The concept of competitive advantage was formulated by Michael Porter (1985). Competitive advantage, Porter asserts, arises out of a firm creating value for its customers. To achieve it, firms select markets in which they can excel and present a moving target to their competitors by continually improving their position.
2. Prepared By
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Manu Melwin Joy
Assistant Professor
Ilahia School of Management Studies
Kerala, India.
Phone – 9744551114
Mail – manu_melwinjoy@yahoo.com
3. The concept of Strategy
• The concept of strategy is
based on three subsidiary
concepts:
– Competitive advantage.
– Distinctive capabilities and
– Strategic fit.
4. Competitive advantage
• The concept of competitive
advantage was formulated by
Michael Porter (1985).
Competitive advantage,
Porter asserts, arises out of a
firm creating value for its
customers. To achieve it,
firms select markets in which
they can excel and present a
moving target to their
competitors by continually
improving their position.
5. Competitive advantage
• Porter emphasized the
importance of:
differentiation, which
consists of offering a product
or service ‘that is perceived
industry-wise as being
unique’; and focus – seeing a
particular buyer group or
product market ‘more
effectively or efficiently than
competitors who compete
more broadly’.
6. Competitive advantage
• He then developed his well-
known framework of three
generic strategies that
organizations can use to gain
competitive advantage. These are:
– Innovation – being the unique
producer;
– Quality – delivering high-
quality goods and services to
customers;
– Cost leadership – the planned
result of policies aimed at
‘managing away expense’.
7. Competitive advantage
• A distinction has been made
by Barney (1991) between
the competitive advantage
that a firm presently enjoys
but others will be able to
copy, and sustained
competitive advantage,
which competitors cannot
imitate. This leads to the
important concept of
distinctive capabilities.
