Porter argued that a company could achieve superior performance by producing similar quality products or services but at lower costs. Who are your customers? The business will need strong research, development, and design thinking to create innovative ideas. A firm's knowledge assets are an important intangible source of competitive advantage. Comparative advantage is a theory about the benefits that specialization and trade would bring, rather than a strict prediction about actual behavior. "Action Your Business Growth: Competitive Advantage." The term competitive advantage refers to the ability gained through attributes and resources to perform at a higher level than others in the same industry or market (Christensen and Fahey 1984, Kay 1994, Porter 1980 cited by Chacarbaghi and Lynch 1999, p. 45). Value proposition is important when understanding competitive advantage. The main challenge for business strategy is to find a way of achieving a sustainable competitive advantage over the other competing products and firms in a market.. A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices. [24], To sustain leadership in a chosen core competency area, companies should seek to maximize their competency factors in the core products like being important in positioning its values, distinctive (differentiated), superior, communicable (visibility), unique, affordable, and profitable. Use our essay writing services or get access to database of 637 free essays samples about competitive advantage theory. Simply stated, it is nothing more than asking for optimal utilization of resources and the globalization of manufacturing and services across the world as if we lived in a borderless (read: flat) world. Comparative advantage. Establishing such an advantage is one of the most important goals of any company. Comparative advantage occurs when economies of scale provide a less costly way of doing something. Learn more about competitive advantage, what it means, and why business owners should aim to identify what sets them apart from their opponents. It is the mental picture of the company held by its audiences. In Ricardo’s theory, which was based on the labour theory … 5  For example, England was able to manufacture cheap cloth. The focus strategy has two variants, cost focus and differentiation focus. A nation’s competitiveness depends on the aptitude of its business to innovate and improve. There are two main types of competitive advantages that exist and they are the: Comparative Advantage M. Porter has identified 2 basic types of competitive advantage: cost and differentiation advantage. [15] Gray and Balmer (1998) say that a strong image can be built through a coordinated image-building campaign and reputation, on the other hand, requires a praiseworthy identity that can only be shaped through consistent performance. Highly skilled labor 3. A low cost producer must find and exploit all sources of cost advantage. Communicate your competitive advantage in your appearance, your resume, and your interview. Signup now and have "A+" grades! A competitive advantage is an advantage over competitors gained by … The traditional method to achieve this objective is to produce on a large scale which enables the business to exploit economies of scale. You've got to know exactly who buys from you and how you can make their life better. If businesses are not making a large enough profit, Porter recommends finding a lower-cost base such as labor, materials, and facilities. A competitive advantage is a capability or position that allows you to outperform competitors. 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