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What is Competitive advantage?

“When two or more firms compete within the same market, one firms possesses a

competitive advantage over its rivals when it earns a persistently higher rate of profit (or

has the potential to earn a persistently higher rate of profit)”

(R. M. Grant, 2000)

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• Competitive Advantage– An advantage

over competitors gained by offering consumers greater value than competitors offer.

The main types of Competitive Advantage

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Cost advantageCost advantage

Differentiation advantageDifferentiation advantage

Competitiveadvantage

Competitiveadvantage

Similar product

at lower cost

Higher pricefor unique product

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Features of competitive strategies

Cost LeadershipCost Leadership Efficient scale Standardization Design for low production

cost Control of overheads and

R&D Avoid marginal customers

DifferentiationDifferentiation Quality Innovation Design Credibility Brand name Reputation Environmental posture Customer service Integrated services

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CSR Can Create Competitive Advantage for Firms

Customers increasingly want to deal with socially and environmentally conscious businesses. This presents

opportunities for small- and medium-sized enterprise (SME) owners to develop new areas of competitive advantage.

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Past research suggests that there are three interconnected sustainability strategies that can help small firms build competitive advantage: 1) Pollution prevention (reducing emissions and waste through continuous improvement towards environmental goals) 2) Product stewardship (measuring and reducing product impacts through tools such as life cycle analysis) and 3) Sustainable development (having a strong overall sense of social and environmental purpose which frame initiatives)

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CSR Can Create Competitive Advantage for Firms

The Case Study: Austrialian Noodle Company

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»we wish to have satisfied and enthusiastic customers. Continuous market research and

investment in product development allows us to be proactive, to share our customers’ thoughts

and to be one step ahead of the competition. We see our customers as partners. We work on a partnership seeking to mutually discover our

customers’ needs and to develop the best solutions for them»

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• The company’s defined mission is to provide a healthy, enjoyable and diversified diet to the Austrian consumer. In this sense, the first priorities are innovation and high-quality standards, especially regarding the freshness and quality of ingredients and production standards,

• The company has a market share of 31% and it covers 99% of the food retailing channels in Austria, which assures a high supply chain position.

• The specific strategic focus is quality differentiation, i.e., value added, as the main focus of the company lies on the strengthening of capabilities through innovation in the design and in delivery of the product in order to meet changing customer requirements.

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The food company in this research used initiatives in each of these areas. In particular, they:•Coordinated with a local university to develop a water treatment system to recycle water the company used for cleaning•Rescheduled delivery from its trucks from morning to afternoon to reduce impacts of noise pollution for community stakeholders•Procured raw materials only from farmers using sustainable, animal-friendly practices•Offered its employees apartments and beyond industry- standards benefits•Developed an in-house academy where employees can take free language courses in addition to job-related training

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As a Result…

• The company was nominated twice (in 2004 and 2005) as the most ‘‘Trusted European Brand’’ in the ‘‘food’’ category by Austrian consumers…

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References• vram, Daniel Ortiz and Sven Kühne. (2008.) Implementing

Responsible Business Behavior from a Strategic Management Perspective: Developing a Framework for Austrian SMEs. Journal of Business Ethics, 82:463-475.

• R.M. Grant, Contemporary Strategy Analysis, Blackwell Publishers, 2000.

• M.E. Porter, Competitive Advantage, New York: Free Press, 1985.

• J. Kay, Foundations of Corporate Success, Oxford University Press, 1995.

• G. Johnson, K. Scholes & R. Whittington, Exploring Corporate Strategy, Prentice Hall, 7th eds, 2005

• C. Prahalad & G. Hamel, “The core competences of the corporation”, Harvard Business Review, vol. 28, n.3, may-june, 1990.

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References

• S. Marthur, “How firms compete?” The Journal of General Management, vol.14, no 1, autumn 1988.

• F. Tilley, P. Hooper & L. Walley, “Sustainability and competitiveness: Are there mutual advantages for SMEs?”, in J. Oswald & F. Tilley, Competitive Advantage in SMEs: Organising for innovation and change, Wiley, 2003.

• K. Weigelt &C. Camerer, (1988), “Reputation and Corporate Strategy: A review of recent theory and applications”, Strategic Management Journal, 9

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