Sustainability of Competitive Advantage

Group Members:

• Elvisha Fernandes 2013014• Nishant Asrani 2013025• Preshita Chaurasiya 2013030• Tejas Udeshi 2013051

Sustainability of Competitive Advantage

• “Sustainable competitive advantage is the unique position that an organization develops in relation to competitors that allows it to outperform them consistently.”

• It is when a firm possesses value-creating processes and positions that only cannot be easily duplicated or imitated by other firms.

• It provides a long-term advantage that is not easily replicated.

• Sustainable competitive advantage can be built up over a period of time based upon some unique competencies. They can be based upon knowledge, know-how, experience, innovation, and unique information.

Developing Sustainable Competitive Advantages

• 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.

• Location: Location is a critical factor in a consumer's selection of a store. Starbucks coffee (shown here ) 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 location strategy.

• 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.

• 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.

• Vendor Relations: Developing strong relations with vendors may gain exclusive rights to sell merchandise to a specific region and receive popular merchandise in short supply.

• 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.

• 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.

Examples of Sustainable Competitive Advantages

Low Cost Provider/ Low pricing:Economies of scale and efficient operations can help a company keep competition out by being the low cost provider. Being the low cost provider can be a significant barrier to entry. In addition, low pricing done consistently can build brand loyalty be a huge competitive advantage (i.e. Wal-Mart).

Market or Pricing Power:A company that has the ability to increase prices without losing market share is said to have pricing power. Companies that have pricing power are usually taking advantage of high barriers to entry or have earned the dominant position in their market.

Strategic assets:Patents, trademarks, copy rights, domain names, and long term contracts would be examples of strategic assets that provide sustainable competitive advantages. Companies with excellent research and development might have valuable strategic assets.

Powerful Brands:It takes a large investment in time and money to build a brand. It takes very little to destroy it. A good brand is invaluable because it causes customers to prefer the brand over competitors. Being the market leader and having a great corporate reputation can be part of a powerful brand and a competitive advantage.

Barriers To Entry:Cost advantages of an existing company over a new company is the most common barrier to entry. High investment costs (i.e. new factories) and government regulations are common impediments to companies trying to enter new markets. High barriers to entry sometimes create monopolies or near monopolies (i.e. utility companies).

Adapting Product Line:A product that never changes is ripe for competition. A product line that can evolve allows for improved or complementary follow up products that keeps customers coming back for the “new” and improved version (i.e. Apple iPhone) and possibly some accessories to go with it.

Product Differentiation:

A unique product or service builds customer loyalty and is less likely to lose market share to a competitor than an advantage based on cost. The quality, number of models, flexibility in ordering (i.e. custom orders), and customer service are all aspects that can positively differentiate a product or service.

Strong Balance Sheet / Cash:Companies with low debt and/or lots of cash have the flexibility to make opportune investments and never have a problem with access to working capital, liquidity, or solvency. The balance sheet is the foundation of the company.

Outstanding Management / People:There is always the intangible of outstanding management. This is hard to quantify, but there are winners and losers. Winners seem to make the right decisions at the right time. Winners somehow motivate and get the most out of their employees, particularly when facing challenges. Management that has been successful for a number of years is a competitive advantage.

Threats to Sustainable Competitive advantageIMITATION• Replication: Imitate every aspect• Substitution: Imitate value proposition and differ on essential parts

DISSIPATION• Loss of performance• Internal: Changes in company’s culture• External: Changes in customer demand

Others firms do not want to imitate

When they are capable of imitatingPost-imitation competition: Unattractive• Natural monopoly: One profitable competitor• Profits after imitation will decrease: market split and reduction in sales

Imitation hurts other parts of the business - Shared resources and choices:• Leadership and vision, culture and organization, brand name and reputation, Shared

systems etc.

Such imitation could make the imitator at odds with other parts of its business

The Dual ThreatThreat to Competitive Advantage: Existing competitors may copy New entrants may enter with similar or identical advantageIssues related to sustainability:

Conflicting existing resources

Negative implications on other parts of the

businessExisting Competitors NO YES

New Entrants YES NO

Thank You!!!