What gives a company a competitive advantage

Competitive advantage

Specific advantage of an organization that is relevant to the performance of that organization and that competitors have to a lesser extent. These benefits can include technological capabilities, cost control, and service aspects, among others. If the ability is relevant in the long term and cannot be achieved by other organizations, it is referred to as a permanent competitive advantage. The value chain analysis can be used as a possible analysis to determine the competitive advantages of an organization.

A unique quality component of a product that the competing products do not have and that is valued by consumers. (See also: USP)

If a company has to assert itself clearly against strong competitors due to the market conditions, then strategic approaches must be chosen that result in clear advantages over other market participants. Positioning options would be:

relative advantages of a company over the competition in the ability to sustainably achieve above-average returns. They are therefore identical to the strategic success factors. According to Simon, competitive advantages must meet three conditions:

1. They must concern a performance characteristic that is important for the customer;

2. the benefit must be perceived by the customer;

3. The advantage must have a certain durability.

Porter attributes all competitive advantage to two basic types: lower cost and differentiation. They result in strengths and advantages when a company succeeds better than the competition in dealing with the competitive forces in the industry. This requires the targeted use of one of the three competitive strategies he differentiates, namely cost leadership, • differentiation or concentration on focal points.

In the product market portfolio analysis further developed by McKinsey, the factors market growth and market share are replaced by market attractiveness and relative competitive advantage. The success factor relative competitive advantage is characterized by the following main criteria:

- relative market position

- relative technology position

- relative research and development potential

- relative qualifications of the staff.

The factor is considered to be influenceable by the company. The advantage of this portfolio scaling is that not only two success factors (market share / market growth) are taken into account, but that entire success factor bundles (both quantitative and qualitative factors) are taken into account. This portfolio is just as clear, manageable and communicative value as the basic model of the Boston Consulting Group. However, the multitude of factors necessitate a more differentiated analysis of the environment and the company.

The bundles of influencing variables require a complex selection, weighting and evaluation process (e.g. scoring models). This results in the risk of a very high degree of subjectivity, both in the selection of success factors, in the evaluation of non-quantifiable variables and in the weighting of the criteria. A greater informative value is therefore not automatically given in comparison to the basic model.

[s.a. Competitive strategies] The fundamental competitive strategies developed by Porter (1999a) aim to find a position for a company or a strategic business unit (SBU) that can be asserted against the competitive forces within an industry, especially against the competition.

The focus of competitive strategies is the creation and defense of strategic competitive advantages as a performance that is superior to the competition. According to Porter, profiling can be based on the one hand on performance or quality advantages ("differentiation"), on the other hand on cost advantages ("cost leadership"), whereby both basic strategies are implemented industry-wide or concentrated on one segment ("focus on focal points") (market niche) can be (cf. Porter, 1999a, pp. 70ff.). The Porter matrix illustrates the "... three promising types of strategic approaches to outperform other companies in an industry" (Porter, 1999a, p. 70).

The selection of the optimal strategy depends on the position of the own business unit in the industry competition. To analyze this position, it is necessary to carry out a competition analysis. It includes the analysis of the competitive forces affecting industry competition, the behavior of new competitors, suppliers, buyers and previous competitors as well as the threat posed by substitute products.

When choosing the strategy, according to Porter, due to the empirically established relationship between profitability and market share shown in Overview 143, attention should be paid to consistent alignment with one of the three basic strategic concepts. The unprofiled middle ("stuck in the middle") is in a dangerous situation in the long term.

Although a polarization of consumers with regard to the purchase criterion relevant to them (price or quality) can be observed (phenomenon of the »loss of the middle«) and this development requires companies to position themselves clearly as premium or discount providers, the alternative will be in the medium to long term Realizing one of the two basic competitive advantages is no longer sufficient to secure the company's success. In buyers' markets in particular, such as the consumer goods sector, the consumer is aware of his dominant negotiating position and tries to meet his high quality requirements at low prices.

strategic competitive advantage

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