Achieving Sustainable Competitive Advantage
STRATEGIC MANAGEMENT
Introduction
In the business world, competitive advantage refers to the processes that allow a company to produce high-quality goods at a lower cost than its rivals. Using these processes, businesses are able to make more money than their rivals. Several factors contribute to competitive advantages, such as cost structure, suitable branding, high-quality manufacturing, optimal distribution networks, intellectual property management, and superior customer service (Barney, 1995).
Important for firm to find the way of achieving sustainable competitive advantage
Because of specific strengths and conditions, competitive advantages generate in higher value for a company and its shareholders. The harder it is for rivals to neutralize a company’s competitive advantage, the more long-term it may be.
Achieving sustainable competitive advantage is critical for companies since it is the only way to be successful in business. With a sustainable competitive advantage, businesses may expect higher employee retention, higher product margins, more sales and a stronger focus on the company as compared to their competitors (Christensen, 2001).
Sustainable competitive advantage is challenging to achieve since what works now may not work tomorrow. As a result, achieving sustainable competitive advantage is vulnerable to market volatility, economic circumstances, and other social factors. Various dynamic elements of the market should be mentioned. When compared to AMD’s market share, for example, Intel’s computer chip division was extremely lucrative (another processor making company). However, AMD has gained market share at the expense of Intel because of the former’s technical superiority. AMD improved the quality of its products and set them apart from Intel’s, resulting in increased market share for the company.
The secret to firm success is developing a sustainable competitive advantage. It’s the driving force behind a company’s sharper focus, more revenue, improved profit margins, and higher customer and employee retention than its rivals (Porter, 1985).
Buyers will put the greatest value on it when seeking to buy a company since it is the primary generator of long-term business value. If firm don’t have a durable competitive edge, firm run the danger of becoming just another “me too” company that struggles along and produces subpar results.
Most small companies lack the market share and purchasing power to successfully compete on pricing and are too tiny to serve all consumers in a market. This means that small companies must create a competitive advantage based on offering more than the competition in a particular market segment in order to be successful.
First mover advantage is a crucial concept that is often brought up. The first entry in a new market has an advantage over other rivals that join the market later. However, although being the first to market may provide firm an edge in the beginning, this advantage is not long-term unless it is accompanied by one of the three kinds of benefits described above. Google and Facebook are two excellent instances of this. Despite the fact that none of these businesses was a trailblazer, they today command a large share of their respective industries (Wang, 2011).
It’s simpler for firm consumers to comprehend why they should part with their money and give it to you rather than your rivals when firm sustainable competitive advantage is used in firm sales and marketing. As a result, company employees have an easier time selling firm goods or services, since they know their promises will be kept. They’re aware that the whole company is working to safeguard and profit on the sustainable competitive advantage (Pfeffer, 1994).
Firm sustained competitive advantage may drive firm decision-making and offer focus and direction.
- Review Competitive advantage for selected firm (PepsiCo)
- Brand Image Icon: PEPSICO has a reputation as a brand that understands the needs of children and adolescents. Drinking Pepsi and other PepsiCo products has long been seen as a fashion statement among young people. The brand’s youthful and fresh appearance has been shown in powerful and memorable commercials. It has also kept kids interested during sporting events like the IPL. The result of these efforts is a large client base(Jallow, 2021).
- Innovative marketing strategies: PEPSICO is well-known for the innovative marketing strategies it employs. As an example, they ran a social media and digital marketing campaign called “Do us a Flavor” in which they sought for suggestions for a bespoke drink.
- Delivery straight from the retailer: PepsiCo is the only supplier of its product to retail outlets. It has a well-developed supply chain and distribution network, which enables it to deliver products quickly and with great availability.
- Strategy for Diversification: PepsiCo has expanded beyond beverages to include snacks like Doritos and Cheetos, which are well-known brands under the Frito Lays umbrella(Jallow, 2021).
How could it contribute towards its business performance?
A company’s ability to surpass the competition is known as a competitive advantage. As a result, the business has higher profit margins than its rivals, which benefits both the corporation and its stockholders (Christensen, 2001).
The following are some methods through which it could contribute PepsiCo towards its business performance:
Cost Leadership
Being the cheapest manufacturer is the goal of a cost leadership approach. This is made possible by PepsiCo taking advantage of the economies of scale that come with large-scale manufacturing.
Using economies of scale and producing products at a cheaper cost than its rivals allow firm to set a selling price that other businesses cannot match. Because of the considerable cost advantage, it has over its rivals, a business that adopts a cost leadership strategy will benefit (Jacobs, 2004).
Differentiation
Firm’s products or services are distinguished from those of its rivals using a differentiation strategy. Innovating or providing high-quality goods and services to consumers are two ways to accomplish this. If firm is effective in differentiating, it will be able to charge a premium for its goods or services.
Focus
Firm employs a focus strategy in which it narrows its market emphasis to a certain segment. If the firm is effective in creating products or services that appeal to these consumers, then this approach is successful (Barney, 1995). There are two approaches to focusing.
- Cost-focus: The lowest-cost manufacturer in a small market
- Differentiation-focus: Products and services that stand out in a small market.
