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Competitive Advantage Theory Review

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The arrival of the 21st century brings with us new challenges to be addressed in order to move forward to the goal of making Malaysia a developed nation. In the field of economy, it takes the form of intense competition for extraction of resources, especially investment capital and revenue markets, as well as the emergence of new competitors in the trade arena in the region and in the general world. Competition is enhanced where every country will fight for competitive advantage in international markets. When a business organization successfully introduces itself and awakens the general public about its existence, it should strive to reduce the losses suffered at the level of independence. At the same time, profit enhancement efforts should be emphasized so that business grows and expands to become competitive with other business organizations be it local or international business organizations. Sustainable competitive advantages are required for a company to thrive in the present global environment.

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Without one or more sustainable competitive advantages a company may not be able to recover from whatever caused the stock to become a bargain. We only want to buy the stocks of companies that are real value investments, not value traps. In other words, we want to acquire stocks trading below their intrinsic value and will grow cash flow for shareholders. According to Porter, competitive advantage is what makes an entity’s goods or services superior to all of a customer’s other choices. The term is commonly used for businesses.

Competitive Advantage Theory (also known as competitive advantage) is the ability acquired by a company through the characteristics and resources it possesses to have a higher performance than other companies in the same industry and market. This theory is corrected by Michael Porter in his book Competitive Advantage (1985). This theory emerged as a critique of the theory of Ricardo’s comparative advantage. The combination of strategy and operational effectiveness will benefit economic operators. Competitive advantage is the term employed by large-scale companies, so this is certainly the main thing that must be owned to compete in the international market as well as the factors that cause inflation. As we know it is not a business if one does not know the how to compete in the open market. Competition in business is common. Especially for those who sell similar products or products that can replace them or their subtypes.

For example, coffee beverage companies will get competition for companies producing tea beverages, or vice a versa. Porter calls this rivalry as a form of competition. If more and more companies are playing in the same field then the competition will also increase. In order to be the market leader of companies with similar products and services, one must have a competitive advantage. Competitive advantage according to Wikipedia is the leverage that a business has over its competitors. This can be gained by offering clients better and greater value. Advertising products or services with lower prices or higher quality that interests consumers. Target markets recognize these unique products or services. However, despite being a market leader one day a business will always be approached by other competitors. If it does not improve or maintain its competitive advantage then the market leader’s status cannot be maintained.

The strategies work for any organization, country, or individual in a competitive environment. To create a competitive advantage, there are three determinants. Which are benefit, target market and competition.

Benefit

What is the real benefit that the company’s product provides? It must be something that the customers truly need and that offers real value. Every market leader must know not only its product’s features, but also its advantages how they benefit their customers. That means being constantly aware of new trends that affect your product, especially new technology. For example, magazines were slow to respond to the availability of free news and top stories on the internet. They thought people were willing to pay for news delivered on a few pieces of paper weekly or even once a month.

Target market

Who are the customers? What are their needs? Market leaders need to know exactly who buys from them, and how they can make their consumer’s life better. That’s how companies create demand, the driver of all economic growth. Magazines or printed news target market drifted to older people who weren’t comfortable getting their news online.

Next comes competition

How to identify real competitors? That’s more than just similar companies or products. It includes anything else the customer could do to meet the need providers can fulfill. Magazines thought their competition was other magazines until they realized it was the internet. They didn’t know how to compete with a news/gossip provider that was instant and free.

Recent EDC research from 700 businesses found that companies that had attained the highest levels of global success also displayed four common attributes: (i) The companies have built solid international networks. (ii) They foster a culture of innovation. (iii) They have extensive knowledge about international markets. (iv) They possess skilled talent at all levels.

Take the CPTPP agreement as an example. The newly signed Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP) is expected to give Malaysia the competitive advantage of the region and increase investor confidence. The CPTPP, signed on March 8, is a new version of the Trans-Pacific Partnership multilateral trade alliance (TPP). It comprises 11 member states, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. According to the Federation of Malaysian Manufacturers (FMM), the agreement promulgated the level of transparency and expectation of investment that could be expected, tariff concessions and channels to address non-tariff barriers for local producers. CPTPP is expected to diversify Malaysia’s exports of products, for example, more than 80 percent of automotive equipment exports, especially rubber components, are expected to enjoy immediate duty free access. This will help manufacturers of Malaysian components and parts to export to OEM equipment manufacturers (OEMs) CPTPP countries like Mexico, and become part of the global supply chain. The tariff concessions agreed by each CPTPP country would increase exports for the electrical and electronics (E & E) industry which has already been a major contributor to Malaysia’s export earnings. This export growth was also expected in other countries such as Canada and Latin American countries, especially Mexico. The country is currently charging high tariffs on electrical appliances, telecommunications and consumer electronics. Malaysia is the market leader for rubber gloves in Canada, and secondly in Peru and Mexico after China. Latex products, especially rubber gloves, remained the largest contributor to the export of Malaysian rubber products. In view of the increase in demand for nitrile glove in Canada, Malaysia’s participation in the CPTPP will provide competitive advantage to the country’s manufacturer of gloves on non-CPTPP countries like China. FMM also mentioned that manufacturers are also expected to benefit from the diversification of imported input sources and industrial components. CPTPP allows for the addition of better raw material imports from Japan and Mexico, and it also provides alternative sources of heavy machinery and equipment.

Competition is not new to business in Malaysia and countries have completed seven bilateral FTAs (Japan, Pakistan, New Zealand, India, Chile, Australia and Turkey) and five regional FTAs through ASEAN (ASEAN with China, Korea, Japan, India and Australia-New Zealand).

The sustainability of the country’s competitiveness is highly dependent on factors such as political and social stability, the richness of natural resources, the human capital and the dynamic and responsive private sector as well as the effectiveness of its public service. The conclusion of the 21st century is a century of opportunities and new challenges in the process of globalization. Most countries have realized the importance of globalization as the cornerstone of economic growth in a world of mutual dependence. Vision 2020 can only be achieved if Malaysia takes advantage of the globalization process.

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