Strategy

Strategy and Competitive Advantage

Competing in the marketplace is like war. You have injuries and casualties,

and the best strategy wins.

John Collins

Competitive advantage is at the heart of a firm's performance in

competitive markets.

Michael E. Porter

Winning business strategies are grounded in sustainable competitive advantage. A company has competitive advantage whenever it has an edge over rivals

in securing customers and defending against competitive forces. There are

many sources of competitive advantage: making the highest-quality product,

providing superior customer service, achieving lower costs than rivals, having

a more convenient geographic location, designing a product that performs better than competing brands, making a more reliable and longer-lasting product,

and providing buyers more value for the money (a combination of good quality, good service, and acceptable price). To succeed in building a competitive

advantage, a firm must try to provide what buyers will perceive as "superior

value"- either a good product at a low price or a "better" product that is worth

paying more for.

This chapter focuses on how a company can achieve or defend a competitive advantage 1 We begin by describing the basic types of competitive strategies and then examine how these approaches rely on offensive moves to build

competitive advantage and defensive moves to protect competitive advantage.

1The

definitive work on this subject is Michael E. Porter, Competitive Advantage (New York Free Press,

1985). The treatment in this chapter draws heavily on Porter's pioneering effort.

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