Competitive Advantage

8. To what extent is it necessary for a firm seeking competitive advantage to choose the type of advantage that it seeks? Discuss the merit of this argument using a company example of your choice?

In the modern competitive markets, Competitive advantage is the core of a firm’s performance. Competition is the driving feature that controls the success and failure of business firms. The appropriateness of the activities of the business s firms than can add to it performance such as a cohesive environment, better strategy implementation or innovations is determined by the competition that the firm is into. However a competitive strategy is formulated my firms and industries so as to understand the fundamental arena of their competitive position

A competitive advantage is a business concept that describes the attribute of allowing a firm to outperform its rivals. Brand loyalty or customer preference for a particular product is the effect of competitive advantage. (Porter, 1985) It is a situation when a firm sustains profits that exceed the average of its industry over its rivals or the so called competitors. Competitive advantage has become the goal of many of the business strategies. A competitive advantage prevails when a particular firm either delivers similar benefits as compared to its rivals but at a lesser cost or provides the customers with benefits that exceed those provided by the competing products. A competitive advantage grows fundamentally when a firm is able to create value for its customers which exceed the firm’s cost of creating it. Value here is what the customers are willing to pay to buy the products or services of the firm. Thus, competitive advantage is something which helps an organization to create superior value for its buyers and better profits for itself. (Competitive

A competitive strategy is the research so as to find a suitable position in the market. The selection of the competitive strategy by a firm is widely dependent on two factors: Firstly the attractiveness of the industry for securing long term profits and secondly on the determinants of relative position within the industry. But it is noticed that none of the factors is most suitable in determining the competitive strategies for any company. A company operating in a very eye-catching industry may also sometimes fail to earn profits because of a poor competitive position but at the same time a better competitive position will help a firm to earn profits even in a not so attractive industry. The choice of competitive strategy becomes more interesting and challenging because both industry attractiveness and competitive position of a firm can change. However a proper competitive strategy should be selected by taking into consideration the five competitive forces that affect the attractiveness of the industry which are rivalry among existing firms, bargaining power of the buyers, bargaining power of suppliers, threat of new entrants and threat of substitute products or services. The ability of the firms in an industry to earn is determined by the collective