2.5: Competitive Advantage and Strategy
What is Competitive Advantage?
The concept of competitive advantage came into popular usage in the 1980s as an attempt to identify and define the strategic goals of the firm. In his now famous work Competitive Advantage: Creating and Sustaining Superior Performance , Michael Porter showed that the goal of all firms is to achieve a competitive advantage in relation to their rivals . This they do either by selling at a lower cost/price or by differentiating their product from those of their rivals (Porter 1985).
Text Source: Reinert, Kenneth A., and Ramkishen S. Rajan, editors. “Competitive Advantage.” The Princeton Encyclopedia of the World Economy , by Nigel S. Grimwade, 1st ed., Princeton University Press, 2010. Credo Reference , search.credoreference.com/articles/Qm9va0FydGljbGU6MzE0MDIx. Accessed 1 Sept. 2023.
Take some time to review the following graphic that depicts Porter's ideas:
Image Source: "Porter’s Generic Strategies: Differentiation, Cost Leadership and Focus," B2U (Website)
In addition to the strategies identified within the above graphic, a fifth strategy called 'best-cost' will be introduced in the 2:57 video that follows:
Where do you think the 'best-cost' strategy would be visible if it were included on the above graphic?