Competitive Advantage

Corporate Strategy

"Sources of competitive advantage rarely yield added value that can be sustained over time."

The following essay is going to attempt to assess the above proposition and try to find if it is possible to add value continually over a period of time. I will first discuss what competitive advantage is and what it means to a firm. Then I will explain the sources of competitive advantage and how the distinctive capabilities of a firm allow it to sustain added value. The discussion is based on a number of viewpoints from different authors who will be clearly indicated and acknowledged. I begin with explaining what competitive advantage is.

So, what is Competitive Advantage? In a number of industries, the average performance of the industry is usually no better than the average performance of industries' as a whole. However particular firms or groups of firms manage to do considerably better than average.

Global Manufacturing Labor Costs

U.S. vs China Economy

Competitive advantage for manufacturing

In this case, the high performing firm or sub-group has something special and difficult to imitate to offer which allows it to outperform its rivals.

Porter (1985) refers to such special assets as the firm's competitive advantage. "A firm's competitive advantages are those characteristics that allow it to do well even in the face of mediocre industry wide performance and free entry into the industry as a whole."

The firm has certain capabilities which allow it to be different from the other firms in the industry. It has certain distinctive capabilities which cannot be reproduced by competitors. However, it is not enough for that characteristic to be distinctive. It is also necessary for it to be sustainable over a period of time.

As Oster (1994) points out, "The key success factors in an industry are those assets that allow a firm to outperform its rivals for a...