Maintaining Competitive Advantage - Essay Example

Maintaining Competitive Advantage Competitive advantage is very important for the success of any given industry. Organizations create competitive advantage by discovering advanced and better ways of competing in companies and bringing them in the market, this act is mostly in originality.This act will shift competitive advantage when the business rivals fails to keep in pace with the invented competing technique. (Hunt, 2000).Amazon has been gaining significant advantages over its competitors by applying the above technique.

It makes use of new modern technologies while at the same time it keeps pace with the changing government regulations, the emergence of new industrial segments, the varying buyer needs and the availability of input cost. The firm applies three types of competitive advantage in its operations i.e. cost leadership, differentiation (of product, image, service, sales, distribution and marketing) and lastly focus in cost and differentiation. (Palmer and Hardy, 2000) Amazon examines activities performed in their organization and relates how each activity is connected to the other.

These activities are the main sources of the advantage, they includes marketing, operation among others. By performing these strategic activities (a method commonly known as value chain) in a better and a cheaper way than its competitors the firm gains the competitive advantage.Value chain helps Amazon to understand the existing probable sources of differentiation and the general behaviour of the existing costs. Activities affecting Amazon's buyer activities are the key determinants of differentiation results.

Cumulative costs in the value chain are used in determining the overall difference between the producer cost and the buyer value of Amazon. The value chain clearly indicates that competitive advantage can emanate anywhere along the chain value.According to porter (1998) competitive advantage entails managing firm's value chain as a system rather than a collection of separate parts. Amazon makes application to this by making a choice of performing activities in a way that is different from the rivals.

He says that for successful implementation to be achieved activities must be combined with each other in a consistent way because the activities are linked to each other and separating them would result in marketing failure. (Peteraf, 1993)In line with Kay (1993) observations Amazon puts in consideration the bargaining power of customers as a competitive advantage, here the firm looks at the buyer volume, availability of the close substitutes, the availability of information to the buyer, evaluating the buyer price sensitivity, the leverage of the buyer and lastly the prices of the buyers total purchase from the firm.

Amazon considers the threats of new applicants in the market and comes with a way of countering them. It switches different cost of its products, evaluation of the brand equity, and the overall expected retaliation from competitors, the government policies among others. It also looks at the bargaining powers of suppliers so as to obtain the required inputs differentiation degree, the firm concentration ratio to the supplier's concentration ratio, and the importance of volume to suppliers. (Penrose, 1995)ConclusionAmazon makes good application of the three types of competitive advantages and the corporate strategy a thing that has seen it competing effectively with its competitors.

It has merged with other firms in business application and applied strategic alliances in a professional way thus boosting the development of its market.ReferencesAlvesson, M. and Willmott, H. (1996): 'Making sense of management': Sage, LondonAndrews, K. (1971): 'The concept of corporate strategy': Richard D Irwin Inc. IllinoisAnsoff, H. (1965): 'Corporate Strategy': McGraw Hill, New York.Hunt, S. (2000): 'A General Theory of Competition', Thousand Oaks: Sage.Kay, J (1993): 'Foundations of Corporate Success': Oxford University Press, OxfordPalmer, I.

and Hardy. C. (2000): 'Thinking About Management': Sage, LondonPenrose, E. (1995): 'The Theory of the Growth of the Firm': Oxford University Press, New YorkPorter, M. (1979): 'How competitive forces shape strategy', Harvard Business Review, March-April, pp. 137-145.Porter, M. (1998): 'Competitive Advantage (with a new introduction)': The Free Press, New YorkWilliamson, O (1975): 'Markets and Hierarchies': The Free Press, New YorkPeteraf, A. (1993): "The Cornerstones of Competitive Advantage: A Resource-Based View," in Strategic Management Journal, Vol. 14, pp. 179-191.