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Sustaining Competitive Advantage

The resources and capabilities of a firm are the central considerations in formulating its strategy: they are the primary constants upon which a firm can establish its identity and frame its strategy, and they are the primary sources of the firm's profitability.
Therefore, in order to overcome a propensity of traditional competitive analysis toward evaluating only indicators of the more tangible, visible and hence easier-to-capture manifestations of a firm (in terms of products, markets, financial performance and so forth); a view of competitive advantage emanating from firm-specific factors should be adopted in competitive analysis.

Since the early 80's, competitive advantage focus has moved toward systems and away from technology. Since both Information Technology and Information System require careful integration in the organization, this is where we should focus our attention.

For example: ERP implementation greatly advantaged TISCO while it was an utter failure in Whirlpool. Similarly, SCM implementation in Walmart and Dell provided them with a competitive advantage while in Nike it was a great failure. Though the exact reasons for the failure of these systems would always remain grey areas, one thing is evident from this, that implementation of these technologies in a firm does not ensure any competitive advantage.

Many kinds of advantage, which can possibly be derived from innovative use of IT, result only in ephemeral advantage, which is quickly neutralisable by second- and later-movers. As opposed to the usual concept of "First Mover Advantage", the phenomenon of 'second-mover advantage' is observed here, where the first-mover actually incurs a disadvantage. This may arise variously because the pioneer increases the knowledge available about the application (hence driving the risks down); establishes a level of volume (and hence overcomes resistance and drives average costs down); and/or becomes locked into a system, which quickly becomes obsolescent (and hence is subject to being overtaken by a well-informed and unencumbered second-mover).

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* Contributed by: -
Varun Dawar & Vaibhav Hari,
IMT, Ghaziabad.