Market: Sustainable Competitive Advantages

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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.
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This strategy shares similarities in approaches such as Resource-Based View (RBV), Core Competence View (CCV) and Dynamic Capabilities View, which suggest that firm’s resources or capabilities are the main sources of competitive advantages for the firm.

Resource-Based View (RBV)
RBV emphasises on the internal aspects of the firm in achieving its competitive advantage. Unlike Porter’s Five Forces, which focuses mainly on the external environment of the firm, RBV takes into account of the firm’s resources and internal capabilities as the primary source of competitive advantage. Through application of new technologies and production of firm’s own new products, the firm develops unique capabilities and resources. These resources provides competitive advantage when the firm accesses and uses these resources effectively. (Worthington et al, 2001)

RBV focus on the accumulation and exploitation of firm-specific assets. Firms create innovations by exploiting these assets, which generates competitive advantage. Companies like IBM seem to have followed such strategy of accumulating valuable technology assets that are being protected by intellectual property rights. (Teece & Pisano,
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However, the next approach considers the changing environment while pursing competitive advantage.

Dynamic Capabilities View (DCV)

As stated by Teece and Pisano (1998):

“…Competitive advantage of firms stems from dynamic capabilities rooted in high performance routines operating inside the firm, embedded in the firm’s processes, and conditioned by its history.” (p.553)

Dynamic capabilities have been defined as abilities (or capacities) but also as processes or routines. (Barreto, 2010)

Firms should develop firm-specific capabilities and renewing their competences to respond to shifts in the business environment. Successful firms are those that can demonstrate timely responsiveness, rapid and flexible product innovation, coupled the management capability to effectively coordinate and redeploy internal and external competences. (Teece & Pisano, 1998)

The key step related to dynamic capabilities (DC) is to identify the foundations upon which distinctive and difficult-to-replicate advantages can be built in. (Teece & Pisano,
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