Competitive Advantage
Competitive advantage is a position a firm occupies against its competitors. A business that had the advantage among the competitors can surpass the expected revenue and had a possibility to be the leading firm in the business sector or industry.
Many forms of competitive advantage cannot be sustained indefinitely because the promise of economic rents invites competitors to duplicate the competitive advantage held by any one firm. Accordingly, a firm possesses a sustainable competitive advantage when its value-creating processes and position have not been able to be duplicated or imitated by other firms.
Discussion
In the further study of the Five Forces in competitive advantage, the Emirates Airlines is use as the subject. The Emirates Airline, in a brief definition, is a major airline in the Middle East. It is the national Airline of Dubai, United Arab Emirates (UAE).The airline ranks amongst the top 10 carriers worldwide in terms of revenue, passenger kilometers, and has become the largest airline in the Middle East in terms of revenue, fleet size, and passengers carried; and now the seventh biggest airline.
In the airline business, there is no doubt that establishing a very vast business facilities and organization is risky. And keeping it stable is also undoubtedly risky too, indeed. But these thoughts were already vanished in the minds of the people operating behind the Emirate Airlines. They made strategies using the Five Forces of competitive advantage to analyze the environment of the business.
The Strategies
Emirates’ strategies are a function of the environment where it operates and the product of intrinsic strategic thinking from within the carrier:
• Threat of New Entrants: It seems, to all appearances that the airline industry is a low entry barrier industry. Finance, the prime entry barriers, is readily available in the Middle East and technology and expertise are purchasable.
The threat - profitable markets that yield high returns will draw firms. This results in many new entrants, which will effectively decrease profitability. Unless the entry of new firms can be blocked by incumbents, the profit rate will fall towards a competitive level (perfect competition). It will result to the existence of barriers to entry (patents, rights, etc.), economies of product differences, brand equity, etc.
• Power of Suppliers: Boeing and Airbus are the two main suppliers and competition among them is probable, observable but not abominable. Also, the likelihood of a supplier integrating vertically isn't very likely.
The bargaining power - also described as market of inputs. Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm. Suppliers may refuse to work with the firm, or e.g. charge excessively high prices for unique resources.
• Power of Buyers: The bargaining power of airline industry buyers in the Middle East is quite low.
The bargaining power - also described as the market of outputs. The ability of customers to put the firm under pressure and it also affects the customer's sensitivity to price changes.
• Availability of Substitutes: Threat is really limited given the distances in the Middle East and the fast pace that is becoming a symbol of the area.
The threat - the existence of close substitute products increases the propensity of customers to switch to alternatives in response to price increases (high elasticity of demand) buyer propensity to substitute. In an ordinary business like retailing, substitutes are always present are customers common reasons in choosing alternatives are: relative price performance of substitutes, buyer switching costs, and perceived level of product differentiation.
• Competitive Rivalry: The airline industry is generally highly competitive and highly competitive industries generally, again, earn low returns because the cost of competition is high. This can spell disaster in low cycle times. The Middle East, however, provides a different story thanks to governments’ readiness to cushion the shocks.
The intensity - for most industries, this is the major determinant of the competitiveness of the industry. Sometimes rivals compete aggressively and sometimes rivals compete in non-price dimensions such as innovation, marketing, etc.
Conclusion
The business should be protected from outside threats, indeed, but that possibility is still blurred and the truth behind a healthy competition is lurking among the shadows. Therefore, the business that can make it through the market is identified as the market leader. The competitive advantage is no sense if the business is unique. The ideal way of competing is challenging your own business against the challenge of the competitors. Sometimes, the competitors that are not related to your business can be your prospect competitor. Studying the market strategy of each business is effective, but the business of your own should be aware that every business is once again, unique to each other.
References:
Badi, M., (2007). Strategy Concepts: Porter’s Five Forces of Competition. [Online] Available at: http://www.dinarstandard.com/management/Porter_FiveForces092007.htm [Accessed 20 Aug 2009].
Gale, I., (2007). "Gulfnews: Emirates is now seventh biggest airline". [Online] Available at: http://archive.gulfnews.com/indepth/airshow_2007/news/10166527.html [Accessed 20 Aug 2009].
Namaki, M., (2007) Emirates Airlines Is this the Right Strategy? In a League of its Own. Capital Magazine [Online] Available at: http://www.micm-canada.org/Emirates_Apr07.pdf [Accessed 20 Aug 2009].
The Executive Fast Track (2009). Sustainable Competitive Advantage. [Online] Available at: http://www.12manage.com/description_sustainable_competitive_advantage.html [Accessed 20 Aug 2009].
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