An organization that is able to outperform its rivals over a prolonged period of time has sustainable competitive advantage. Google for example has sustainable competitive advantage because it continues to outperform its competitors consistently over and over. Past performance, however, is no guarantee of future performance. Automotive magnate, Henry Ford, was driven by his ambition to mass produce a reliable car at a low cost. Google founders, Larry Page and Sergey Brin, in the meantime, were motivated to create a better search engine. In his book, Strategic Management, Frank Rothaermel reveals that successful business people like these, made their fortunes as the consequence of providing quality products or services consumers wanted. He postulates that strategic management is the significant component that helps create superior value, while containing the cost to produce it (Rothaermel, 2013). In other words, the greater the difference between value, creation, and cost, or the greater economic contribution the firm makes, the greater the likelihood is that they will achieve the competitive advantage.
Sharp executives learned that to gain a competitive advantage, the firm needs to provide other goods or services consumers value more highly than those of their competitors, or that their goods or services are similar to their competition, but are offered at a lower rate. The essence of strategic management therefore, is being different from their rivals which in turn, makes them unique. Harvard Business School expert Michael Porter (2011) emphasized that strategic management is as much about deciding what not to do as it is about deciding what decisions to make. In addition, because supplies of resources are not unlimited, leaders must carefully contemplate business strategies in their quest to achieve the competitive advantage (Porter, 2011). In other words, those that try to do everything for everybody, inevitably are creating a recipe for inferior outcomes.
Another component executives consider is that strategic positioning requires trade-offs. In The Mission of Corporate Strategic Behavior (2014), my research work took a peek at the many obstacles the music industry faced because of a shift in economic conditions as well as the strategic decisions executives made and new partnerships they forged to remain competitive in a changing market place (Berry, 2014). Industry leaders achieved these goals through strategic management by staking out a unique position in their industry that allowed them to continue to provide value to their customers while controlling costs while protecting their intellectual property. Other companies, in the meantime, create strategic positioning by cooperating with competitors to achieve strategic objectives. The term for this practice is known as “coopetition”. For example, JCPenney is a low-cost retailer. It is clear their strategic profile serves a specific market segment. Saks Fifth Avenue on the other hand, is an upscale retailer. They built their strategic profile by providing superior customer service to a specific luxury market segment. Although these companies are in the same industry and their respective customer segments may overlap a little, if at all, because of their positing strategies, they are not direct competitors. To keep it that way, executives must make conscious trade-off decisions that will enable both organizations to strive for the competitive advantage in the same industry.
Well, that’s it for today! Until next time … Keep your systems strategically organized
“Leaders must be close enough to relate to others, but far enough ahead to motivate them.” ― John C. Maxwell
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Berry, M. A. (2014). The mission of corporate strategic behavior. USA: Kindle Direct Publishing.
Porter, M. (2011). HBR’s 10 must reads on strategy. Boston, MA: Harvard Business Review Press.
Rothaermel, F. (2013). Strategic management. New York, NY: McGraw-Hill.