Sustainable Competitive Advantage

In this competitive economy, firms nowadays are concern with ways to achieve not just competitive advantage, but sustainable competitive advantage. Firms use some version of strategy and approach in achieving the desired competitive advantage. This strategy inevitably requires incorporating ‘innovation’ into their strategies as well as into their business models, and nonetheless, into the corporation itself.

Firms face difficulties in sustaining competitive advantage due to the rapid globalisation and commercialisation in goods and services. Therefore, firms see the need to innovate constantly, which in the process uses innovation to justify their strategies as innovation provides the primary means of differentiating a product from its competitors.

Traditionally, price differentiates all products in the market. If the firm is unable to use price as the differentiator for its product, then the firm has to find other means of differentiation. Intense competition has left firms with no other alternatives, but to innovate, in order to stay in business and obtaining competitive advantage. (Westland, 2008)

Freeman and Soete (1997) suggest that firms can turn to alternative options or strategies, which help firms to innovate and survive with the changing world science and technology. These strategies involve a variety of different combinations of using resources, scientific and technical skills; forming alliances; licensing innovations; attempts technology and market forecasting; and attempts to develop a variety of new products and processes on their own. (Freeman & Soete, 1997)

This article focuses on some of the theoretical approaches that suggest resources and capabilities as their sources of competitive advantage and that firms will develop its resources or capabilities to achieve competitive advantage. This article also looks into two practical examples of companies from different sectors, providing some evidence of the application of theoretical concepts with development of resources or capabilities, and eventually achieving competitive

Core Competences View (CCV)

CCV draws upon RBV’s idea of firm’s resources as the main sources of competitive advantage, and that core competence (CC) does not diminish with use. Unlike physical assets, which deteriorate over time, competencies are enhanced as they are applied and shared, which indirectly increase competitive advantage (Prahalad & Halem, 1990).

Prahalad and Halem (1990) highlighted that the firm’s management’s ability to consolidate corporate-wide technologies and production skills, into competencies that helps businesses to adapt quickly to changing opportunities. The ability to use these competences to produce unanticipated products, are the real sources of advantage in long run. (Prahalad & Halem, 1990)

CC are the accumulation of learning to coordinate various production skills and integrate multiple streams of technologies. It is about harmonising technology, organisation of work and delivering of value (Prahalad & Halem, 1990). These CC can be a technological expertise or an organisational capacity to deploy. Thus, making them firm specific and non-transferrable (Coombs,