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Having defined positioning, we can now begin to answer the question, What is strategy? Strategy is the creation of a unique and valuable position, involving a different set of activities. If there were only one ideal position, there would be no need for strategy. Companies would face a simple imperative-win the race to discover and preempt it. The essence of strategic positioning is to choose activities that are different from rivals. If the same set of activities were best to produce all varieties, meet all needs, and access all customers, companies could easily shift among them and operational effectiveness would determine performance.
Sustainable Competitive Advantage
h Unique competitive position for the company
h Activities tailored to strategy
h Clear trade-offs and choices vis-a-vis competitors
h Competitive advantage arises from fit across activities
h Sustainability comes from the activity system, not the parts
h Operational effectiveness a given
The question of value
To begin evaluating the competitive implications of a firms resources and capabilities, managers must first answer the question of value Do a firms resources and capabilities add value by enabling it to exploit opportunities and/or neutralize threats?
The answer to this question, for some firms, has been yes. Sony, for example, has a great deal of experience in designing, manufacturing, and selling miniaturized electronic technology. Sony has used these resources to exploit numerous market opportunities, including portable tape players, portable disc players, portable televisions, and easy-to-hold 8mm video cameras. M has used its skills and experience in substrates, coatings, and adhesives, along with an organizational culture that rewards risk taking and creativity, to exploit numerous market opportunities in office products, including invisible tape and Post-It(TM) Notes. Sonys and Ms resources--including their specific technological skills and their creative organizational cultures--made it possible for these firms to respond to, and even create, new environmental opportunities.
Although a firms resources and capabilities may have added value in the past, changes in customer tastes, industry structure, or technology can render them less valuable in the future. General Electrics capabilities in transistor manufacturing became much less valuable when semiconductors were invented. American Airlines skills in managing their relationship with the Civil Aeronautics Board (CAB) became much less valuable after airline deregulation
rareness
That a firms resources and capabilities are valuable is an important first consideration in understanding internal sources of competitive advantage. However, if a particular resource and capability is controlled by numerous competing firms, then that resource is unlikely to be a source of competitive advantage for any one of them. Instead, valuable but common (i.e., not rare) resources and capabilities are sources of competitive parity. For managers evaluating the competitive implications of their resources and capabilities, these observations lead to the second critical issue How many competing firms already possess these valuable resources and capabilities?
Consider, for example, two firms competing in the global communications and computing industries NEC and AT&T. Both these firms are developing many of the same capabilities that are likely to be needed in these industries over the next decade. These capabilities are clearly valuable, although--since at least these two firms, and maybe others, are developing them--they may not be rare. If they are not rare, they cannot--by themselves--be sources of competitive advantage for either NEC or AT&T. If either of these firms is to gain competitive advantages, they must exploit resources and capabilities that are different from the communication and computing skills they are both cited as developing. This may be part of the reason why AT&T recently restructured its telecommunications and computer businesses into separate firms.(n)
While resources and capabilities must be rare among competing firms in order to be a source of competitive advantage, this does not mean that common, but valuable, resources are not important. Indeed, such resources and capabilities may be essential for a firms survival
imitability
A firm that possesses valuable and rare resources and capabilities can gain, at least, a temporary competitive advantage. If, in addition, competing firms face a cost disadvantage in imitating these resources and capabilities, firms with these special abilities can obtain a sustained competitive advantage. These observations lead to the question of imitability Do firms without a resource or capability face a cost disadvantage in obtaining it compared to firms that already possess it?
Obviously, imitation is critical to understanding the ability of resources and capabilities to generate sustained competitive advantages. Imitation can occur in at least two ways duplication and substitution. Duplication occurs when an imitating firm builds the same kinds of resources as the firm it is imitating. If one firm has a competitive advantage because of its research and development skills, then a duplicating firm will try to imitate that resource by developing its own research and development skills. In addition, firms may be able to substitute some resources for other resources. If these substitute resources have the same strategic implications and are no more costly to develop, then imitation through substitution will lead to competitive parity in the long run.
So, when will firms be at a cost disadvantage in imitating anothers resources and capabilities, either through duplication or substitution? While there are numerous reasons why some of these internal attributes of firms may be costly to imitate, most of these reasons can be grouped into three categories the importance of history in creating firm resources; the importance of numerous small decisions in developing, nurturing, and exploiting resources; and the importance of socially complex resources
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