It has been said that there is such thing as a sustainable strategic advantage. Do you agree? Why or why not?
Under the normal state of affairs, most market transactions are considered as a zero-sum game. Following the same logic, it can be argued that one company’s strategic advantage is a strategic disadvantage of at least one of its competitors. However, if all players in a certain market employ the principles of strategic management, a strategically disadvantages competitor will try to minimize or revoke its state, thereby weakening the superiority of its competitors. Hence, in the simplest sense, sustainable strategic advantage does not exist.
However, not all markets behave this way. Monopolistic markets are one example in which lack of competition helps to sustain the monopolist’s strategic advantage unless the market structure changes. In the field of IT, Microsoft’s immense share of the operating systems is the company’s predominant strategic advantage. It faces some competition from Apple and Linux, but the two latter companies, each one with its own competitive advantages over its rival, do not seem to be near to face a significant challenge to Microsoft. Therefore, unless something dramatic will happen in the market, it should be assumed that Microsoft’s strategic advantage as a market leader is rather sustainable at the moment.
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Nevertheless, having a major strategic advantage (also in the caliber of Microsoft’s) does not imply that the company can let loose of strengthening and developing its pros. In fact, market leaders such as Microsoft, Google and Amazon have gained the power to a great extent by using the weaknesses of former behemoth – Apple, AltaVista and books.com, for that matter. Not surprisingly, wise strategic management is heavily based on maintaining innovation and find new ways to sustain the advantages.
In conclusion, strategic advantage cannot be considered as sustainable. However, it can be extremely strong in some cases, and thus prove itself as a solid back for the company, given that the strategically advantaged company succeeds to retain and develop its advantages. If a company adopts the notion that it is “too strong to be defeated,” it may face a significant and dangerous strategic disadvantage.
It has been said that the advantage that leading-edge retailers such as Dell and Wal-Mart have over their competition isn’t technology; it’s their management. Do you agree? Why or why not?
As corporate history tells us, superior technological abilities have always contributed to efficiency, both strategic and operational, and should be thus treated as one of the most important sources of strategic advantage. However, technology alone is only a part of the story.
German poet Berthold Brecht once wrote:
General, your tank is a powerful vehicle.
It smashes down forests and crushes men.
But it has one defect:
It needs a driver.
General, your bomber is powerful.
It flies faster than a storm
and carries more than an elephant.
But it has one defect:
It needs a mechanic.
General, man is very useful.
He can fly and he can kill.
But he has one defect:
He can think.
(1938)
Although Brecht’s intention was rather different, we can use his short manifesto to gain an important insight on technology in business. That is, technology may make a drastic change in the company’s operations and market performance, but it useless without potent individuals who manage it and know its boundaries. Therefore, it is managers who give the greatest advantage to organizations, partially from making the best use out of available technologies and, to a greater extent, by adequately employing all other resources.
One example that can for this idea is Wal-Mart, whose superior technical abilities have brought about immense improvement in the retailer’s efficiency. Clearly, those technologies were developed or acquired by the Wal-Mart staff and managerial functions. They are also the ones who define how the existing and prospective technologies should be used and are also responsible for making the best use out of the technology. On the other hand, the technological advantages did not help Wal-Mart’s executives when they had to develop the company’s global operations, specifically in the face of great challenges, as occurred in Germany.
In conclusion, superior technological abilities can be a major source of strategic advantage, but “they need a driver.” Only a comprehensive managerial body, which can employ technologies and use them in the market, can bring competitive advantage and wealth to the company. When managers are weak, or cannot grasp the pros and cons of available technologies, they may lose it to their competitors or turn it into a white elephant.
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