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[Volume 7, Issue 1(14), 2018]

THE COMPETITIVE ADVANTAGES THEORETICAL ASPECTS

M. IŠORAITĖ
Vilniaus kolegija/The University Applied Sciences, 08105, Lithuania
[email protected]

Abstract
The Article analyses the concept of competitive advantages, creating competitive advantages, model competitive
advantages. It is argued that competitive advantage is influenced by the factors such as infrastructure, the
complexity of the business, labor and goods market efficiency, financial market complexity, innovation,
technology, institutions of higher education and training, and macroeconomics. It is also believed that equally
important for are both external as and internal factors These factors determine whether a company is able to
defeat its rivals and lead the market. Competition has its theoretical models and competitive advantage in the
development of strategies as part of the targeted helps companies gain a competitive advantage over the
competition. It is important to regularly monitor and examine the target competitors' strategies to quickly
respond to their actions in order to grasp how to overcome them and find themselves in the leadership position it
so that to survive and conquer the market.

Key words: competitive advantages, creating competitive advantages, model competitive advantages,
competition, competitors

JEL Classification: M30, M39

I. I NTRO DUCTION

Every company in the market has a competitive strategy that improves a rapidly changing business
environment and globalization in order to increase profits and customer loyalty. The company is constantly
looking for new opportunities and the ways to make their operations more efficient. For some companies major
important factors are competitive strategies and plans for strengthening the competitive advantage, while others
focus on the company‘s growth, the number of operations and investigations. Each company seeks to attract new
customers, and also to retain them and to look for ways for how better adapt to consumer needs and satisfy them.
The company does not need to offer the lowest prices on the market and a better quality product than the
competition, but it is important to react faster than the competition in a changing environment, adapt to market
developments, as well as innovation in the company's activities. The article purpose – analysis of the competitive
advantages theoretical aspects. Research methods – scientific literature analysis, comparison method.

II. CONCEPT OF COMPETITIVE ADVANTAGES

Korsakienė (2012) argues that the competitive advantages include positional and performance advantage
relative to competitors due to the business held and distributed resources and capabilities advantage. Therefore,
the competitive advantage is defined as a significant advantage over its competitors due to the cost allocation and
the results of the operation of which depends on the positioning strategy. The competitive advantage in
preventing the acquisition of goods or service provider to relax, because competitive advantage can be copied.
Competitive wars are going on constantly, so there's no guarantee that competitive advantage will be maintained
for long (Sekliuckienė, Langvinienė (2011)).
Duncan, Gintei , Swayn (1998) stated “assess the extent of the competitive advantage or disadvantage
possessed by each of the identified strategic resources and capabilities. Alternative values are assigned according
to the following definitions; Inadequate. The resource or capability is below the minimum required to be in the
business.:
Adequate. The resource or capability is the minimum required to be in this business or to minimally
compete.
Attractive. The resource or capability is better than the minimum required to compete but does not
represent a particular advantage (or disadvantage in the case of a weakness). It will merely get the attention of
appropriate individuals.
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[Volume 7, Issue 1(14), 2018]

Potential. The resource or capability is sufficient to attract attention and represents an important strategic
consideration.
Competitive. The resource or capability represents a clear competitive advantage/disadvantage relative to
members of the strategic group.
Distinctive. The resource or capability cannot be duplicated by competitors.”

Table 1 Concept of competitive advantages

Author Concept of competitive advantage

Porter (1980) Competitive advantage is at the heart of a firm’s performance in competitive markets.
Competitive advantage means having low costs, differentiation advantage, or a
successful focus strategy. Competitive advantage grows fundamentally out of value a
firm is able to create for its buyers that exceeds the firm’s cost of creating it.
Saloner, Shepard, Most forms of competitive advantage mean either that a firm can produce some
Podolny (2001) service or product that its customers’ value than those produced by competitors or that
it can produce its service or product at a lower cost than its competitors.
Wang (2014) Competitive advantage is obtained when an organization develops or acquires a set of
attributes (or executes actions) that allow it to outperform its competitors. The
development of theories that help explain competitive advantage has occupied the
attention of the management community for the better part of half a century.
Ghemewat (1986) The competitive advantage is more sustainable the greater the number of sources of
cost or differentiation advantages.
Barney (1997) The competitive advantage is considered sustainable if those resources are also
nonimitable (i.e., cannot be easily duplicated by competitors), nonsubstitutable (i.e.,
other resources cannot perform the same function), and nontransferable (i.e., cannot
be acquired in the marketplace).
Hunt (2000) Modern business strategy maintains that the strategic imperative of a firm should be
sustained, superior financial performance and the belief that this goal can be achieved
through a sustainable competitive advantage in the marketplace.
Kay (1993) Competitive advantage is a deceptively simple idea of assessing a company’s
capabilities and market position by how they give it advantage 4 relative to
competitors’. Competitive advantages are ephemeral and only worth as much as the
value that the market places on them.
Powell (2001) Competitive advantage has generated a large volume of scholarly output, both
theoretical and empirical; firms do, by all accounts, attempt to identify, create and
leverage competitive advantages; and competitive advantage is universally accepted
in strategic management courses and textbooks as an essential concept in strategy.
Urbancová (2013) The innovative activity of organisations significantly influences competitiveness
which is based on inimitable skills and abilities. Achieving a higher competitiveness
by means of innovations means producing less costly products of better quality
compared to those manufactured by competitors.

Hanningtone, Struwig, Smith (2013) stated that Competitive advantage is sustainable when rival firms
give up plans to imitate the resources of the competitors or when barriers to imitation are high. When the
imitative actions have come to an end without disrupting the firm’s competitive advantage or when it is not easy
or cheap to imitate, the firm’s competitive strategy can be called “sustainable”.

III. CREATING COMPETITIVE ADVANTAGES

Every company that wants to be competitive must pay proper attention to its competitors, to investigate
them, as well as understand the target customers. In order to gain an advantage over the competition, it is
important to present such proposals that fulfill the needs of the target users to a greater extent than the competitor
offers. When choosing a marketing strategy the company needs to take into account competitors' strategies and
target the needs of users, so it is of utmost importance to analyze the competition.
Competitor analyses are the following:
• Companies setting their competitors - competitors, companies offering the same services or products to
the same customer groups by offering a similar price. Also, competitors may be considered to be companies that
are not only produce similar or identical goods and services, but also meet the same needs.
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• Competitor definition of the objectives - It is important to find out not only the competitor's profit
targets, but also how important are competitor market share growth, service, technological leadership and other
targets.
• competitors setting strategies - must know the characteristics of competing products, quality, range of
prices and their policies, the subtleties of customer service, sales incentive programs and distribution chains. It is
also necessary to study the competitors in product development and research, purchasing, finance and production
strategies.
• Competitor assessing strengths and weaknesses - the company has to find a few years information about
its competitors, identify their goals, strategies and operational efficiency. Intentions to obtain the necessary
information are the primary customers, dealers and suppliers of marketing research. In search of flaws
competitors, the company has to look for any assumptions about their competitors or business inefficiencies in
the markets.
• Competitor retaliation rating - Some of the actions of competitors react slowly, thinking that they have
loyal customers pay, quickly identify the behavior of competitors or does not have a sufficient budget to respond
to them. Others react to price reductions, but pay attention to the intensification of advertising competitors, other
companies in all actions of the competitors react instantly and do not allow them to occupy the market, but there
are also those whose action is unpredictable, even on the basis of economic, historic or other data.
• Competitor Selection - When a company wants to use the least possible time and resources, it uses weak
competitors, but in order to reveal their potential and get a higher return, seeks to overcome stiff competition.
Some competitors behave as expected, in compliance with industry rules to ensure market stability, are able to
set prices according to costs, encourage other companies to reduce prices or increase differentiation. However,
the other competitors in the market are not winning, but buying, strong risk, deliberate trying to destabilize the
industry.
The company that wants to create for itself an effective marketing strategy must get much information
about its competitors. It is important to constantly analyze the differences between the major competitors and
their products, pricing, sales support programs and distribution chains. In carrying out these actions the company
determines its own potential strengths and weaknesses and becomes more effective in its marketing campaign
against the competition.
According to Kotler (2012), in the competition it is important to develop competitive strategies that would
stand out from its competitors, but firstly it is essential to know its market position, goals, capacities and
resources. Kotler distinguishes four different positions:
1. The leader - the company that owns the largest market share in the industry. The Other company adapts
to its new products, price changes, product distribution and support;
2. Contender for the leader its industry is in the second position only to the leaders trying to capture a
larger market share, attacking the leader;
3. Follower - the company does not want to change the situation in the market and will maintain the
current share of the market, fearing more to lose than gain profit;
4. The niche filler - services to small segments of the market, other companies go unnoticed or ignored.
This market position specifying the strategy take the company or it could be viewed as a dangerous
competitor to the market leader, and it only serves the remaining segments, which are not relevant to large
companies governing market conditions and constantly seeking to conquer the rest of the market, as the
competitive struggle never ends.
Competitive advantage is divided into 3 strategies:
1. Pricing strategy - important for companies that produce and sell standardized products. The idea is to
reach a huge market and audience. In order to take this strategy requires significant investments that help
increase productivity, and improved product manufacturing processes of the organization, interspersed products.
2. Distribution strategy - includes the company, which produces and sells strongly individualized goods.
As products and services are unique, this strategy allows the firm strongly dominate and also promote the
growing attention and an advantage over the competition.
3 Recollection strategy - this strategy allows the company to focus on narrow market segments in which it
will try to become superior to the competitors, optimizing the allocation price. These strategies take small and
medium-sized firms, in order to avoid direct contact with stronger rivals.
In summary, it can be said that competition is the engine that encourages companies to quickly respond
to arising situations and adapt to the environment, to follow competitors' actions and mistakes, share and learn
from others. This is a business basis, which drives companies to grow, innovate and of course to meet the
changing needs of their customers. Various scientists do not agree on a precise definition of competitive
advantage but they reveal a variety of factors, and analyze them in various aspects.
It is argued that competitive advantage is influenced by the factors such as infrastructure, the complexity
of the business, labor and goods market efficiency, financial market complexity, innovation, technology,
institutions of higher education and training, and macroeconomics. It is also believed that equally is important
 ECOFORUM
[Volume 7, Issue 1(14), 2018]

for both external as internal factors. These factors determine whether a company is able to defeat its rivals and
lead the market. Competition has its theoretical models and competitive advantage in the development of
strategies As part of the targeted help companies gain a competitive advantage over the competition. It is
important to regularly monitor and examine the target competitors' strategies to quickly respond to their actions
in order to grasp how to overcome them and find themselves in the leadership position it, to survive and conquer
the market.

Determination Competitor Competitors' Competitors' Competitors' Deciding

company's goals definition strategies strengths and responses which rivals
competitors definition weaknesses evaluation attacking and
evaluation dodging

Figure 1. Competitor analysis phases (Kotler, Amstrong (2012))

The company, which wants to create an effective marketing strategy, must get as much information about
their competitors as possible. It is important to constantly analyze the differences between the major competitors
and their products, pricing, sales support programs and distribution chains. In carrying out these actions the
company determines its own potential strengths and weaknesses and develops more effectively in its marketing
campaign against the competition.
According to Kotler (2012), in the competition it is important to develop competitive strategies that would
stand out from its competitors, but the first need is to know your market position, goals, capacities and resources.
Kotler distinguishes four different positions:
1. The leader - the company that owns the largest market share in the industry. The Other company adapts
to its new products, price changes, product distribution and support;
2. contender for the leader - your industry is in the second position only to the leaders trying to capture a
larger market share, attacking the leader;
3. Follower - the company does not want to change the situation in the market and will maintain the
current share of the market, fearing more to lose than gain profit;
4. The niche filler - services to small segments of the market, other companies go unnoticed or ignored
(Kotler, Amstrong (2012).
This market position specifying the strategy take the company or it could be viewed as a dangerous
competitor to the market leader, and it only serves the remaining segments, which are not relevant to large
companies governing market conditions and constantly seeking to conquer the rest of the market,since the
competitive struggle never ends.
When position market taken in policy-making. Alina-Daniel says that competitive advantage is divided
into 3 strategies:
1. Pricing strategy - important for companies that produce and sell standardized products. The idea is to
reach a huge market and audience. To take this strategy requires significant investments that help increase
productivity, and improved product manufacturing processes of the organization, interspersed products.
2. Distribution strategy - it takes the company, which produces and sells strongly individualized goods.
As products and services are unique, this strategy allows the firm strongly dominate and also promote the
growing attention and an advantage over the competition.
3 of recollection strategy - this strategy allows the company to focus on narrow market segments in which
they will try to become superior to the competitors, optimizing the allocation price. These strategies take small
and medium-sized firms, in order to avoid direct contact with stronger rivals. (Stanikūnas (2008)).
In summary, it can be said that competition is the engine that encourages companies to quickly respond to
arising situations and adapt to the environment, to follow competitors' actions and mistakes, share and learn from
others. This is a business basis, which drives companies to grow, innovate and of course to meet the changing
needs of their customers. Various scientists do not agree on a precise definition of competitive advantage but
they reveal a variety of factors, and analyze them in various aspects.

IV. MODEL COMPETITIVE ADVANTAGE

Companies are constantly looking for the ways to make their operations more efficient try to make their
products more competitive and at the forefront of the market, to attract more long-term customers.
Manufacturing of its products is the fight for customers, discussed how best to adapt and meet their needs.
Therefore, it is important to analyze and figure out a company's competitive advantage model for carrying out its
activities. Mr Porter - one of the first scientists who analyzed in detail the competitive advantage of its resources
and formed the five forces model. (Fig. 2) According to this model, the researchers investigated the possibilities
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[Volume 7, Issue 1(14), 2018]

of competitive advantage. Analysis to evaluate the factors that determine the competitiveness of the essence and
growth.
Each of these five forces (suppliers, new competitors, customers, substitutes, and existing competitors in
the market) are considered structural factors: threat of new competitors, the bargaining power of buyers,
bargaining power of suppliers, threat of substitutes. These factors affect the country, the company and the
industry in competition. It is important to imagine what could create barriers to competitors that the company at
the forefront and would not force out of the market; which must be buyers and suppliers that do not express their
dissatisfaction and do not claim against the requirements; as customers to assess the company, its products and
services, which may see advantages against competitors' products; the operation of competition with other
companies. Following the analysis of all these factors and their parts it is easier to get a competitive advantage.
This model shows in which areas the company, industry or country is superior to competitors, and how it is best
used.

Entry Barriers Rivalry Determinants

• Economies of scale • Industry growth
• Proprietary product differences • Fixed (or storage) costs / value added
• Brand identity • Intermittent overcapacity
• Switching costs • Product differences
• Capital requirements
New Entrants • Brand identity
• Access to distribution • Switching costs
• Absolute cost advantages • Concentration and balance
Proprietary learning curve Threat of • Informational complexity
Access to necessary inputs • Diversity of competitors
Proprietary low-cost product design
New Entrants • Corporate stakes
• Government policy • Exit barriers
• Expected retaliation
Industry
Bargaining Power Competitors Bargaining Power
of Suppliers of Buyers
Suppliers Buyers

Intensity
of Rivalry
Determinants of Buyer Power
Determinants of Supplier Power
• Differentiation of inputs
• Switching costs of suppliers and firms in the industry Threat of Bargaining Leverage Price Sensitivity
• Presence of substitute inputs • Buyer concentration vs. • Price/total purchases
• Supplier concentration
Substitutes
firm concentration • Product differences
• Importance of volume to supplier • Buyer volume • Brand identity
• Cost relative to total purchases in the industry • Buyer switching costs • Impact on quality/
• Impact of inputs on cost or differentiation relative to firm performance
• Threat of forward integration relative to threat of Substitutes switching costs • Buyer profits
backward integration by firms in the industry • Buyer information • Decision maker’s
• Ability to backward incentives
Determinants of Substitution Threat
integrate
• Relative price performance of substitutes
• Substitute products
• Switching costs
• Pull-through
• Buyer propensity to substitute

Figure 2 Porter's five forces model (Porter (1990)

According Korsakienės (2011), the integrated competitive advantage model based on the following
aspects: competitive advantage due to environmental factors, focusing on the actions of competitors and
consumers; resource-based theory of competitive advantage that objects - the company's resources and skills; •
forming strategic alliances based on assumptions. Competing firms simulation assumptions constitute barriers
competitive position in the market. Simulation barriers include: organizational culture, information asymmetries,
management skills, etc.
This model shows that by combining resources and capabilities with the external environment they
become directly involved in strategic alliances in the formation of the appearance thanks to predatory, increases
productivity, creates new resources and skills, as well as new products, services, markets, and significantly
reduces the risk of . It conveys the link between the company's valuable resources and skills, simulation barriers
and factors affecting the industry. This model provides an opportunity to examine the continuing competitive
advantage in speed. By acquiring and maintaining a competitive advantage the company can focus on the
coordination between the internal and external environmental factors, resources and cooperation.

V. CONCLUSIONS

Competitive advantage can be defined as the market against competitive position, which has an impact on
competitors in the market structure. Based on the literature analysis, the following competitive advantages by
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[Volume 7, Issue 1(14), 2018]

external and internal factors were discusses: political, economic, social, ecological, technological environment,
strategy and rivalry, demand conditions, industry cluster. The source of competitive advantage identified the
following factors: inherent characteristics of strength, radical innovation, knowledge management, competitive
advantage sources customization, economies of scale, human resources, business management, organizational
culture and higher level of prices for international clients. The company’s analysis of competitors is to identify
the company's competitors, defining their objectives and strategies determined competitors, an assessment of the
advantages and disadvantages of retaliation and going on the competitors’ selection.

VI. REFERENCES

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Management Executive, Vol. 12, No 3, 6-17.
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