by: Ben Haring
All of us in business are constantly thinking of ways to stay ahead of our competitors, but what actually is competitive advantage? Many strategy specialists discuss competitive advantage and the need for it in business, yet very few of them actually define the term. The difficulties in finding a suitable definition may simply be the result of competitive advantage meaning what it is; i.e. an advantage in terms of competitiveness, where no exact definition is given because it is company or product specific.
The notion that competitive advantage is company specific is supported by Hay and Williamson (1991, p42), where they define the term as a, “deceptively simple idea of assessing a company’s capabilities and market position by how they give it advantage relative to competitors”. They bring forward the opinion that competitive advantage can only be found by making a comparison between a company and its competitors. This is further supported by Barney (1991, p99) who also brings in the concept of adding value, where he states, “a firm is said to have a competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by current or potential competitors”.
Thus competitive advantage is unique to the company in question, it’s compatibilities, how it positions itself in the market and how it adds value to its customers. When identifying your company’s competitive advantage try assessing it by these factors above.
Recent Developments in Competitive Advantage
Rayport and Jaworski (2004) suggest as the focus of competition shifts from what companies do to how they do it, the new frontier of competitive advantage lies in the quality of interactions and relationships companies can establish with their customers and markets. In order to gain the most from advances in (Human) thinking as well as in new technology, they believe that a harmony must be found in the intelligent division of labour between man and machine. Thus a company may be able to achieve competitive advantage by differentiating how they interact with their customers. With the advances in modern technology companies can reach more customers in different ways. For example, you can now order a pizza from Domino’s via interactive digital television. No other pizza delivery company can offer such a service and so Domino’s has developed a differentiated competitive advantage through exploiting new customer interfaces.
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