Sustainable Competitive Advantage

Abstract

This note discusses the sources of competitive advantage for firms, including scale economies, network economies, counter positioning, switching costs, branding, cornered resources, and process power. It also introduces the features of sustainable competitive advantage, offers examples, and includes a framework for assessing the sustainability of each source of competitive advantage. This note is taught at Darden in digital marketing and would also be suitable in a module covering competitive marketing strategy.

Excerpt

UVA-M-1015

Jan. 12, 2022

Sustainable Competitive Advantage

Prosperity attracts predation, which discourages the investments required for civilization.

—Ernesto Dal Bó, Pablo Hernández, and Sebastián Mazzuca

Beginning with the ancient Egyptians and the Sumerians, civilizations have struggled with a sociological paradox. Natural resources like rivers and fertile lands offer the ingredients for prosperity. But this prosperity also attracts invaders. Consider Egypt: the Nile River provided the fertile lands needed for farming, which allowed the Egyptians to prosper and create wealth for themselves. The Egyptian civilization was able to survive invasion because it had natural barriers. Deserts to the east and west of the Nile and the sea to the north functioned as natural barriers that protected the people and resources of Egypt from invaders (see Figure 1). The result was one of the longest-lasting peaceful civilizations.

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Keywords: sources of competitive advantage, scale economies, network economies, counter positioning, switching costs, branding, cornered resources, process power, sustainable competitive advantage, SCA, Toyota, TQM, total quality management, Hamilton Helmer