DURABILITY OF COMPETITIVE ADVANTAGE
Durability of competitive advantage refers to the rate at which the firm’s capabilities and resources depreciate or become obsolete. It depends on three factors:
A) Barriers to Imitation:
Barriers are factors which make it difficult for a competitor is copy a company’s distinctive competencies. The longer the period for the competitor to imitate the distinctive competency, the greater the opportunity that the company has to build a strong market positioned reputation with consumers. Imitability refers to the rate at which others duplicate a firm underlying resources and capabilities.
Tangible resources can be easily imitated but intangible resources cannot be imitated and capabilities cannot be imitated.
B) Capability of Competitors:
When a firm is committed to a particular course of action in doing business and develops a specific set of resources and capabilities, such prior commitments make it difficult to imitate the CA of successful firms.
A major determinant of the capability of competitors to imitate a company’s competitive advantage rapidly is the nature of the competitor’s prior strategic commitments & Absorptive capacity.
i) Strategic commitment:
A company’s commitment to a particular way of doing business that is to developing a particular set of resources & capabilities.
ii) Absorptive capacity:
Refers to the ability of an enterprise to identify value, assimilate, and use new knowledge.
C) Dynamism of industry: Dynamic industries are characterized by high rate of innovation and fast changes and competitive advantage will not last for a long time. The most dynamic industries tend to be those with a very high rate of product innovation.
Ex: Computer industry.
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