A Sustainable Competitive Advantage

A SUSTAINABLE COMPETITIVE ADVANTAGE

This concept of providing a service that consumers feel is superior to the competition and sustainable over time is called a sustainable competitive advantage (SCA).

THE CONCEPT OF A SUSTAINABLE COMPETITVE ADVANTAGE

To qualify as a sustainable competitive advantage, the perceived advantage must meet four requirements.

1)                  The consumer must value the concept. An advantage that is not valued by customers will not result in additional sales.

2)                      The second condition for an SCA is that it be non substitutable. Substitutability can occur

when a competitor can use a similar advantage a firm may develop a strong competitive advantage due to its large number of outlets. Another firm,

unable to duplicate the large number of outlets. Another firm, unable to duplicate the large number of outlets, may develop Internet, fax, or telephone access that allows customers the same relative access. Thus, the large number of outlets may no longer be a strong advantage if customers do not need to go to the facility to conduct business. Banks and financial services are now facing this situation with the increased popularity of computerized on-line banking services and internet financial services.

3)    The third requirement for an SCA is that the service firms have the resources and capability of delivering the SCA to its customers. Although a particular advantage may be a goal for the firm, it cannot be developed into sustainable competitive advantage unless the firm first has the capabilities. A firm may want to be the low-price provider of a service, but unless it has the size to provide economies of scale, it will be unable to obtain that position.

4)    4)     The last requirement for an SCA is that it be sustainable, which implies it cannot be easily copied by competitors. Some type of barrier to imitation must exist. The barrier can be economies of scale, capital costs, service offerings differentiation, buyer switching costs, access to distribution channels, or experience effects.

UNDERSTANDING SUSTAINABLE COMPETITIVE ADVANTAGE

1)                      Must be valued by customers.

2)                      Cannot be easily substitutable.

3)                  Must have resources and capability of delivering the sustainable competitive advantage to its customers.

4)                      Must be sustainable and not easily copied by competitors.

BARRIERS TO IMITATION

Economies of scale: Example- In the fast food industry, Taco Bell has developed economies of scale that make it difficult for other fast food outlets offering Mexican food to effectively compete.

The other barriers to imitation are Capital Costs, Service Offering Differentiation, Buyer Switching Costs, Access to distribution Channels and Experience Effects.

SOURCES OF COMPETITIVE ADVANTAGE

A sustainable competitive advantage is built on a firm providing either superior resources or distinctive skills. Superior resources allow a firm to develop unique or different to imitate. Distinctive skills allow a firm‟s personnel to offer a service in a unique or different way. When the two are combined in a single SCA, the competitive advantage becomes even more sustainable. Sustainable competitive advantages can be achieved through a

^v          unique or different operational position

^v          scale effects, cost and demand synergy

^v          brand or firm equity

^v          customer relationships

^v          service package, or information technology.