Achieving Competitive Advantage at Continental Illinois Bank - Case Study Example

According to Michael Porter, a firm can fail to sustain in an attractive industry and might not earn a huge profit if it adopts strategy towards the implementation of a poor competitive position. Conversely, another firm which operates in a poor industry can succeed to operate efficiently through the adoption of a competitive advantage strategy (Porter, 1990). In this context, an example of ‘Continental Illinois Bank’ can be provided that adopted a poor competitive position in an attractive industry of ‘financial services’.

At a certain point of time (during the year 1981) the bank chose to capture the market of wholesale credit. The bank although succeeded in achieving its aim but the achievement of leadership position in this loan segment could not be transformed into a competitive advantage. Conversely, this strive towards leadership made the bank grant even those loans which other banks were not granted at that point of time to the borrowers. Thus, the bank got involved in the escalation of cost and gradually the bank became ineffective (Porter, 1998).

The bank failed to transform its leadership strategy into a competitive advantage because the structure of the industry did not support leadership (University of Pennsylvania, 2011). For achieving the competitive position, the bank should have focused on attaining both differentiation as well as cost leadership. Leadership indicated that the bank had to deal with various corporations which are quite large and are sensitive towards prices of the loans. The poor position of the bank made various wholesale operators withdraw their funds from the bank that left the bank in a situation of a liquidity disaster.

Therefore, this example shows as to how a business can fail in an attractive industry if it is unsuccessful to adopt a competitive strategy which is compatible with the industry (Cooley, 2009). A good company that can be cited as an example for demonstrating as to how a firm can gain a competitive advantage in a not so attractive industry with the most appropriate selection of competitive strategy (cost leadership and differentiation) would be that of “Crown Cork and Seal”. This firm belongs to the metal container industry, the industry which was characterized by high bargaining powers of the suppliers and buyers.

In addition to this, there was stiff rivalry and threat of substitutes when the firm adopted the strategy for gaining competitive advantage (University of Nevada Las Vegas, 2002). The company decided to concentrate on its core competencies and leave the technological innovation to be performed by its competitors. This move was initiated through applied research results which measured that being a small firm within the industry; it should concentrate on business development through the adoption of the most appropriate strategy (University of Virginia, 2011).

Crown Cork and Seal, in spite of following its competitors’ strategy of diversifying the business into manufacturing containers of plastics and glasses, waited for the best time of grasping growth opportunity that will lead towards competitive advantage. After William J. Avery succeeded John Connelly as the CEO in the year 1989, he faced a huge dilemma regarding whether he should consider the strategy of business expansion like his competitors. This would mean an alteration in the prolonged growth strategy being followed by his antecedent CEO.

Thus, after several serious considerations, William J. Avery undertook his firm’s merging with the Continental Can Canada that broadened the firm’s scope towards expansion and innovation. Hence, it shows that cautious moves of the firms lead to the adoption of a competitive advantage strategy even when the market is not so attractive (Bradley, 2005).