It’s Not What You Think
- New Horizons in Management series
6. The myth of competitive advantage The myth of competitive advantage is predicated on the notion that one ﬁrm can obtain and maintain an insurmountable superiority over all other ﬁrms in its industry by making incremental changes to its strategic components. The advantage is said to be derived from collectively ﬁne-tuning the organization’s systems and processes, that is, by increasing the value added by each of the strategic components and by improving the interrelationships between them. The purpose of this strategy is to minimize competition.1 There are ﬁve primary channels through which, it is asserted, an advantage can be realized: minimum price, commodity uniqueness, customer concentration, organizational magnitude and, more recently, knowledge. Some ﬁrms attempt to create an advantage by selling their products or services at a lower price than any of their competitors. Larger ﬁrms, it is argued, who possess the greater market share in a given industry, dissuade competitors from signiﬁcant expansion for fear of saturating the market with too many similar goods or services. A variation on this channel is the preferred source. Some organizations attempt to make themselves the preferred source by forcing customers to buy replacement parts or expendables from them, or by creating contractual obligations that require customers to use them for subsequent maintenance. Commodity uniqueness refers to attempts by organizations to distinguish their products and services from their competitors in such a way as to make them unique in the marketplace.2 In customer concentration, a ﬁrm may attempt to be both inexpensive...
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