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Meaning, Concept & Nature of

Competitive Advantage

According to Pitts and Snow, acompetitive advantage is any feature of a

business firm that enables it to earn ahigher return on investment despitecounter pressure from competitors.

Can be gained at -

Corporate level through synergy andBusiness level through market share.

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5 Force Model

Michael porter argues that competitive nature of anindustry depends on the following 5 forces

Threat of Substitutes

Threat of

New Entrants

Bargaining

power of BuyersBargaining power

of SuppliersRivalry among

existing firms

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Sources of Global Competitive Advantage

Conventional Comparative advantage

Economies of Scale

marketing

logistics purchasing

Global Experience

Product differentiation

Technological Innovation

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A MODEL OF COMPETITIVE

ADVANTAGE

Recourses

Distinctive

competencies

capabilities

Cost advantage

or

differentiation advantage

Value

creation

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Types of competitive advantageTypes of competitive advantage

Low cost Differentiation

Industry-wide

Niche

Cost leadership Differentiation

Focus withlow cost

Focus withdifferentiation

MARKETS

Strategies for Gaining

Competitive Advantage

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Value chain analysis and

Competitive Scope Michael porters value chain consists of two types of activities : (a) Primary activities inbound logistics , operations , outbound

logistics

(b) Support activities procurement , technology and development ,

human resource management

According to Michael porter there are 4 dimensions of scope which

influence competitive advantage.

(a) Segment scope

(b) Vertical scope

(c) Geographic scope

(d) Industry scope

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Porters Diamond model of

National Competitive Advantage

Demand conditions

Related and

Supporting

industries

Company strategy ,

Structure and Rivalry

Factor

Conditions

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Demand conditions

A strong domestic market stimulates the firm from

being a startup to a slightly expanded and bigger

organization.

Example German automobile companies.

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Firm Strategy , Structure and

Rivalry Heavily influenced by structures of ownership and

control.

Domestic rivalry and search for competitive advantage

can help provide organizations with bases forachieving such advantage globally.

Example Japanese automobile industry.

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Factor Conditions

Factor Endowments A nations position

in factors of production such as skilled

labour or infrastructure necessary to

compete in a given industry

Basic factor endowments

Advanced factor endowments

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Basic factor Endowments

Basic factors

Natural resources

Climate Geographic location

Demographics

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Advanced factor endowments

If a country has no basic factors , it must

invest in advanced factors.

Communication Skilled labour

Research

Technology Education

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Sustaining Competitive Advantage

1. Replicability

2. Transferability

3. Transparency4. Durability