Explain what is meant by sustainable competitive advantage..(SCA or just CA)

A CA can be described as ‘an advantage a firm has over a competitor or over a group of competitors within the same market or industry’ (Kay 1993). It must be however, a relative advantage, which is to say that it should be compared to the competition. For example, Apple’s brand image is an advantage, because the logo is instantly recognisable, and could call itself more recognisable than competitors such as Blackberry or Nokia. Jack Welch (formerly of GE) said that ‘if you don’t have a CA, then don’t compete.’ This quote highlights the importance of a CA in business terms, and shows how it can be the difference between surviving in a market, or dominating in a market.

The development of the CA is interesting; and it can be split into three main stages. Initially, the development of a CA was thought to be down to leadership; if a firm had a successful leader, then they would make successful decisions that would benefit the firm. However, in 1980, Michael Porter developed a theory which toppled this. Using his ‘5 Forces Model’, Porter believed that a firm could create a CA through differentiation (thus nullifying the threat of substitutes and the bargaining power of consumers) and/or through low costs (nullifying the threat of new entrants and suppliers.) Porter believed that by analysing the external environment, a firm could pick a good industry to enter and succeed in. This strategy in theory makes sense, but for a firm that has been making t-shirts, diversifying into the mobile phone market (because it has been identified as a good industry) isn’t practically viable. The final theory of developing a CA comes from the RBV. This (in contrast to Porter’s outside-in view) looks internally at a firm, and highlights areas that the firm excels in to produce a CA. The structure