Since both cost and differentiation advantages summarize the organisation’s position in the marketplace, they can indeed be called positional advantages.
A competitive advantage is found in cases where the organization has the capacity to provide the comparable added benefits as rivals but at a competitive price (cost advantage), or offer advantages that go above and beyond those of competing products and services (differentiation advantage).
As a result, a competitive advantage helps the organization to generate better value for its customers or clients along with much better sales and profits for the company.
Since both cost and differentiation advantages summarize the organisation’s position in the marketplace, they can indeed be called positional advantages.
A resource based perspective highlights that a company takes advantage of its resources as well as competencies to create a competitive advantage that in the long run benefits in better value creation.
The following diagram brings together the resource-based and positioning perspectives to demonstrate the model of competitive advantage:
Resources and Capabilities
Based on the resource-based perspective, to be able to build a competitive advantage the organization needs to have sufficient resources and capabilities that are preferable over its rivals. Otherwise, rivals can easily duplicate the approach the organization was following and then any advantage in a short time would probably cease to exist.
Capabilities promote the organisation’s potential through the effective utilization of its resources.
The organisation’s resources and capabilities collectively build its unique competencies.
Cost & Differentiation Advantage
Competitive advantage is built through the use of resources as well as capabilities to attain regardless of whether better value structure or a differentiated product or service. Michael Porter developed a matrix applying cost advantage, differentiation advantage, along with a broad or narrow focus in order to identify a collection of generic strategies that the organization can go after to develop a competitive advantage.
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Value Creation
The organization builds value through carrying out a selection of pursuits that Porter defined as the value chain. Together with the organisation’s unique value building activities, the organization operates in a value system of vertical activities including the ones from upstream suppliers and downstream channel members.
To succeed in a competitive advantage, the organization is required to engage in more than one value building activities in a manner that generates significantly more value compared to rivals.
Premium value is without question built through lower costs or better advantages to the consumer or client.
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