Question

Successful businesses outperform their competitors due to some advantages that make them successful. Businesses also remain profitable due to their core competence. Discuss the concepts ‘competitive advantage’ and ‘core competence’.

Answer 1

Competitive Advantage:-
A company will have a competitive advantage when it finds itself in a position that makes it superior to its rivals in the market.Competitive advantage refers to factors that allow a company to produce goods or services better or more cheaply than its rivals. These factors allow the productive entity to generate more sales or superior margins compared to its market rivals.
Competitive advantages generate greater value for a firm and its shareholders because of certain strengths or conditions. The more sustainable the competitive advantage, the more difficult it is for competitors to neutralize the advantage. The two main types of competitive advantages are comparative advantage and differential advantage.
A) Comparative Advantage:A firm's ability to produce a good or service more efficiently than its competitors, which leads to greater profit margins, creates a comparative advantage.
B) Differential Advantage:A differential advantage is when a firm's products or services differ from its competitors' offerings and are seen as superior.
Core Competence:-
Core competence refers to a particular set of skills or strategies that set a company apart from its rivals. If core competence is about harmonizing streams of technology, it is also about the organization of work and the delivery of value.The three fundamental characteristics of core competence are,
1)It creates perceived value for customers.
2)It has a wider market applicability.
3)It makes difficult for the rival firms to imitate.Core competence is the technical and managerial know-how, experience and expertise, that makes a deadly combination of capabilities and resources for the organization, which helps the organization to get an edge over its rivals.
COMPARISON between Core Competence and Competitive Advantage:
1.)Competitive advantage and core competency are inter-connected that both focus on helping companies gain better footing in the market and increase their profits.
2.)Competitive advantage does not ensure that the company will remain successful in the long term, while core competence ensures that the company remains successful for an extended time period.
3.)The impact of competitive advantage on a business is restricted and specific to a given area, while core competence has a more widespread impact on the business because it helps the company progress on the whole.
4.)Core competence is one that fulfills three criteria: provides access to several markets, increases benefit to customers and is difficult to be reproduced by other companies. Competitive advantage, however, exists when a company stands out from the rest of the companies in the market.