Competitive advantage is having a favorable position over all challengers in a common endeavor (Liou & Tang, 2009). Therefore, competitive advantage is the result is the result of implementing strategies to take advantage of the critical success factors of developing the ability to invest in the future while being profitable in the present (McGarth & MacMillan, 2009). In most instances, competitive advantage comes from pursuing a price or a differentiation strategy.
Having a favorable position
Obtaining a favorable position over the competition occurs when a business conducts market research and takes action to do the things necessary to gain more customers than the competition. Establishing a competitive intelligence program or research department is an investment by the business in determining the strengths, weaknesses, capabilities, opportunities, threats, objectives, and strategies to potentially position the business in a favorable position to capture large pieces of the market (David, 1999). This includes a discovery process that uncovers the pricing, marketing, and growth strategy the competitor business employs. Once the business obtains this information, leadership develops strategies to improve the business position in the market.
Developing competitive advantage
Developing competitive advantage in the 21st century involves developing several strategies. McGarth and MacMillan (2009); believes investing in the future while being profitable in the present, adapting to the environment, taking risks, capturing the tacit knowledge (knowledge stored in individuals minds) in the organization, and investing in knowledge capital are key ingredients in securing competitive advantage. McGarth and MacMillan (2009) recommend leaders move from the old paradigm of business as usual to adopting new strategies to develop competitive advantage.
The road ahead for understanding competitive advantage
Business leaders must adapt new heart-sets and mind-sets to meet effectively the challenges that exist in the internal and external environment of the 21st century (Karakas, 2007). Gone are the days when a business can sit back and rest on the success acquired when they first enter a market or being satisfied with the current stable of products. Business leaders must constantly be developing new product lines and prepare for an organizational future that may result in the organization doing business completely different from their core business. McGarth and MacMillan (2009) recommend initiating a renewal process, evaluating change options using financial models, and mapping the future growth portfolio as strategies to employ in meeting the challenge of developing competitive advantage.
Understanding competitive advantage requires business to evaluate its competitive position. This involves redefining the business purpose, rethinking the health of the business, and constantly viewing the business as entering the market, regardless how long the business have been established or how profitable the business is presently. The 21st century business must always seek to improve market position or concede to an early demise.
References
David, F. R. (1999). Strategic management: Concepts and cases (7th Ed.). Upper Saddle River, NJ: Prentice Hall.
Karakas, F. (2007). A portrait of the leader in the twenty-first century, Leadership in Action. 26(6), 23-24. Retrieved June 11, 2008, from
Academic Search Premier database.
Liou, F. and Tang, E. (2009). Competitive advantage, value creation, and du Pont identity. The Business Review, 12(2), 127. Retrieved
September 21, 2009, from ABI/INFORM Global database.
McGarth, R. G., and MacMillan, I. C. (2009). How to rethink your business during uncertainty. MIT Sloan Management Review, 50(3),
25-30. Retrieved September 21, 2009, from ProQuest Multiple databases.