Competitive Advantage

Competitive Advantage - Ability to be consistently more profitable than their competitors in the same market or industry. Persistent Performance Differentials are a result of Competitive Advantage.
 * Have to be a genuine legitimate advantage. Not luck or windfall or seasonal or anything else.
 * Not mere differences
 * Not attractive industry characteristics
 * Not competitive necessities
 * CA is necessary for a firm to be MORE profitable

Productivity Differentials within the Industry
 * Productivity = ratio of output obtained to input used.
 * Difficult to compare since firms operate on different scales.
 * TFP(Total Factor Productivity) is used instead which is a productivity measure under the assumption that firms are using the same input.
 * Measuring productivity not profitability. Not a proxy for profitability.
 * Productivity is largely different across firms in the industry and they tend to persist. And high productivity firms tend to last longer.
 * Productivity differences tend to lead to profit differences.
 * Firm-level attributes dictate productivity

Sources of Competitive Advantage
 * Resource + Capabilities = Advantage
 * Resources are inputs and/or specialised assets
 * Capabilities are what a firm can do much better than others or is unique
 * Combining these gives the firms advantage - consistently higher profits
 * This is a resource-based view of the firm
 * Competitive advantage is a method of using assets to create value and capture them. It can be used to increase quality(or niche) for consumer or reduce cost.
 * Not what you have, but what you do with it.

Sustainable Competitive Advantage
 * Hazy? No. HAEzI.
 * Heterogeneity
 * Products are different enough that you retain an advantage. Differentiation essentially. Differentiation has to be significant for competitive advantage to be significant.
 * Imperfect Imitability
 * Difficult to imitate hence competitive advantage is sustained. Can do this through specialised tech, synergy, corporate culture, patents, complicated strategy, experience, laws, network, scale, reputation, switching cost, etc.
 * You don't know you're behind(Perception). You don't know what to improve(Inspiration). You don't want to improve(Motivation). You don't know how improve(Implementation).
 * Early Mover Advantage
 * First usage/domination of asset resources can be a huge advantage. Particularly for natural resources.
 * Can dominate new market. Can get economies of learning more quickly. Can set entry barriers. Can build a reputation/brand first.
 * Can be locked into old tech/methods if staying incumbent for too long.
 * Appropriability
 * Quality of being imitable or reproducible
 * Imperfect Mobility
 * If another firm can't imitate you they can't take away/imitate your core resource or capability.
 * Co-specialisation
 * Resources/Assets that produce more benefit when employed together instead of being individually employed

Strategic Positioning
 * Cost Based Advantage
 * Price reduction < Cost reduction = Profit gained
 * Size, scale, tech, network, management
 * Benefit Based Advantage
 * Price increase > Cost increase = Profit gained
 * Physical characteristics of product, Product quality, After product service, Perception/Image, Presentation
 * Niche/Differentiation Based Advantage
 * Differentiate significantly
 * Target a large niche
 * Produce at low enough cost
 * Have to be very very focused. Have to say NO to a lot of things.