potential of price competition among challengers and in the end consumers are likely to lose as the firms might not be able to sustain the lower-price-good-value scheme. Notwithstanding the price competition and low margins, there are some recommended ways in which a low-priced scheme can bring about a firms competitive advantage. The market segment must be low-price sensitive, and also the SBU has a cost advantage over its challengers.

However, in practice, the lower price scheme ordinarily grooved by lowering operational cost alone does not give the firm the competitive advantage if the firm is not able to sustain it in the long-term as there are now more firms entering the market because of low or no entry roadblocks like small cap requirements and also how efficient the staff might be.

Hybrid competitive scheme seeks to accomplish differentiation and a price lower than that of challengers simultaneously. This is not an easy scheme to pursue because to differentiate a product or service involves some money and increases cost the very affair the low price seeks to reduce. This scheme is fit for the DIY industry as like Robert Dyas are not able to stand the competition. The winner of this is contingent on providing unique more efficient products or services to consumers whilst at the same time in operation at a lower cost to be able to lower its price below the industry level. The winner of this scheme could further be enlarged if the firm has economies of scale and can increase volume of gross sales more than its challengers, thereby, reduction its base cost as a result. Asda's George brand is an example of a generic hybrid scheme in a SBU.

Another scheme is differentiation scheme. This seeks to provide products or services all different from those of its challengers by adding features valued by consumers. The main objective of exploitation this is to either maintain the market share or increase market share relative to its challengers. A clear example of this is aircraft manufacturer Airbus's wider fuselages, cockpits designed for use in more than one aircraft and electrical rather than mechanical flight controls.

Those features have helped Airbus win clients like New York-based Jet blue; although Jet Blue is staffed with former employees from Boeing. (Fortune, Europe Edition 22 November 17th 2003; pp34) This scheme could be used to accomplish a competitive advantage which is its ultimate aim by the firm investment more in R&D, unique designs and features. The marketing-based approaches in terms of good marketing communication (example advertising the products or services) besides as the brand power to win the loyalty of consumers. (Example Airbus)

The fifth generic competitive scheme is the focused differentiation scheme which seeks to provide high perceived value; justifying a substantial price premium ordinarily to a hand-picked market, segment. It is ordinarily adopted to counter or to contend others in ostensibly similar segment. This could therefore be argued that focused differentiation is just an extension of any of the four strategies so far considered contingent on the challengers in that new segment which is ordinarily middle to high income earners. A persuasive example is the introduction of Lexus in 1989 by Toyota to contend with other luxury brands of BMW and Mercedes Benz new series.

For the focused differentiation scheme to be used to obtain a competitive advantage over challengers in the industry, the business unit must find ways to make the production more efficient to be able to pass on the nest egg to clients. The business unit must identify new segments and must also be prepared to sharply create new market segment where it is believed first movers get huge advantage. Again Toyota prides itself in that by being the first to introduce a brand,scion,specifically for young buyers in January, 2003 which was a winner and the introduction of hybrids in 1997 marketing 127,000 far more than Honda.( Hybrid uses two engines and is environmentally friendly.) (Fortune, Europe Edition, Number 24 December 22 2003; pp57).

The essence of the various strategies discussed so far is to create or add value to the products or services in order to give imtried and or enough satisfaction to the client so that the firm will gain a competitive advantage over its rivals. However, it is one affair for a firm to gain a competitive advantage and another to sustain the competitive advantage so gained. So when a firm is able to get a competitive advantage over its challengers, it becomes expedient to try to sustain that advantage.

Some of the ways to sustain the competitive advantage is by what is delineate as analytic mechanism. This is the application of forces like roadblocks of imitation which limit the extent to which a competitive advantage can be duplicated or matched or even possibly scrapped through the imagination creation activities of other firms. Though similar in hypothesis to the roadblock of entry force, whereas the entry roadblocks protect profitpower of an entire industry, analytic mechanisms sustain the competitive advantage of a single firm. For example legal roadblocks like trademarks, patents or intellectual property rights as in Microsoft's case.

It could also be for the mere fact that the leading firm makes it difficult for the challenger to catch up with the firm's technology because it entered the market earlier and it continues to research and might be able to move to a superior position by the time its challengers catch up. This is noted as the early mover advantage. Because the business unit has entered the market earlier, the past winner in the market is believed to sustain the firm.

Nevertheless, disregarding how distinct the scheme adopted to gain the property competitive advantage or enough satisfaction that the client may get besides as the mechanisms put in place to sustain the competitive edge, simple economic science has tried that man's needs are insatiate and with the IT age, there is an imtried dynamism in business that products and services can become obsolete before they even reach the next user.

The question is can the firm continue to create more value than its challengers now than then?

Now with the advent of information systems and technology, this traditional way of competitive advantage or competitive edge has, therefore, taken a different turn. Information gathering and I mean a competitive information gathering in deed can to some large extent make a difference to a firm's position in an industry and for that matter affect its competitive advantage one way or the other.

A good and recent example is Asda installment radio frequency identification (RFID) system, a device which could be used to scan bar codes of incoming goods which could save Asda $8.35 billion annually through improvement in its supply chain direction. Fortune, Wal-Mart keeps the change, November 10,2003pp 23.

Firms can either use their own database or an cognition gathering software package to track its operations and get the required information like inventory, clients, and trends of challengers' performance and about the fast moving products to formulate their strategies or form what is noted as information partnerships for the purpose of sharing information to gain competitive or strategic advantage; and even link their systems with some challengers to accomplish synergies.

This is becoming important as a result of the fact that competition in the business world now is not only inside a particular industry one operates but can also be cross-competition with people in other related industry like universities and publishers competitive attributable forward and backward integrations. Baxter Healthcare International is noted to offer medical supplies from its challengers and office supplies through its electronic ordering channel to its clients. By doing this the firm increases its client base besides as loyalty of its clients is enlarged.

At this juncture, the statement that "there is no such affair as a property competitive advantage" can be considered in relation to the circumstances that happened in Sears, which used to be USA's largest retail merchant until Wal-mart overtook it after a diversification scheme went bust in spite of the fact that it (Sears) has been heavily computerised with more expenditure going into IT and networking than all other non-computer firms in the United states apart from Boeing. So why couldn't this huge amount spent in computers and networking been able to give them the competitive edge over its rivals? Is it attributable the fact that the hardware alone is not decent to provide the information required unless it is integrated with the appropriate software package? Sears did exactly that.

Trying to reinvent itself, Sears started to explore nearly all strategies including low pricing scheme, delayering, imtried marketing ploys besides as embarking on a $4billion five-year store renovation to make the stores more attractive. All to no avail.

Then Sears detected that, its merchandise buyers do not have reliable information on precisely what clients were buying at each store. Management was relying on 18 separate systems that often gave conflicting and redundant pricing information. They could only view a division's daily performance. This was not good for a firm of Sears's stature. Sears later demanding its grips over the business once once again by building a large database involving the consolidation of information on dealing records,90 million households,31million Sears' card users, their credit status, and other related data.

The database houses the company's Strategic Performance Reporting System (SPRS).Now Sears' 1,000 buyers and managers know what hot-marketing merchandise to refill right away. This competitive information gathering to some extent helped turn around Sears. Its store gross sales started rising and planned to join partnership with AOL to boost its online business by targeting AOL's 21 million clients by developing content for AOL on subjects such as how to build a deck, tips on home decorating and other home improvement topics; and also move its providers to an electronic ordering system similar to it delineate for Baxter Healthcare, by linking its computerised ordering system directly to it of each provider to eliminate paperwork all for an imtried flow of goods into its stores.

As antecedently discussed, if a firm can keep or maintain its deceive creating value, leverage strategic assets e.g. access to efficient distribution channels, maintain market position and may be low cost advantage then it can be said to have a property competitive advantage. This is dead not possible in that dynamic business world. The most difficult part of this is that the firm must create more value than its challengers every now and then. Will its challengers be looking on without doing anyaffair?

Microsoft e.g. is disbursal billions of dollars to develop its own search engine that will be incorporated in both its online service MSN and its new in operation system due in 2006 to combat Google's dominance in the search engine industry. (Fortune, 22 December 2003pp 17).

In my own opinion supported the discussions above, if really property competitive advantage is the persistence of a firm's power to surpass its industry, then answer it to say that, as much like gathering and use of competitive information as illustrated in the Sears' story above can give a firm a (property) competitive advantage, it is really difficult if not impossible to sustain any competitive advantage for a very long time. This is so because of the rate of technological changes, changes in business strategies, and the fact that clients' loyalty can wane and affect gross sales leading to a fall in market share and thus competitive advantage. Boeing was overtaken by Airbus in the aviation industry at some time. Sears' leadership was taken away by Wal-mart.

In spite of the availpower of choice of the five generic strategies, it is supposed that the onus of their winner rests with direction and how the technology and the information gathered are amalgamated for use. This is so because a careful monitoring and evaluation constantly and the right identification and proper timing of a particular segment are keys to the winner of these strategies attributable market dynamism.

REFERENCE

Can Sears reinvent it? A case study taken from London South Bank University IS.
Davenport, T.H; Prusak, L. (1998) Working Knowledge: How Organizations Manage What They Know. Havard Business School Press, Boston, Ma.
Fortune, December 13,2004, pp59
http://informationr.net/ir/8-1/paper144.html
Laudon, K.C; Laudon, J.P. (2004) Management Information Systems: managing the digital firm, 8th edition, USA: Pearson Prentice Hall.
Scholes, K.and Johnson, G (1999) Exploring corporate scheme, 5th Edition. London: F.T Prentice Hall.
Sheila,C.Main Article: Knowledge Management, issue 18,2004
Yogesh, M. B. The Company, - What Really is Knowledge Management? Crossing the Chasm of Hope. Gartner Group Inc.,October 1996