© September 2014

Competitive Advantage Firm’s ability to score profit above the average profitability for all firms in its industry

Distinctive competencies – Firm-specific strengths that allow a company to gain competitive advantage by differentiating its products and/or achieving lower costs than its rivals – Arise from resources and capabilities

Superior quality = customer perception of greater value in a specific product’s attributes Form, features, performance, durability, reliability, style, design Quality products = goods and services that are reliable and that are differentiated by attributes that customers perceive to have higher value

The impact of quality on competitive advantage High-quality products increase the value of (differentiate) the products in customers’ eyes Greater efficiency and lower unit costs are associated with reliable products

The quantity of inputs it takes to produce a given output Productivity leads to greater efficiency and lower costs Employee productivity Capital productivity

The act of creating new products or processes Product innovation Creates products that customers perceive as more valuable, increasing the company’s pricing options Process innovation Creates value by lowering production costs Perhaps the most important building block of competitive advantage

Doing a better job than competitors of identifying and satisfying customers’ needs Superior quality and innovation are integral to superior responsiveness to customers Customizing goods and services to the unique demands of individual customers or customer groups

Sources of enhanced customer responsiveness Customer response time, design, service, after-sales service and support Differentiates a company/its products; leads to brand loyalty and premium pricing