BALBALLEGO, AIZA L.

MBA – II
SEMINAR IN MANAGEMENT

MODULE 8: Competitive Advantage

1. Looking inside for Competitive Advantage

 this effort of Looking inside for Competitive Advantage has focused on the relationship
between a firm's environmental opportunities and threats on the one hand, and its internal
strengths and weaknesses on the other. Summarized in what has come to be known as
SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis,
 this traditional logic suggests that firms that use their internal strengths in exploiting
environmental opportunities and neutralizing environmental threats, while avoiding
internal weaknesses, are more likely to gain competitive advantages than other kinds of
firms.
 This simple SWOT framework points to the importance of both external and internal
phenomena in understanding the sources of competitive advantage. To date, the
development of tools for analyzing environmental opportunities and threats has proceeded
much more rapidly than the development of tools for analyzing a firm's internal strengths
and weaknesses. To address this deficiency, this article offers a simple, easy-to-apply
approach to analyzing the competitive implications of a firm's internal strengths and
weaknesses.
 The journey of creating such a competitive advantage starts with analyzing the
potential sources of such a competitive advantage. Sources of competitive advantage
come both from opportunities and threats for a company, presented by its
environment, and its internal strengths and weaknesses. Various frameworks such as
Porters Five Force Model helps to unpack environmental opportunities and threats,
but this environmental analysis must be complemented with internal analysis to gain
from it in full.
 The internal attributes (technically known as resources and capabilities) of the
companies are expressed in terms of financial (debt, retained earnings, etc.), human
(knowledge, experience and other attributes of employees), physical (machines, plant
building, etc.) and organizational (history, organizational culture, policies, etc.)
assets, used to develop, make and deliver superior products and services to the
customers.
 Professor Barney delineates four questions any manager must address to utilize
internal attributes of a firm right to gain competitive advantage:
1. Do a firm’s resources and capabilities add value by enabling it to exploit
opportunities and/or neutralize threats? For some companies such as Sony, answer
to this question has been “yes”, and it has exploited very well its strength in
manufacturing miniaturized electronics products through its offering of watershed
products such as walk-man, portable CD player, camcorder, etc. On the other hand,
many companies such as Sears have failed to sniff environmental changes such as
changing consumer demographics, tastes, etc., and lost their historical legacy along
with missing new opportunities. A firm must continually evaluate its resources and
capabilities vis-à-vis opportunities and threats presented by its environment.
2. How many competing firms already possess these valuable resources and
capabilities? A valuable resource is only a source of edge to a company only when it
 is not shared by other competing firms i.e. it must be rare. Though common valuable
resources too are essential for the existence of a firm; rare and valuable resources
provide a firm with a temporary competitive advantage. WalMart collects real-time
data through its point-of-contact data collection system, and use it to serve the
customers better, gaining a competitive advantage over K-Mart- its competitor in the
US market.
3. Do firms without a resource or capability face a cost disadvantage in obtaining
it compared to firms that already possess it? The temporary competitive advantage
gets transformed into a sustained one, if imitating these resources leads to a cost
disadvantage for competing firms. Competing firms could try to imitate such
resources either through duplicating or substituting with some other resources serving
the same purpose. Sometimes, historical advantage, complex social dynamics, etc.
make this imitation impossible, let alone expensive. Caterpillar, a world-wide
supplier of heavy construction equipment could become so giant, when it won a
contract with the US government during in the World War-II, to build air-strips, army
bases, etc., and allies helped it to develop a worldwide network, it boasts of even now
through its claim that it can provide services anywhere in the world in 48 hours.
Without any government support, it will at least be doubly challenging for any firm to
develop such a world-wide network, matching the costs at the same time to compete
with such a company, unless it develops some unique resource or capability that the
former company doesn’t have.
4. Is a firm organized to exploit the full competitive potential of its resources and
capabilities? The potential to gain a competitive advantage attained by creating
valuable, rare and inimitable resources and capabilities get harnessed into a real
competitive advantage through its organizational competency to exploit those
resources and competencies. Caterpillar, for example, could sustain the competitive
advantage attained through government support, through organizational systems such
as appropriate compensation policies to motivate its workforce.
 In the end, Professor Barney cautions that just conducting the business by capitalizing
on SWOT analysis won’t take it much farther. Competitive advantage is created and
sustained by putting valuable, rare and inimitable resources to the competition, and
exploiting those to the fullest through superior organizational capabilities.

2. Creative Competitive (dis) Advantage: Learning Food Lion’s Free Fall

 Many lessons can be learned from the avalanche of bad press and the strategic errors
that overwhelmed Food Lion in the early 1990s. Although the focus of the press
reports was on worker exploitation and unsanitary practices in food preparation, Food
Lion's core problems go much deeper. This company provides a springboard example
to illustrate the dysfunctional outcomes of a myopic vision of strategy. Food Lion's
fundamental strategic error was not uncommon: It based its strategy on an
organizational strength that did not create a sustainable competitive advantage. We
address the benefits gained from expanding the boundaries of a firm's value chain to
incorporate both suppliers and customers, adding value in multiple activities and in
multiple ways, and achieving close integration of value-creating activities.

REFERENCES:
 https://www.jstor.org/stable/4165288
 http://rciima.blogspot.com/2019/06/looking-inside-for-competitive.html
 https://www.researchgate.net/publication/274753901_Creating_competitive_disadvantage_L
earning_from_Food_Lion's_freefall