Sustainable Competitive Advantage Through Core Competencies in a Resource Based Approach

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Question: The ability of some firms to sustain longer term competitive advantage relates to their capabilities according to the resource based theory of the firm. Summarise this approach to explain why some firms perform better than others in an industry. Sustainable Competitive Advantage Within all economies there have always been firms that are destined for success and firms that are doomed to failure... or have there? Is this an inevitable outcome predestined by exterior market forces or are there generalizations we can make about the fundamental nature of business performance that will help allow managers and entrepreneurs to shape their firms to make economic profits even into the long run? It is obvious that some firms…show more content…
This creates profit for the firm rather than an individual who can be tempted away from the company by higher remuneration etc, creating a competitive advantage that cannot be easily imitated. • Reputation is an important commercial capability for differentiating products and conveying information about product quality. Surprisingly it is most potent when used in markets where product information is not instantly available. Consumers learn about a product by search activity, immediate experience or long term experience, it is the later where it is most crucial. This concept has become increasingly relevant with the ease of access to the internet for research. However for items such as funeral services, medicines, universities and car hire all services will state excellent service but by the time a fallacy has been discovered it is often too late. Hence reputation is the source by which we make our choices Advertising influences our perception of reputation and expensive advertising leads us to believe the firm will be around for the long term to recoup its costs. The firm must stand by its promises for only a few negative experiences can cause them to lose credibility and all sunk costs of advertising. • Innovation relates to Porters views of keeping costs down or improving ones products at a low cost however when viewing innovation as a distinct capability it
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