The firms interact with each other in a competitive environment. They can employ various strategies to ensure that they deliver optimum value to their customers or make innovative use of their resources or develop a unique identity of their firm for gaining an edge over their competitors (Barney, 1991). Such strategic actions comprise the various competitive advantages they can have in their business. They can be created through firm’s constant endevaors and a visionary attitude.
Porter (2008) suggests that the “competitive advantage grows out of value a firm is able to create for its buyers, that exceeds the firm’s cost of creating it” (p.3). The generic strategies of the organization can help in creating competitive advantage by specifying the strategic position of the firm at simplest level. The ingredients for the competitive edge of the firm comprise (1) positioning of the firm within the industry using competitive strategies adapted to the five force framework (2) fostering innovation and creativity in the working environment (3) systematic implementation of chosen strategies through activity mapping and (4) sustaining the competitive advantage through continuous improvements in products and processes.
The model of competitive strategy suggests that industry structure and the relative positioning of the firm with respect to its competitors within the industry with an objective to rule the competition. The “Five Forces” captures the essence of competitive advantage theory propagated by Porter (1985). These forces determine the profitability of the industry. The competitive edge can only be derived by adopting appropriate competitive strategies which must be grounded firmly on the sophisticated understanding of the rules of competition determining the attractiveness of the industry. Porter proclaims that ” the ultimate aim of competitive strategy is to cope with and, ideally, to change those rules in the firm’s behavior” (Porter, 1985, p. 4). One industry may be more attractive than others but it is important to decide how much value the firm is capable of yielding to its buyers. Though the structure of the industry can play a crucial role in determining who will capture the value but a firm can influence and manipulate the impact of these five forces in its favour with the help of its own strategies to attain long-term advantage.
Innovation can be a very important tool for creating the competitive advantage by the firm. The perception or discovery of novel and more efficient ways for competing in an industry and making them available to the customers in terms of positive rewards like better quality products and services through market is innovation. With the help of the new innovative practices, procedures and products the firm can create differentiation from its competitors thereby yielding competitive edge to the firm. The innovations can play a crucial role in shifting the competitive advantage from one hand to another as the rivals fail to make use of such innovations either due to lack of the ability to conceive the new way or are unable or unwilling to make a prompt response to exploit these new ways. The early movers which respond promptly to innovative products and practices gain significant advantages especially in those industries where the economies of scale are prominent. The advantages are also multiplied particularly when the customers are sensitive to market changes and are prone to switch suppliers with a greater likelihood. The most typical examples where the innovations can be strategically employed to shift and gain competitive advantage are the instances where there is (1) any change in government regulations, (2) new buyer needs have evolved or there has been a drift in the prior needs, (3) emergence of new technological advancements, (4) shift in input costs or their availability and (5) the new industry segment have emerged (Grant, 2010).
The implementation of any chosen strategy with activity mapping as prescribed by Porter (2008) can actually help the firm to build on its ideas of the chosen generic strategy in more detail. In order to attain the competitive advantage it is requires that the entire value chain of the firm is managed as an aggregate entity towards a common goal rather than working as a combination of separate parts with distinct goals. The choice of the alternatives for positioning the firm not only determines the selection of activities performed by the firm and the configuration of the individual activities along with their inter-relation and inert-dependence. The major crux of strategy implementation is regarding the choice of the activities and the choice of the mechanism to perform the chosen activities in a distinct and different manner, as compared to the rivals (Hanson et al., 2001). The firm represents more than the accumulated sum of the various activities it performs as the linkages that connect the various activities in the value chain have an influence on cost or effectiveness. Thus the firms need to optimize the cost or effectiveness at these linkages through systematic and well structured coordination. The activity mapping contributes by explaining the role of different strategies, their positions and implementation in actual practice to yield competitive advantage for the firm. According to Porter (2008), the combination of these strategies in a consistent fit is the key to successful implementation and in this respect, the strategic position of the company is prescribed by the integrated network of uniquely tailored activities designed to deliver the competitive advantages for the firm. According to Porter, the role of the fit among the activities is extremely critical as it can help in filtering out the competitors through the creation of a strong chain, a “chain that is as strong as its weakest link” (Porter, 2008, p.23). The three types of fit for the chain of activities can be realized as a simple consistent fir of the first order that links each activity with the overall strategy, reinforcement or the second order fit where in distinct activities get reinforcement from each other and effort optimization fit resulted through the coordination and exchange of information eliminating the redundant efforts and scraps.
Last but not the least ,the firms can sustain the competitive advantage by focusing on the competitive advantages that cannot be imitated or are rare like reputation ,brand image, technology, customer and stakeholder relationship (Dess et al., 2013). In addition to this, the philosophy of constant improvement and upgrading should be fostered to ensure that the firm keeps on creating new advantages while the competitors replicate older ones by running scared. To conclude it can be said that the creation of competitive advantage is not a destination but a persistent, rigorous journey that is facilitated by the choice of appropriate strategic action taken by the firms.