DURABILITY OF COMPETITIVE ADVANTAGE

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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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