The pro blem her e is that if we id e ntify co mp e tit ive ad va nt age w ith

The pro blem her e is that if we id e ntify co mp e

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The pro blem her e is that if we id e ntify co mp e tit ive ad va nt age w ith su pe r ior prof- it abi lity. why do we need the c on c ep t of co mpeti t iv e ad va nt age at a ll ? A key dis ti nc - ti on is that c omp e titi ve advantage ma y not be re vealed in hi gh er p r ofit abilit y-a fi rm may fo r go c urr e nt profit in favor of i nv es ting in mark et shar e, t ec hn o l ogy, cu sto me r l oy alt y, or ex ec utiv e perks.' In v iewing co mp e titiv e advantag e as the res ult o f matc hing int e rn al s tr e ngt hs to ex te rn al success facto rs, I may have con ve yed th e no ti o n of co mp et i ti ve ad van tage as so methin g s tatic and stable. In fact, as we o bs e rv ed in Chap te r 4 w hen d iscuss- ing co m pe tit ion as a pro cess of .. cre ati ve des tru c ti o n, .. co mp e titi ve ad va ntag e is a di seq uili b rium ph eno menon : it is c re ated by c hang e and , o n ce es ta blis h ed, it se ts in mot io n th e co mpetiti ve pr oce ss that leads to it s des tru c ti o n. Establishing Competitive Advantage Th e cha ng es that ge nerate co mp eti ti ve ad va nt a ge can be either intern al o r e xt erna l. Fig ur e 7. 1 d ep icts th e ba sic relatio nships . Exte rnal So ur ces of C han ge For an e xt e rn al ch ange to cre at e comp e titi ve ad va nt ag e, th e c hang e mu st have differenti al eff ec ts on co mpanie s beca u se o f their d i ff ere nt reso ur ces and c apab il i ti es or strate gi c p os itio ning . Fo r ex ampl e, du r ing 20 14, th e p ri ce of Urent cr ud e declin ed fr o m $ 108 to S 58 per ba rr e l. As a re s ult , wi th in t he automobile industry the c ompeti ti ve po sition of Daim le r, J ag ua r Land Rover, and o th er c ompa n ie s pr o duc in g l arg e, con ve nti o nall y p owe red c ar s i mp ro ved rel a tive to Toyota , H onda , Tesla, and o ther pr o du ce rs o f el ec tri c a nd fuel - effi c ient c ar s. The;, grea t er th e magnitud e of the ex t ernal chan ge and the g reat er th e differ en ce in the st rategic pos iti o nin g of firms , th e grea t er th e pr opensi ty fo r externa l c han ge to g e;, nerat e com pe tit iv e adv a ntage , as indi cated by th e di s per sio n o f pro fitabili ty FIGURE 7.1 T hc crnc-rgcnce orn,111pct1ti,·c· achant.,gc· How does competitive advantage eme rge? External sources of change e.g ., • Changing customer demand • Cha ng ing prices of inputs • Technological change Reso urce hete ro gene ity among fir ms cre at es winne rs and lo ser s Some fi rms are faster and mo re effective In exploiting chan ge Internal sources of change Some firms have gre ate r creative and innovative c apab ility 1 69
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I 170 PART Ill llUSINESS STRATEGY AND THE QUEST FOR COMPETITIVE ADVANTAGE :- , - .11, f ~~' f, .-,; among the firms w ith in an indu stry. The wo rld 's tobacco indu s try h as a r elat ively stable ex t erna l envi ro nm e nt a nd ah e l eadi ng firm s pur sue s imilar s trate gies w ith si mi lar r esources a nd c ap abi liti es: differ ences in p ro fitabilit y am ong fi rm s t en d to he s mall. Th e a oy indu s try , o n th e o ah er hand ,
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