Types of competitive advantage

Published on March 30, 2023   8 min
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Hi, I'm Allen Amason the Dean of the Parker college business at Georgia Southern University, Professor of Management and author of the textbook from Strategic Management from theory to practice. I am talking in this session about different types of competitive advantage.
Competitive advantage is the crux of strategic management that the singular focus of the strategic manager, Peter Drucker famously once said that the purpose of a business is to create a satisfied customer who will do business with the firm over and again because of their satisfaction will spread the news of business because of their satisfaction will of course, increase the businesses customer base and increase the businesses grave engagement across its various potential customers. To do that, what a strategic manager looks to do is to increase competitive advantage, to increase the value that the customer sees in the transaction and increase, of course, the demand for the firm's product or services.
The question arises about competitive advantage. Are all competitive advantages made the same? Are all competitive advantages done in exactly the same way, or are there different types of competitive advantage? This question arises because it really is an old discussion in the strategic management discipline. It's one that goes all the way back to the origins of the discipline and the work of Michael Porter, where he described a simple typology of three types of competitive advantage in his 1980 work, those three types who are low cost, differentiation and focus. Now, these concepts, of course, are still very commonly used today. This typology, these three types are still commonly heard in the lexicon of strategic management and commonly discussed by business managers and academics alike. But the terms themselves have become so common, are so simple really in their elegance. Sometimes we can lose sight of what they really represent. When we do lose sight of what they represent, it undermines the power of the concepts. I wanted to talk about them briefly and just help if I could, listeners of this talk to understand what these types of competitive advantage really represent and clarify the implications of what they really mean for a business.