Unit 3: Creating Competitive Advantage
The success of a strategy depends on the firm's competitive advantage, or whether its position in a competitive market allows it to achieve its goals, which might include higher returns on investments, greater efficiency or superior effectiveness in comparison to competitors. What sets your product or service apart from the competition? Two generic strategies for developing a competitive advantage are cost leadership and differentiation. Cost leadership is a strategy that Walmart follows. This company aims to offer the lowest prices in order to draw in customers. Differentiation is a strategy designed to make your product or service so unique that it stands out from the competition in a desirable way to a target market. Nintendo launched the Wii video game console by differentiating their product with motion sensitive controllers. This company pursued a cost leadership strategy in conjunction with this differentiation strategy.
There are a number of ways to achieve competitive advantage, and they all require a focus on the competitors. It is important to keep this in mind when studying this unit. This unit's primary takeaway should be the concept of sustainable competitive advantage. As soon as your competitors see a strategy of yours working, they will either copy or leapfrog it. Sony immediately attempted to copy Nintendo by developing its own motion-sensitive controllers, and Microsoft has moved to motion recognition via cameras. Sustainable competitive advantage involves not only jumping ahead, but staying there.
Completing this unit should take you approximately 18 hours.
Upon successful completion of this unit, you will be able to:
- explain the meaning of competitive advantage;
- describe the factors that create competitive advantage;
- apply Total Quality Management to strategic management principles as a best practice; and
- analyze ethical concepts about objectives and process.
3.1: Competitive Advantage
This is a classic work about strategy and its usefulness. As you skim this text, think about how the author discusses one's ability to control their own destiny. Compare this to the idea of fate and consider how other cultures may approach that idea in the strategic management process. Lastly, analyze the concept of "the ends justifying the means". How does this relate to your own idea of ethics?
Watch this video for a quick introduction to developing a strategy for competitive advantage.
Read this section. As you read, think about the role of the value chain in strategic management.
3.2: Types of Competitive Advantage
Read this article, which provides a historical account of using a value chain to develop the organization's sustainable competitive advantage.
Read this section on business-level strategy. Do the exercises at the end of the section.
This presentation presents and explains the Delta Model as a tool for competitive advantage by identifying business competencies in three different areas: system lock-in, total customer solutions, and best product.
3.3: Total Quality Management
Read pages 167–171, which discuss how strategic managers can apply a process to sustain a competitive advantage by creating high-quality products and reducing costs.
Unit 3 Assessments
- Receive a grade
Take this assessment to see how well you understood this unit.
- This assessment does not count towards your grade. It is just for practice!
- You will see the correct answers when you submit your answers. Use this to help you study for the final exam!
- You can take this assessment as many times as you want, whenever you want.
- View
Use this activity to practice contextualizing the information you've learned in Unit 3. Once you submit your answer, evaluate it using the provided guide to responding.
