Sustaining Competitive Advantage

Question 1

What is a sustained competitive advantage?

Answer 1

The ability of a company to achieve superior profitability and profit growth over time by protecting and extending its initial success.

Question 2

What are the three key factors that determine the durability of competitive advantage?

Answer 2

• Barriers to imitation
• Capability of competitors to imitate
• Dynamism of the industry environment

Question 3

What are barriers to imitation?

Answer 3

They are obstacles that prevent or delay competitors from replicating a company’s distinctive competencies.

Question 4

What are some examples of resource barriers to imitation?

Answer 4

• Economies of scale
• Capital requirements
• Switching costs
• Access to distribution channels

Question 5

What are some examples of competency barriers to imitation?

Answer 5

• Brands
• Talent
• Patents or licenses
• Loyal customer bases
• Influence networks
• Distribution networks

Question 6

What does the VRIO Framework stand for?

Answer 6

Value, Rarity, Imitability, and Organization

Question 7

What is the purpose of the VRIO Framework?

Answer 7

It helps companies assess whether their resources and capabilities can support long-term competitive advantage.

Question 8

What question does the VRIO Framework ask to determine if a resource has value?

Answer 8

Does the resource or capability enable the firm to exploit an opportunity or defend against a threat?

Question 9

What determines if a resource is rare in the VRIO Framework?

Answer 9

If few or no competitors possess it.

Question 10

What makes a resource difficult to imitate according to the VRIO Framework?

Answer 10

Resources protected by patents, high acquisition costs, or complex tacit knowledge are difficult to imitate.

Question 11

Why must a company be organized to capture the value of its resources?

Answer 11

To exploit its valuable, rare, and hard-to-imitate resources to achieve a sustained competitive advantage.

Question 12

What are the benefits of using the VRIO Framework?

Answer 12

• Uncovering sources of competitive advantage
• Better resource allocation
• Supporting broader strategic thinking

Question 13

What are the key traits that influence a competitor’s capability?

Answer 13

• Agility
• Absorptive capacity
• Financial flexibility
• Adaptability

Question 14

What is industry dynamism?

Answer 14

It refers to the speed and frequency with which an industry changes.

Question 15

Why is sustaining a competitive advantage in dynamic industries challenging?

Answer 15

In dynamic industries, innovation, shifting customer preferences, and technological disruption constantly reshape the competitive landscape, making it difficult to maintain an advantage.

Question 16

What must companies do in dynamic industries to maintain a competitive advantage?

Answer 16

• Continuously scan the environment
• Identify emerging trends
• Invest in new capabilities