CHAPTER 15 STRATEGIC ELEMENTS OF COMPETITIVE ADVANTAGE SUMMARY In this chapter we focus on factors that help industries and countries achieve competitive advantage. According to Porter's five forces model, industry competition is a function of the threat of new entrants, the threat of substitutes, the bargaining power of suppliers and buyers, and rivalry among existing competitors. Porter's generic strategies model can be used by managers to conceptualize possible sources of competitive advantage. A company can pursue broad market strategies of low cost and differentiation or the more targeted approaches of cost focus and focused differentiation. Today, many companies are discovering that industry competition is changing from a purely domestic to a global phenomenon. Thus, competitive analysis must also be carried out on a global scale. Global marketers must also have an understanding of national sources of competitive advantage. Porter has described four determinants of national advantage. Factor conditions include human, physical, knowledge, capital, and infrastructure resources. Demand conditions include the composition, size, and growth pattern of home demand. The rate of home market growth and the means by which a nation's products are pulled into foreign markets also affect demand conditions. The final two determinants are the presence of related and supporting industries and the nature of firm strategy, structure, and rivalry. Porter notes that chance and government also influence a nation's competitive advantage. Porter's work has been the catalyst for promising new research into strategy issues, including D'Aveni's work on hypercompetition and Rugman's recent double-diamond framework for national competitive advantage.
DISCUSSION QUESTIONS 1. How can a company measure its competitive advantage? How does a firm know if it is gaining or losing competitive advantage? Cite a global company and its source of competitive advantage? Competitive advantage is...