Competitive advantage is defined as the strategic advantage one business firm has over its rival firm within its competitive industry.
Competitive advantage theory suggests that industries should follow strategy that creates high-quality goods to sell at high prices in the market. Competitive advantage rests on the notion that cheap labor is ubiquitous and dismisses the significance of natural resources for a good economy.
Competitive advantage calls for maximizing economies of scale in goods services that fetch premium prices (Stutz and Warf 2009). To gain competitive advantage a business strategy of a firm manipulates the various resources over which it has direct control and these resources have the ability to generate competitive advantage (Reed and Fillippi 1990 cited by Rijamampianina 2003, p. 362).
Superior performance outcomes and superiority in production resources reflects competitive advantage (Day and Wesley 1988 cited by Lau 2002, p. 125). Competitive advantage is attained when an organization acquires an attribute that allows it to outperform its competitors in the form of access to natural resources or some high grade or cheaply available raw material, or access to highly trained and skilled human capital or develops some new technologies like information technology either to be included as a part of the product, or to assist in making it.
Information technology has evolved such as a major competitive advantage strategy that it can also contribute to competitive advantage by shining out the competitors, by eliminating middle-men in the marketplace using the Internet as the middle-man. Powell (2001, p. 132) views business strategy as the tool that manipulates the resources and create competitive advantage, hence, viable business strategy may not be adequate unless it possess control over unique resources that have the ability to create such a unique advantage.
“A firm is said to have a competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential player” (Barney 1991 cited by Clulow et al.2003, p. 221).” Competitive advantage will ensure market leadership. Resources held by a firm and the business strategy will have a deep impact on generating competitive advantage.
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