The development of the concept of competitive advantage and how these Literature review

The development of the concept of competitive advantage and how these ideas have been taken up and have influenced the enginee - Literature review Example Competitive advantage not only provides firms with the necessary edge but it also ensures that they are able to create and maintain niche position in the market. Hence, elements of competitive advantage become major tools of survival in highly competitive business environment of contemporary times. The paper would be mainly discussing the development of the concept of competitive advantage of firms and it is exploited by businesses to maintain market position. Concept of competitive advantage The concept of competitive advantage is complex in its scope and therefore is difficult to define with conclusive authority. Many scholars have tried to unravel the factors that can be applied universally for all businesses but have failed to do so. Though early scholars had tried to identify strength and weaknesses of business strategies and plans that could be exploited by businesses to compete against their rivals, the words ‘competitive advantage’ remained elusive (Andrews, 1971 ; Ackoff, 1970). Interestingly, Penrose (1959) and later Ansoff (1965) had used the word but only to describe as how to compete. For them, various components of business strategies were important issues within competitive advantage and were required to be identified as strength or weaknesses so that they can be used to compete against the rivals in industry. ... It therefore, provides huge possibility for factors or elements that could still be used by firms to gain competitive advantage. The generic strategies vis-a-vis cost leadership, differentiation and focus were promoted as major ingredients of competitive advantage by Porter. But in the contemporary environment of recessive trends and changing format of social structure, these factors are used by all firms. They have become an easy means of survival but in the tough times, they could be caught in the vicious war of price cut leading to loss and closure. Thus, something ‘more’ is required for firms to gain competitive advantage or CA. Hay and Williamson (1991: 42) describe CA as capabilities which give the firms relative advantage against the rivals. Barney (1991: 99) also asserts that CA is value creating strategy that is unique and is not used by competitors. Both scholars were aware that CA is important aspect of businesses but were deficient in describing the elements that constitute CA. The definition was abstract in its content but at the same time, gave invaluable insight into the importance of having competitive advantage. Kay (1993: 24) believed that CA is a measurable financial performance outcome that can be defined as ‘ratio of added value to the firm’s gross or net output’. Most important is the fact that Kay had used it as a tangible asset or value addition to the product and services that help the firms to improve their financial outcome. The criteria lose its essence in the fast transforming scenario of emerging new paradigms in intangible assets and business compulsions. Competitive advantage cannot be confined within the context of tangible products and viewed objectively for its value added services. The transforming values have