The term competitive advantage refers to the ability gained through attributes and resources to perform at a higher level than others in the same industry or market (Christensen and Fahey 1984, Kay 1994, Porter 1980 cited by Chacarbaghi and Lynch 1999, p.
[1] The study of this advantage has attracted profound research interest due to contemporary issues regarding superior performance levels of firms in today's competitive market.
It is aimed at creating defensive position in an industry and generating a superior ROI (return on investment ).
A differentiation advantage arises when a business can provide different products and services from its competitors which are more closely aligned to customers' needs.
Competitive advantage rests on the notion that cheap labor is ubiquitous and natural resources are not necessary for a good economy.
Competitive advantage attempts to correct this issue by stressing on maximizing scale economies in goods and services that garner premium prices (Stutz and Warf 2009).
Also, it provides the understanding that resources held by a firm and the business strategy will have a profound impact on generating competitive advantage.
Powell (2001, p. 132)[10] views business strategy as the tool that manipulates resources and creates competitive advantage.
[12] According to well-established variational methods, a business pursuing an optimal strategy will follow the shortest economic path that makes the most efficient use of resources.
If businesses are not making a large enough profit, Porter recommends finding a lower-cost base such as labor, materials, and facilities.
[16] When businesses can find the perfect balance between price and quality, it usually leads to a successful product or service.
A product or service must offer value through price or quality to ensure the business is successful in the market.
Success comes to firms that can deliver a product or service in a manner that is different, meaningful, and based on their customers' needs and desires.
Deciding on the appropriate price and quality depends on the business's brand image and what they hope to achieve in relation to their competition.
For firm knowledge to provide a competitive advantage, it must be generated, codified, and diffused to others inside the organization.
[20] Firms with a knowledge-based core competency can increase their advantage by learning from "contingent workers" such as technical experts, consultants, or temporary employees.
Moreover, interactions with contingent workers can provoke the firm to codify knowledge that was tacit in order to communicate with the temporary employees.
[23] Modern knowledge management theory now suggests that serendipity can be tapped as a strategic advantage for building a core competency.
In the end, real advantage can be created by the management's ability to unify corporate-wide technologies and production skills into competencies that capacitate individual businesses to adapt quickly to changing opportunities.
[28] Gray and Balmer (1998) say that a strong image can be built through a coordinated image-building campaign and reputation, on the other hand, requires a praiseworthy identity that can only be shaped through consistent performance.
This positioning, or competitive advantage, is based on creating the right "image" or "identity" in the minds of the target group.