Importance of Competitive Advantage: a brief literature review

By John Dudovskiy
June 22, 2014

Importance of Competitive AdvantageCompetitive advantage has been defined as “something that the firm does better than its competitors that give it an edge in serving customers’ needs and/or maintaining mutually satisfying relationships with important stakeholders” (Ferrell, 2012, p.16).

Core competency has been explained by Prahalad and Hamel (1990) as collective learning within organisations in terms of coordinating various kills and increasing the level of integration of multiple streams of technology.

The concept of core competency is proposed by Prahalad and Hamel (1990) as collective learning within organisations in terms of coordinating various kills and increasing the level of integration of multiple streams of technology. Prahalad and Hamel (1990) argue that core competencies can be identified by asking following three questions:

Firstly, which aspects of a product or service can provide it access to other markets? Secondly, which aspects of a product or service are perceived by potential and current customers as increasingly valuable? Thirdly, what are the specific elements associated with brand in general and/or product or service in particular that are difficult to be imitated by competitors?

According to William and Curtis (2008) basing core competencies on product features and capabilities may prove to be counter-productive in terms of adapting to changes in external market environment. In other words, William and Curtis (2008) argue that core competency may become a core rigidity imposing threats to long-term growth prospects of the business.

Practical implications of the concept of core competency are credited for the appreciation of importance of competitive advantage. It has been noted that “competitive advantage results when more customers become strong attached to the products of the organisation” (Sekhar, 2010, p.51).

Boone and Kurtz (2013) discuss the role of imitability of competitive advantages for long-term growth prospects of businesses. Boone and Kurtz (2013) propose that low-order competitive advantages such as cost advantage can be imitated by competitors with access to cheaper resources. Boone and Kurtz (2013) recommend the adoption of strong brand image and technological innovation in various business processes for the sources of competitive advantage, because of higher levels of sustainability of such sources of competitive advantage due to their difficulty being imitated by competitors.

Loudon et al. (2010) propose changes in customer needs and emergence of new customer needs as potential sources of competitive advantage. Although, this idea seems appropriate in theoretical level, Loudon et al. (2010) do not justify this opinion by mentioning relevant examples from real-life business world.

Changes in government regulations are mentioned by Ginter (2013) as opportunity to gain competitive advantage by certain private entities. Specifically, Ginter (2013) refer to introduction of tariffs for the import of certain products in order to support local manufacturers, thus providing cost advantages to local manufacturers to compete with foreign multinational corporations.


Boone, L.E. & Kurtz, D.L. (2013) “Contemporary Marketing” Cengage Learning

Ginter, P.M. (2013) “The Strategic Management of Health Care Organisations” John Wiley & Sons

Ferrell, O.C. (2012) “Marketing Strategy: Text and Cases” Cengage Learning

Prahalad, C.K. & Hamel, G. (1990) “The Core Competence of the Corporation,” Harvard Business Review, Volume 68. Number 3.

Loudon, D., Stevens, R. & Wrenn, B. (2010) “Marketing Management: Text and Cases” Routledge

Sekhar, G.V.S. (2010) “Business Policy and Strategic Management” I.K. International Pvt Ltd

William, J. & Curtis, T. (2008) “Marketing Management in Practice” Routledge

Category: Marketing