Avoiding Failure And Sustaining Competitive Advantage
When a company loses its competitive advantage, its profitability falls. The company does not necessarily fail, it may just have average or below-average profitability and can remain in this mode for a considerable time, although its resources & capital base is shrinking.
Reasons for failure:
The Inertia argument says that companies find it difficult to change their strategies & structures in order to adapt to changing competitive conditions.
b) Prior strategic commitments:
A company’s prior strategic commitment not only limits its ability to imitate rivals but may also cause competitive disadvantage.
c) The Icarus Paradox:
According to Miler, many companies become so dazzled by their early success that they believe more of the same type of effort is the way to future success. As a result, they can become so specialized and inner directed that they lose sight of market realities and the fundamental requirements for achieving a competitive advantage. Sooner or later, this leads to failure.
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