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Competence
A competence becomes a core competence when the well-performed activity is
centralto the companys strategy, competitiveness, and profitability
Often, acore competence results from collaboration among different parts of
an organization
Typically,core competencies reside in a companyspeople, not in its physical
assets
A core competence gives a company a potentially valuable competitive and
collaborative advantage
Examples of core competencies
Skills in manufacturing a high quality product
System to fill customer orders accurately and swiftly
Fast development of new products
Better after-sale service capability
CompetenciesCompetencies
Competencies
CoreCompetencies
Distinctive
competencies
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Superior know-how in selecting good retail locations
Innovativeness in developing popular product features
Merchandising and product display skills
Expertise in an important technology
Expertise in integrating multiple technologies to create whole families of
new products
The Sustainability of Competitive Advantage
Barriers to imitation
Speed of imitation by competitors in reducing advantage
Imitation by acquiring similar resources
Imitation of capabilities (more difficult)
Limits on competitors
Prior strategic commitments
Absorptive capacity for change
Industry dynamism
The rapid innovation shortens product life cycles
Avoiding failure and sustaining competitive advantage
Focus on the building blocks of competitive advantage.
Institute continuous improvement and learning.
Track best industrial practice and use benchmarking.
Overcome inertia.
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Along-term competitive advantage that is not easily duplicable or surpassable by
thecompetitors.
Developing Sustainable Competitive Advantages
1. Customer Loyalty: Customers must be committed to buying merchandise and
services from a particular retailer. This can be accomplished through retail branding,positioning, and loyalty programs. A loyalty program is like a "Target card." Now, when
the customer uses the card as a credit card, Target can track all of their transactions and
store it in their data warehouse, which keeps track of the customers needs and wants
outside of Target. This will entice Target to offer products that they do not have in stock.
Target tracks all sales done on their cards. So, Target can track customers who use their
card at other retailers and compete by providing that merchandise as well.
2. Location: Location is a critical factor in a consumer's selection of a store.
Starbucks coffee (shown here Figure 1) is an example. They will conquer one area of a
city at a time and then expand in the region. They open stores close to one another to let
the storefront promote the company; they do little media advertising due to their locationstrategy.
3. Distribution and Information Systems: Walmart has killed this part of the retailing
strategy. Retailers try to have the most effective and efficient way to get their products at
a cheap price and sell them for a reasonable price. Distributing is extremely expensive
and timely.
4. Unique Merchandise: Private label brands are products developed and marketed
by a retailer and available only from the retailer. For example, if you want Craftsman
tools, you must go to Sears to purchase them.
5. Vendor Relations: Developing strong relations with vendors may gain exclusive
rights to sell merchandise to a specific region and receive popular merchandise in shortsupply.
6. Customer Service: This takes time to establish but once it's established, it will be
hard for a competitor to a develop a comparable reputation.
7. Multiple Source Advantage: Having an advantage over multiple sources is
important. For example, McDonald's is known for fast, clean, and hot food. They have
cheap meals, nice facilities, and good customer service with a strong reputation for
always providing fast, hot food.
Example of Companies with Sustained Competitive Advantage1. Strong research and Innovation
The technology industry is one of the leading industries with respect to strong
research and innovation. And when it comes to setting the pace using
innovation as leverage;Apple and Sony are the two companies that have held
their leadership position using innovation as a competitive advantage.
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2. Brand Popularity
Being recognized all over the world as a respected brand is a sustained
competitive advantage that companies such as Virgin, Apple and
Coca cola have used as leverage to hold the market sway for years. Virgin is a
company that has used its brand name as leverage to break into
new markets in completely new territories.
3. Corporate reputation
Corporate reputation is a form of sustained competitive advantage that
companies such as Price Waterhouse and Berkshire Hathaway have leveraged to
become world class entities.
4. Strategic assets
Holding strategic assets such as patents is a strong source of sustained
competitive advantage and General Electric has stood the test of time
because of the several patents held. Mind you that possession of these strategic
assets has madeGeneral Electric one of the most powerful
companies in the world.
5. High volume production
Dangote Group of companies became one of the leading conglomerates in Africa
because of its ability to produce goods on high volume and ensure a uniform price
throughout Nigeria.
6. Access to working CapitalGenerally, public liability companies (quoted companies) have a sustained
competitive advantage over private companies because of their infinite
capacity to raise capital from the public. Take a look at how Oracle acquired
57 companies in a space of five years and Reliance Industries investing a
billion dollars in a single swoop to open a chain of retail stores.
7. Barriers to Entry
Barriers to entry due to government restrictions and regulations have been the
source ofsustained competitive advantage for companies such as Telmex
and Chevron.
8. Superior Product or customer support
IKEA has become a market leader in the furniture industry because of its ability to
provide superior product at an affordable rate; backed by a strong customer support
system.
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9. Exclusive re-sel ling or distribution rights
The Coscharis Group has become one of the leading automobile retailers in Nigeria
and West Africa at large because of its possession of exclusive distributorship of
BMW brand throughout West Africa.
10. Ownership of capital equipment
Ownership of capital equipment can be a source of sustained competitive
advantageand Julius Berger has proved it by becoming a leading company in the
construction industry.
11. Flexibility
The ability to change swiftly is a strength and source of sustained
competitive advantage that Microsoft leveraged upon to become the
largest software company in the world.
12. Speed and Time
Speed and time was once an overlooked source of sustained
competitive advantage until FedEx and Domino Pizza used it as leverage to
become industrial pacesetters.
13. Low pricing
Wal-Mart as at the time of this writing is the most capitalized company in the world.
Thanks to its low pricing strategy that became its strong source of
competitive advantage.
13. Superior database management and data processingcapabilities
GTBank, AT&T, Google, Facebook have become market leaders in their various
niches because of the superior database management and data processing
capabilities they possess.
As a final note, these are the sources of sustained competitive
advantage and the corresponding companies that leveraged such
advantage. The message I am trying to pass across through this article is
that you dont have to win at every level; you just have to win atone level. If you cant win with innovation, you can win with speed and
flexibility.