● Fragmented: The market’s needs are less well defined and numerous
ways exist to gain advantage. The industry is often well suited to niche
player and profitability may not be linked directly to size. Commonly,
organisations grow by offering a range of niche products to different
segments – a multi-segmentation strategy (e.g. computer software).
● Specialised: The potential advantage of differentiation is considerable
and numerous ways exist to achieve this advantage. Profitability and
size are not automatically related. Such industries include those develop-
ing customised solution to specific problems (e.g. management con-
sultancy) and firms involved in the development/application of
innovative technology (e.g. biomedical engineering).
Understanding generic strategies and the application of competitive
advantage to the business environment is fundamental to success. Davidson
(1997) offers an alternative view and states that competitive advantage is
achieved: ‘... whenever you do something better than competitors. If that some-
thing is important to consumers, or if a number of small advantages can be com-
bined, you have an exploitablecompetitive advantage.’ Instinctively, this view
appeals to the industry practitioner. The most potent sources of competi-
tive advantage can be summarised as:
Strategy formulation 157Many
SpecialisedVolumeFragmentedStalemate
Few
Small LargeNumber of ways
to achieve
competitive
advantageSize of advantage
Figure 8.4
BCG strategic
advantage matrixIdentifying sources of competitive advantage
1 Actual product performance Robust, economic, easy to use
2 Perception of product Brand image, product positioning
3 Low cost operations Location, buying power
4 Legal advantage Patents, contracts and copyright
5 Alliances and relationships Networking, procurement
6 Superior skills Database management, design skills
7 Flexibility Developing customised solutions
8 Attitude Aggressive selling, tough negotiation(^1) Adapted from Davidson (1997).