Are There New Sources Of Competitive Advantage In Markets, Which Are Being Exploited By Forward Looking Organisations In The 21st Century? Use Examples To Illustrate Your Answer.

Competitive advantage in today’s dynamic business environment has moved on enormously since the time Michael Porter (1980) devised the generic strategies. This is supported by Jay Kandampully and Ria Duddy whom state “Traditional approaches to management and marketing are an inadequate means of keeping abreast with an escalating competitive market” (Management Decision 1999). They go on further to suggest “A firm’s competitive advantage is their ability to serve customers present and future needs”.

Forward looking organisations are today exploiting new sources of competitive advantage, relationships is now seen as a key source of creating and sustaining a competitive advantage. The long-term success of a business can be argued is due to there “ability to expand and maintain a large and loyal customer base” (management decision 1999). Many Business's have recognised the importance of customer loyalty such as Tesco’s who have the вЂ?loyalty card’ whereby customers who consistently use their card are rewarded; this will help in building a вЂ?long term’ relationship.

As Doyle and Stern state relationship marketing is a long term, continuous series of transactions between parties. In today’s environment forward thinking organisations are realising “the annual profits generated from a customer who has been with a company for seven years are typically more than five times the amount it generates in the first year” (Doyle Stern). Thus “Organisations have realised that it is five times more expensive to attract a new customer than it is to retain an existing one” (Heskett et al., 1990). Doyle and Stern (2006) make a point that profits today are derived from customers won in the past, this goes along with the previous point.

Sanderson (1998) states Porter’s ideas in 1985 are not as valued today in comparison to those of Hamel and Prahalad (1994) whereby a вЂ?competence’ approach is undertaken “where managers seek to find advantage through an internal analysis of the key resources which the organisation own” (management decision 1998). Sanderson (1998) goes on to reinforce the importance of the customer by delivering his view that “the current shift from customer focus to customer driven can only continue”. Many business today operate under a customer satisfaction ethic, one such is Enterprise Rent-a-Car. Enterprise operates under a customer service based culture and has seen incredible success in the UK within the rental car industry since there entry into the UK market. “The company recorded revenues of $9 billion during the fiscal year ended July 2006, an increase of 8.9% over 2005.” (Datamonitor)

There success according to Jack Taylor the founder of the business was due to following the core values based around exceeding customer expectations. Doyle and Stern (2006) state “customers who rate themselves as вЂ?highly satisfied’ are six times more likely to buy again”

Innovation is a key component for businesses in the 21st Century to stay competitive, as Kandampully and Duddy state “In this highly competitive business world, firms cannot compete on yesterday’s standards and expect to be the winner today”. Due to the business environment “Technological changes today are rapid and commonly discontinuous, leading to relatively short product life spans” (Achrol 19991). Thus forward thinking organisations are aware there is a need for continuous innovation for maintaining a competitive advantage. To withhold a sustainable advantage “firms will have to out innovate the competition continuously” although is innovation alone enough to hold a competitive advantage. As Sanderson (1998) states it’s “Become imperative that firms not only innovate, but also anticipate and create for the future”. By looking into the future organisations may ensure they stay at the top of their business if they do not then the outcome could be the same as the Swiss watch industry. The industry once “manufactured nearly 65 per cent of all watches” which accumulated to “90 per cent of the trade”, although today this is no longer true as they now only “control 10 per cent” (management decision) with the Japanese now having the majority share. The quality of the Swiss watch is still extremely high but the industry failed to keep up with the changing environment and the need to innovate, thus they were no longer meeting the needs or desires of the customers.

Strategic alliances are becoming much more abundant in the 21st Century with globalisation being the main reason. Sanderson (1998) states there are a way for enterprises to get involved within global competition. (Management decision 1998). By creating an alliance it can offer multiple advantages, for instance by combining resources from two different sources then economies of scale may be achieved. Sanderson (1998) puts the point forward that “the alliance is also a means to divide the risk for a sole firm”. Although in practise many problems can arise such as “difficulties in the co-ordination with the partners who may have different or even contradictory targets” (management decision 1998). For example when Air Canada formed “Star Alliance” it helped in creating a competitive advantage as it created a benefit for the customer, Kandampully and Duddy stated the alliance not only provided customers with flexibility in air travel- but established a service advantage that proffers benefits for all those comprising the partnership