A firm must have a competitive advantage. It's sustainability depends on it. Four common ways for a firm to secure a competitive advantage are 1. First entrant into the market, 2. Niche dominance, 3. Market Share, and 4. Government protection. Another competitive advantage that is usually not discussed in business literature; family businesses. Family firms have competitive advantage because they can avoid the bureaucracy that comes with big corporations.
In an emerging market, being the first entrant can be an advantage, but the uncertainty within the environment can be hazardous for new firms. Without any dominant leaders, emerging industries are easy to enter, which leads to higher competition. A new firm must decide on the correct direction of the industry and be the best at it. They need to establish brand recognition and brand loyalty. An example of a new entrant dominating it's industry is Amazon.com. For the first nine years it invested heavily in establishing itself as the best in it's field through brand loyalty , and in 2003, finally made a profit. It now has a strong competitive advantage. It's name is synonymous with e-commerce.
An example of a company creating a niche market can be Def Jam records. This company caters to hip hop listeners, and does very well. With the many record companies, they differentiate themselves by focusing on hip hop. But, among the many hip hop record labels, they have the better artists, and dominate the hip hop music niche.
An example of a company have with tremendous market share can be Microsoft. Microsoft dominates the software industry, but because it has such a broad base of customers, many smaller companies that focus on one part of the market can exist. Another strong competitive advantage a firm can use is serve a niche market only. Many smaller software companies that specialize to customers needs can exist, even with a giant like Microsoft.
Firms with government protection can be the cable companies, such as Cablevision. These companies are given protection because of the costs, trouble, and aesthetically, it would not make sense. Some companies are given geographical locations to provide cable for without threat of competitors. If customers encounter any problems with their service, they do not have much options to turn to.
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Good post alex.
Microsoft is definitely a market leader in software with their operating system used by a vast majority of computer users. Also, they did a brilliant job with Microsoft Office - an application no office can practially live without. They are so good at their software (and yeah it's sometimes buggy but oh well) that Apple - their fierce competitor - now makes computers that support both Windows and Mac operating system (excellent move in my opinion)
I see that you have listed Def Jam as creating a niche, but are they differentiating themselves? Aren't other companies into the Hip Hop division too, like Koch records. Just a thought. Good post
Microsoft is definitely the market leader now but Apple is making their move to re-take some of that back with their Mac OS. Some people have already switched from Windows to Mac, and i'm sure there will be more to come. I for one am going to stay with Windows. =)
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