The Role of Strategy in Management
Competitive Advantage
Creating Competitive Advantage
Businesses create competitive advantage by doing some things better than their competitors. For example, look at the companies in the chart that follows. By doing some things much better than competitors, the businesses are able to create a valuable distinction for customers.
Creating Competitive Advantage
| Company | How Company Creates Distinction |
|---|---|
| Apple | Research and development: creates new or improved products with leading-edge technology |
| Nike | Marketing: uses celebrity endorsements to create a powerful brand image |
| Walmart | Supply chain management: created a highly integrated system to keep supplier costs low and keep products that customers buy on the shelf |
| Zappos | Customer service: strives to deliver "Wow!" in the customer's experience |
| UPS | Logistics: integrates package delivery with customer needs |
| Zara | Rapid responsiveness: quickly gets the latest styles into stores |
It may seem that the best way to create competitive advantage is to do everything well. Unfortunately, this is not possible. Generally, resources are limited and it would be much too costly to try to excel at everything. Businesses that try to do too many things well often don't succeed at doing anything extremely well and don't produce distinction. This is referred to as being "stuck in the middle".
Creating competitive advantage is not the only goal of business. Companies also must be able to maintain their competitive advantage. When competitors see a company is doing something that customers value, they will try to copy it. Some things can be copied quickly. For example, when American Airlines introduced the AAdvantage frequent flier program to reward loyal customers, it was copied within months by Delta, United, and British Airways. Other things are more difficult to copy. Walmart, for example, has created a tightly linked supply chain to provide low costs. No other company has figured out how to duplicate this system. The goal of companies is to create competitive advantage in ways that are difficult or costly for competitors to copy. This is called a sustainable competitive advantage.