Not sustainable for long: It is not always possible for companies to sustain individual sources of competitive advantage for long (rivals copy and do everything possible to wipe out the edge through their own innovations). So, the best way to maintain leadership is to continually seek new forms of advantage through constant experimentation, innovative efforts and investments in the latest technology. Competitive advantages are not sustainable, but leverage able. A leverage able advantage is one that a company can use as a spring board to new advantages. Therefore, a company that hopes to endure must be in the business of continuously inventing new advantages.
In order to implement the chosen strategy, a firm must have the relevant competitive advantage. To become a global player, for example, a cement company can buy or take controlling stakes in competing firms. However, unless the company has some relevant competitive edge over its rivals in terms of pricing, transport costs, distribution network, location of units in cement deficit states etc., the acquisition strategy may not pay off in the long run. In the rush to become a major player a firm, therefore should not throw caution to the wind and extend its arms over the market beyond a point.
A successful strategy is always built around the competitive advantage. Without such a distinct advantage, it is not possible to achieve corporate objectives successfully. It becomes difficult to outwit competitors. The firm may not be in a position to price its products in a flexible way. Where there is a distinct edge, as in the case of Maruti Udyog limited for instance in terms of sales, price advantage, cost advantage owing to its massive scale of operations monopoly status in the lower income segment etc. The firm could breathe easily by playing on the price, cost, early bird status, monopoly position, brand image and a host of other factors. Likewise Bajaj Auto in scooters, Telco in the heavy vehicles segment have acquired competitive advantages by building strong entry barriers.
Competitive advantage factors:
*Market standing and market share: (say Bajaj Auto in Scooters, Hero Honda in motor cycles, Reliance Industries in textiles and petrochemical Maruti in small cars).
*Innovations in marketing (Birla 3M, LG Electronics credit card operations of Citi Bank).
*Customer Service (Washing machine segment where each player tries to extend the warranty period by a few months).
*New product Development (Citibank, HDFC Bank, Ranbaxy, Dr Reddy Labs).
* Price (Maruti Udyog in small cars Exide Industries in batteries Moser Baer in data storage products, Archies in Greeting card segment etc. ).
* Distribution Channel (Hindustan Lever, Bata India, Britannia Industries, Asian Paints).
*Personnel Selling or sales Force Effectiveness: Eureka Forbes Limited which has achieved unique success in vacuum cleaners and water purifiers through personnel selling)
*Product in terms of quality design, technological strength differentiation, brand image etc
Firms usually build competitive advantage using various routes such as:
Innovation is a new idea applied to initiating or improving a product, process or service. Today’s successful organizations must foster innovations and master the art of change or they will become candidates for extinction. Victory will go to those organizations that maintain their flexibility continually improve their quality, and beat their competition in the marketplace through a constant stream of innovation products and services.
Integration could be horizontal or vertical called as backward integration here a business grows by becoming its own supplier.
During the past 20 months, Indian software firms have made over 25 overseas acquisitions and the trend promises to snowball in the coming years.
These acquisition have been made with a view to climb up the value chain and survive in a fiercely competitive market. After a long slumber the cement industry in India is also moving towards acquisitions rapidly to overcome recession like conditions.
In the ice cream market HLL with a market share of 27 per cent and Gujarat Cooperative Milk Marketing Federation) (Amul Brand) with a market share of 40 per cent are trying to move closer to the hearts of millions of customers through innovations campaigns. (real milk, ice-cream, real value for money).
Alliances have also become quite commonplace these days (when two major players join hands to outwit competitors).