Firms which succeed in implementing competitive strategy can gain competitive advantage: this latter improves the firm’s competitive position, creates a barrier to entry, and enables a firm to change its competitive stance in response to market changes. Two constructs appear significant at this strategic level.
First, distinctive competence; this refers to activities which a firm does better than its competitors, but which require superior skills and resources. The latter are basically tangible assets such as the technology, the distribution network or superior resources; access to supply can also enhance the position. Distinctive competence can create barriers to imitation and help sustain competitive advantage; and superior skills and resources improve the firm’s position when they can lower costs (through scale economies, the learning curve or capacity utilization) or create value to customers. Organization is another element of distinctive competence: a better organizational design and appropriate structure enables a firm to adapt more responsively and faster to changes in markets and the environment.
Secondly, strategic fit; in internal and external conditions this is relevant to dynamic competitiveness. Firms can achieve competitiveness only when management accurately identifies the skills and resources matched to strategic choices, including objectives, the target of market entry, and the quality of tactics and implementation. Some firms invest in unprofitable projects to establish a toehold in a potentially attractive market or technology in order to make a later move. Especially in the case of new technologies, the first investment often provides experience and useful information for making further investments. A first- mover strategy provides a competitive advantage, especially when ambiguity and a largely non-recoverable cost associated with entry are high. Uncertainty also affects strategic fit. When a market is volatile due to changing technology, political risk or economic uncertainty, a first-mover bears the risk and high cost of pioneering since new products can often be replaced quickly. This unstable condition requires a quick response. Changes in demand and competitive conditions in the host market also affect a firm’s strategic flexibility.
Effective competitive strategy also depends on product and market characteristics, and types of products do influence the degree of standardization. High-technology firms tend to use international diversification strategies since high-technology goods are more likely to have culture-free preferences, and only aspects of product design need to be customized. And expansion or switching strategic fit into a time horizon also affects competitiveness. An organization’s success depends on its ability to reshape strategies in response to changing global environments and markets.