Competitive Advantages In Business Strategy

For firms, competitive advantage and success go hand-in-hand. Because so many firms are judged on their profit margin, having a high competitive advantage that allows the firm to dictate prices and drive down costs is key. Thus, firms are constantly seeking out how they can increase their advantage in hopes that it will result in increased profits. This push to have a high competitive advantage leads firms to examine five key elements that are used in determining a firm’s advantage: established rivals, threats from new entrants, the power of buyers, the power of suppliers, and the availability of substitutes. Every business decision by firms take these five elements into consideration and how they will affect a company’s bottom line. This paper …show more content…
Countries that permit monopolies to dominate industries, whether through de jure or de facto monopolies, are effectively keeping international trade from occurring within those industries. If England were to have an equally efficient and accurate search engine akin to Google, Google would likely limits its push of search into the English market. Rather, Google, and firms in a similar situation, look for markets that lack established rivals and allow easier entry into the market. This similarly ties in with threats to new entrants. Countries that have high barriers to entry, be it well-established firms/rivals, high tariffs on imports/exports, increased scrutiny of international firms, etc. dissuade new firms to enter the industry in the respective country. Countries that would rather promote international trade would offer low barriers to entry, through low tariffs, few rivals, and little scrutiny over international firms. This would attract foreign firms to the market and increase international …show more content…
Countries with powerful buyers who are price sensitive and have easy access to substitutes would be a less-than appealing marketplace for trade. Firms are unlikely to enter into a new market that could possibly lead to buyers dictating prices, instead opting to mitigate the risk of the capital investment into new market by instead foregoing trade at all. If buyers are able to drive the price down too low or are price sensitive and likely to switch firms or to a substitute, the firm’s cost-benefit ratio of trade could be too high for the trade to occur. Rather, markets where the firms are able to dictate prices to buyers who are unlikely to switch become extremely attractive for international trade, leading foreign firms to seek out trade with the