5.2 Impacts of Circular Economy Implementation on Organizations 109
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5.2.2.1 Non-Monetary Impact: Competitive Advantage
The analysis of data for the current study reveals that organizations see the benefit
of achieving a competitive advantage for their firm. Competitive advantage is a
well-known concept in strategy, as well as international business. The strategic
management theories build upon the assumption that organizations are able to shape
market structures in their favor with strategic actions (Eloranta and Turunen 2015).
Considering early work from Porter (1985), competitive advantage can be defined
as follows: “Competitive advantage grows out of value a firm is able to create for its
buyers that exceeds the firm’s cost of creating it. Value is what buyers are willing to pay,
and superior value stems from offering lower prices than competitors for equivalent
benefits or providing unique benefits that more than offset a higher price. There are
two basic types of competitive advantage: cost leadership and differentiation” (Porter
1985, p. 3). In other words competitive advantage for organizations occurs through
a surplus of value in comparison with rivalry firms in the same industry. Distinc-
tive activities and resources are seen as means to create that value (Martin 2014).
First type of a competitive advantage is cost leadership. Results of this study oncompetitive advantage achieved through cost leadership are explained under the
monetary aspect ‘circulatable material costs’ in chapter 5.2.1.1. These are that cost
leadership can be obtained in case purchasing recycled resources is cheaper than
purchasing virgin resources. Results show further that cost leadership can result
from using production waste as input for production.
Differentiation as the second basic type of competitive advantage can be achievedthrough, e.g. added customer value. Organizations state that their products, either
through being circulatable (technical circle) or through biodegradability (biological
circle), gain additional value for the customer. This additional value results from
the possibility of buying new products at a significantly lower price when buying
it for the second time. This offers customers the possibility to save money when
buying a product from this organization for the second time. Another benefit of
this approach for the organization is the long-term customer relationship that can
be established by incentivizing the return of end-of-life products and selling refur-
bished ones. Case Epsilon is planning to incentivize customers to return their old
product at the end of the lifecycle e.g. by offering the possibility for the purchase
of a new product at a significantly lower price: “When a customer buys sustainable
products, which are reusable, then there is a great chance that, depending on the
development of the material prices, he is able to purchase a top product at a cheaper
price when he is buying it for a second time” (see Appendix: German Quote 63). A
different type of customer value emerges through the production of biodegradable
products. Biodegradability ensures that all ingredients are non-toxic and therefore
non-hazardous to humans’ health. The interviewee of case Delta forms it as follows: