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Competitieve Advantage

What is competitive advantage? The context of competitive advantage starts with the make/buy decision. A competitive advantage occurs when a supplier is able to create value for its customer that exceeds the supplier's cost o creating it. Once the customer decides to buy, the decision becomes one of a value selection. Note that it is the customer's definition of value that is going to govern this decision. Assuming that a choice of suppliers exists, it is the supplier who offers the highest customer value that will have a competitive advantage in securing the customer's business.
It is becoming increasingly obvious to most organizations that competition is worldwide in scope and that profitable markets are likely to attract increased competition. Suppliers who do not have appropriate competitive strategies are vulnerable to profit and market share erosion and, possibly, extinction. A competitive strategy outlines how the supplier approaches the market (customer) and positions the company and its products (value). There are three basic competitive strategies:
Cost Supremacy: low cost producer;
Differentiation: introduces other considerations beyond price, e.g., company reputation, reliability, expertise, product features, etc.; and
Focus: efficiency and effectiveness gained through limited product, industry coverage, geography, etc.
Each supplier establishes a strategy that best matches its strength;.
Strategies
Competitive strategy seeks to create customer value through price and differentiation. Pure price strategy is typically associated with the economies of scale, access to low-cost labor, unique process, commodity situations or where vertical integration provides superior profitability. Differentiation will use other value components such as leadtime, quality, service, breadth of product, etc. in combination with price to gain superiority.
The key concept of competitive advantage is profitably creating value as defined...