Competitive Advantage

Abstract

This chapter defines what competitive advantage means to a company and describes the traditional types of competitive advantage that a company may possess. For cost advantage, the major drivers of cost are explained to provide an understanding of how they, either individually or in combination, cause the cost of a company’s activity. Similarly, for differentiation, the principal drivers of uniqueness are explained, including how they interact to create sustainability of differentiation. The chapter also looks at how advances in Information Technology (IT) affect competition and discusses the sources of competitive advantage. In addition, it covers the strategies that a company needs to pursue to exploit the technology so as to gain an advantage and protect it from rivals. In particular, the attention is shifted to neo-classic competitive advantages, which are generated from business strategies that avoid the classic trade-offs between mass production and invention models, where IT plays a key role by allowing a company to implement improvements more quickly. On the need to sustain a competitive advantage, the chapter reviews Porter’s concept of sustainability and explains the main factors involved. In a construction context, the nature of competition is described. The key sources of competitive advantage for international contractors are reviewed with respect to their distinct abilities to operate in the global markets. It is followed by illustrating how the sources can potentially be converted into critical success factors for the companies using the five cases presented in chapter 1. The chapter concludes with a summary of the main points covered on competitive advantage.