The Importance of Competitive Advantage in Strategic Management

The company’s management team is responsible for making strategic decisions regarding the staff, resources, supply chain and marketing efforts. Within each of these divisions, managers can save the company considerable amounts of money by getting an edge over its competitors. Jeffrey Harrison explains in the book “Foundations in Strategic Management” that a competitive advantage is best gained when the company has resources, be it labor, know-how or products that are difficult to imitate.

Labor

A quality labor force assists management, part of which is gained by achieving a competitive advantage. Companies carve a niche and differentiate themselves from competitors through the development of corporate culture, a quality human resources department and a mission statement. Job benefits such as the option of telecommuting and bringing pets to work is another way corporations establish a competitive edge.

Businesses benefit by hiring and retaining top talent. Job turnover is costly: Robert Mathis, author of the book, “Human Resource Management,” says job turnover could cost one-third of the annual salary for a low-level worker, but as much as two times the salary for a highly skilled professional worker.

Resource Allocation

Companies that gain a competitive advantage with resource allocation can buy materials for less money than competitors. Managers procure items at a cheaper cost using a variety of methods: buying in bulk, using a vendor overseas, entering into long-term contracts and negotiating for a lower price are just a few. Managers also identify regions that generate the greatest cost savings.

Logistics

Logistics of a company's supply chain management strategy pertain to how businesses transport and manage its operations. In most cases, large multinational companies establish this advantage with greater ease than smaller businesses. For instance, a big-box retail store can get discounts on shipping, inventory and the production of goods. Strategy regarding logistics also pertains to stock updates, space allocation in warehouses and corporate offices, order processing and returns.

Marketing

Brand development--the design of a logo, the colors used for packaging and the aesthetics of a product--is used businesses to develop strong brand recognition and, therefore, bolstered competitive advantage. The branding efforts are the reasons individuals spend more resources to acquire a similar product that is identical in function. Stores go through great lengths to differentiate their businesses from competitors. For instance, Karl Moore and Niketh Pareek explain in their book, "Marketing: The Basics," that some stores including Abercrombie & Fitch, Hallmark and Bloomingdale's use store fragrances to enhance the shopping experience: Some smells increase the amount of time spent in the store by 40 percent.

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About the Author

Since 2008 Catherine Capozzi has been writing business, finance and economics-related articles from her home in the sunny state of Arizona. She is pursuing a Bachelor of Science in economics from the W.P. Carey School of Business at Arizona State University, which has given her a love of spreadsheets and corporate life.