Why is the concept of competitive advantage central to the study of strategic management?

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Competitive advantage is critical because it is the foundation of the viability and profitability the firm. A useful framework to understand competitive advantage is Porter's Five Forces (see slide deck in the references for an in-depth look at the framework). Developed by Michael Porter, Harvard professor and founder of the Monitor Group, Porter's Five Forces is a framework for analyzing a firm's position within the competitive environment. The Five Forces are 1) Threat of new entrants, 2) Threat of substitutes, 3) Bargaining power of customers, 4) Bargaining power of suppliers, and 5) Competitive Rivalry.

The reason that Porter's Five Forces is a useful framework is that it forces the firm to fully flesh out the building blocks of and considerations for the implementation of its strategy. Additionally, a company's position changes over time (new firms enter or leave the market, consumer tastes change, etc.), and regularly evaluating the firm's strategy allows it to protect, maintain, or even increase its competitive advantage relative to the market in which it participates.

In conclusion, the reason that competitive advantage is central to the study of strategic management is that competitive advantage is ultimately the path toward success for any firm. Whether the firm is a multinational corporation or a local mom-and-pop, it needs to understand its position and the competitive landscape to simply persist, let alone succeed.

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One of the main goals of strategic management is to give a firm a competitive advantage over other firms in the same field. Strategic plans are long-term plans for the direction of a business (or other large organization, but since the question is about competition, this response will focus on business strategic planning.) These plans set out goals, identify the resources needed to achieve them, and usually set out benchmarks or markers for success.

The ultimate purpose of any business is to make money by providing goods and services, and in a market system, businesses only make money if they are able to compete with other firms offering similar goods and services. So gaining a competitive advantage is absolutely central to the strategic planning of businesses. In order to do so, strategic plans often include plans for attracting talent from the workforce, for better branding, and for targeted marketing and advertisement. They also include steps to boost productivity and efficiency. Ultimately, strategic planning is intended to provide a sort of road map to success for businesses—in other words, a pathway to profitability. While strategic plans seldom mention competitors, they are geared toward making more money than other firms. Therefore, competition and sustainability are at the heart of strategic planning.

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When we talk about strategic management, we are referring to how an organization uses its resources to attain its goals and objectives. This type of planning is more flexible and covers a wide range of business activities; it looks at the business both internally and externally.

The reason why competitive advantage is important in the study of strategic management is that it is part of the external environment. A firm that has a competitive advantage usually produces a quality product that cannot be easily copied by its rivals. A firm can also gain a competitive advantage by having sole access to raw materials.

Take the example of a firm that is new to the market. This company doesn’t have any loyal customers or economies of scale because it is small. To make money, the company has to come with an effective strategy. It has to analyze the competitors in the external environment. It could be that the competitors are getting their raw materials from a single supplier. If the new business can get the raw materials directly without passing through a broker, they can reduce costs and gain a competitive advantage that will allow them to sell their products at a lower price. From there, the firm looks internally to find a person that will keep an eye on the raw materials and make sure that they are not misused by the staff. The company’s strategic plan, in this case, can be to sell the products at a lower price to attract clients.

In conclusion, knowledge of the firm’s competitive advantage allows the company to plan properly and come up with a more effective strategy.

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Strategic management is concerned with setting objectives, analyzing the business environment in which a company is operating, and ensuring that appropriate plans are put into place across the board to maximize profitability and market share.

Without the goal of using these plans and objectives to gain an advantage over one's competitors, there would be little or no point to the field of strategic management.

A competitive advantage is defined as something that makes Company A's goods or services preferable in the eyes of its target market to those of Company B. This consumer preference means more sales and ultimately greater profitability for Company A.

Were it not for the pursuit of better profits and greater market share, there would be no need for strategic management. That's why the two concepts are so closely linked.

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This is because the whole point of strategic management is to gain a competitive advantage for your firm.  

A firm's strategy consists of the set of related actions that its management takes in order to improve the way the firm performs.  Every firm wants to improve its performance to the point where it is superior in some way to its competitors.  This superiority is the firm's competitive advantage.  

When studying strategic management, you are learning how to analyze and devise your firm's strategy.  You are learning how to look at the various strategies your firm might take and to determine which of them will give you a competitive advantage.  You are also learning about how to implement the strategy that is selected.

The purpose of studying strategic management, then, is to be able to do a better job of creating competitive advantages for your firm. Therefore, the concept of competitive advantage is central to this field of study.

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