How a firm can gain competitive advantage

For this assignment, we were to select 2 ways a firm can gain competitive advantage and discuss it.

I think product/service differentiation is important for a firm to secure competitive advantage, especially if a firm is in or entering a fairly dense industry. This is particularly important because in an industry that has been around for a while, any firm needs to find a unique point of differentiation, otherwise they would be doing the same as existing firms. Why would customers want to change to another firm then? Even if a firm isn’t entering a dense industry, that firm still needs to be unique to secure competitive advantage. A firm that is maturing in a dense industry can restructure themselves to be unique. This can be done by looking at what is currently being offered by rivalries, what/how customers feel about what is being offered and what else can be done to increase market share and thereby gain a competitive advantage. An example of a firm that gained competitive advantage by being unique, as compared to competitors in the market n a fairly dense industry is Apple.

I think Apple is a good example because they’ve been around for many years but was never as popular as it has been in recent years. I think their differentiating point is their changes in technology –being more innovative, such as creation of iPods, iPhone, better MAC computers, etc. All of these products and services they offer are all correlated with one another. I also think their campaign is very modern and appleaing to a vast majority of the public. They also offer customers many services associated with their products and also perhaps the first hands on experience customers can gain with all the products they offer before the customer decides to buy. Competitors in the industry haven’t really gained much of a competitive advantage in recent years because it seems as though they don’t really have a campaign which differentiates themselves from other brands. For instance, I think Apple’s colors are unique to their company. PCs are often dark, dull colors; as are other electronics. Rarely do they come in Apple’s signature white and multi colors. Also, what differentiates them from others is that all their products seem to correlate with one another –iPods are in the iPhone, you need a dock for the iPod, skins compliment the iPods, etc. It seems once a customer chooses to purchase any one of their products, they are most likely to purchase another because of the positive experience they’ve gained from using one of their products/services.
Another example is Toyota’s emphasis on safety and fuel efficiency. Although Toyota isn’t a pioneer in the automobile industry, they’ve managed to gain competitive advantage in this market by being a pioneer in a new idea for this market, thereby differentiating themselves from their competitors. With oil prices rising substantially, Toyota is one of the first companies to introduce fuel efficient cars. Although fuel efficient cars have not saturated the market, Toyota’s emphasis on safety and reliability gains also them a competitive advantage; they’ve gained a large market share, particularly in the United States in recent years, well over domestic automobile companies like Ford.
Another important way a firm can secure competitive advantage is being the first mover/first entrant into the market. This is important because if a firm is the first to enter the market, this will establish a reputation amongst other firms who may decide to enter the industry later on. By being the first entrant, this can also foster greater customer loyalty. Customers know that you are the first to create or break into the industry with your product/service; they will trust that by being able to enter the market first and being able to stay in the market for a period of time, you have something customers know and trust. Also, being “original” may allow customers to think of your company first when they want the particular service/product offered. Since you are the pioneer, customers can automatically think of you and thus, purchase from you.

An example of a firm who has secured competitive advantage by being the first mover/entrant into the market is Microsoft Corporation. Microsoft is the pioneer of user friendly software products for computers. They created the Microsoft Windows operating system for computers and the Microsoft Office software. Both have helped Microsoft gain a competitive advantage in the computer software market, because practically all PCs use Microsoft software. Even some Apple Macs which never used Microsoft software has adjusted to using it. It seems people are so used to using the Microsoft operating system and Office that it is difficult for people to adapt to another program/software. Almost every PC one buys has Microsoft programs in it and even if it doesn’t (like the Apple MAC), it can be purchased should a customer feel they want Microsoft instead. It’s almost standard that to purchase a PC is to expect Microsoft software installed in it. That is why being a pioneer like Microsoft is has gained them a competitive advantage.

Another example would be eBay. eBay is the pioneer of online auctioning between two parties. They were the first to enter the market with the concept of two parties selling products/service to one another through online auctioning and to this day, they are still the leader in which many people from around the world do online auctioning through. I know whenever I think of auctioning something, trying to find something really rare or even slightly cheaper, eBay comes to mind. I think eBay has a high competitive advantage because they were the first to enter the market with this concept and they’ve been around for a while, thus they’ve established a reputation for online buying/selling at auctioned prices. Other sites such as Craig’s list have obtained a portion of eBay’s market share, but eBay still has the advantage since they were the first to enter the market. Buyers/sellers are used to their technique for trading and have created a selling record tract on eBay’s site, which would bring them back to the site.