Competitive Strategic Advantage

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competitive strategic advantage
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  MBA - III Semester (2009-10) ASSIGNMENT ON  “  COMPETITIVE/STRATEGICADVANTAGE PROFILE OF FIRM”SUBJECT: - “CORPORATE LEGALFRAMEWORK” SUBMITTED TO SUBMITTED BY MR. C. KUJUR ABHAY SINGH(LECTURER) SHUBHANGI SHYINDILYASURENDRA KUMAR SAHUPRATIMA BANJARESATYUSHA KANTA LAL  GURU GHASIDAS UNIVERSITY BILASPUR C.G  INDEXINTRODUCTION1CONCEPT OF COMPETITIVE ADVANTAGE2DYNAMICS OF NATIONAL COMPETITIVE ADVANTAGE3TYPES OF COMPETITIVE ADVANTAGE4APPROACHES FOR COMPETITIVE ADVANTAGE5GENERIC COMPETITIVE STRATEGY6STRATEGIC INTENT8BENCHMARKING10SYNERGISTIC APPROACH13CRITICAL SUCCESS FACTORS APPROACH16COMPETITIVE ADVANTAGE PROFILE19COMPETITIVE ADVANTAGE PROFILE OF MARUTI UDYOG19CONCLUSION 20  INTRODUCTION A competitive advantage is an advantage over competitors gained by offeringconsumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices. Competitive advantage is, in very basic words, how a firm manages to keepmaking money and sustain its position against itscompetitors.According toMichael Porter in histheory of generic strategies, the three methods for  creating a sustainable competitive advantage are through: 1.Cost leadership- Costadvantage occurs when a firm delivers the same services as its competitors but at alower cost; 2.Differentiation- Differentiation advantage occurs when a firm deliversgreater services for the same price of its competitors. They are collectively known aspositional advantages because they denote the firm's position in its industry as aleader in either superior services or cost; 3.Focus (economics)- A focusedapproach requires the firm to concentrate on a narrow, exclusive competitivesegment (market niche), hoping to achieve a local rather than industry widecompetitive advantage. There are cost focus seekers, who aim to obtain a local costadvantage over competition and differentiation focuser, who are looking for a localdifference.Many forms of competitive advantage cannot be sustained indefinitelybecause the promise of economic rentsinvites competitors to duplicate thecompetitive advantage held by any one firm.A firm possesses a sustainable competitive advantage when its value-creatingprocesses and position have not been able to be duplicated or imitated by other firms. Sustainable competitive advantage results, according to theresource-based view theoryin the creation of above-normal (or supernormal) rents in the long run.Analysis of competitive advantage is the subject of numerous theories of strategy,including thefive forcesmodel pioneered byMichael Porter of theHarvard Business  School.According to the Competitive Advantage model of Porter, a competitivestrategy takes offensive or defensive action to create a defendable position in anindustry, in order to cope successfully with competitive forces and generate asuperior Return on Investment. According to Michael Porter, the basis of above-average performance within an industry is sustainable competitive advantage.  CONCEPT OF COMPETITIVE ADVANTAGE Competitive advantage, also known as strategic advantage, is essentially aposition of superiority on the part of an organisation in relation to its competitors.This superiority exists because the organisation has developed somecompetencies which meet the environmental requirements in a better way ascompared to its competitors. A more formal definition of competitive advantage isas follows: Competitive advantage exists when there is a match between the distinctivecompetencies of a firm and the factors critical for success within its industry thatpermits the firm to outperform competitors. It concludes, then, that competitive advantage is externally focused whileorganisational competence is internally focused. Therefore, an organisation'scompetence does not automatically lead to competitive advantage. Thisphenomenon can be explained by two situations:1. The core competence of the organisation may not be of any importanceto the industry in which the organisation is operating. There are numerousexamples of this phenomenon; organisations diversifying into non-core competenceareas, failing therein and divesting such business. For example, L&T having corecompetence in engineering and cement, diversified in shipping (non-corecompetence area) sustained losses and divested it. Metal Box, having corecompetence in packaging materials, diversified into bearing and had to divest it,and so on.2. Even if core competence has relevance in the industry segment, other competitors may have the same strength and the particular organization may nothave any competitive advantage. What becomes, then, important for theorganization is to have relatively greater strength in that important factor than itscompetitor, For example, two competitors may enjoy low manufacturing costs; butone with the lower manufacturing costs has a competitive advantage.In the present-day globalised economy, an organization’s competitiveadvantage should not be looked at merely in the context 'of internal competition butat the global level - because if an organisation has competitive advantage againstdomestic competitors, it cannot be put in safe territory as it has to generate thatadvantage against global players in the industry concerned. However, at the globallevel, the competitive advantage of an organisation is largely determined by thenational competitive advantage. Therefore, before focusing on individualorganisations' competitive advantage, let us have a brief look at the dynamics of national competitive advantage.
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