Diversify on Core to Sustain Competitive Advantage
Diversify on core to sustain competitive advantage
Introduction
Company urges invest in something new to achieve advantage to develop their business. However with technology improving and market becoming mutual the “pie” seems not big enough for such increasing amount of investors. Many fail to gain economies of scale. Moreover, in the current market company is in the competition also turns to be fiercer. An excessive investment to unrelated and “hot” may compel company neglect their existing business developments which result in competitive advantage lose. Porter (1985) insisted that company who abandoned its core business prematurely, searching for new opportunities that only erode their core. Data from 185 companies in 33 industries shoe that market leaders earned a 25.4% return on capital, compared with 14.3% for companies in a weaker market position (Zook 2001). It is the time for company to make more affect on sustaining their competitive advantage. A prudent competitive strategy should be chosen to support this.
Managers are challenged by whether to diversify or not. Kastens (1973) believes:” Diversification is fundamentally a negative strategy…diversifiers are always run away from something.” Actually, diversification effects on performance should not be absolutely denied. A kind of prudent diversification can be of sense. This essay identify focusing on core competency diversification can be considered to be an approach to improve sustainable competitive advantage that acquire company to achieve their goal in a long-term run.
Competitive Advantage To win the business game companies have to possess advantages relative to competitors including innovation, process improvement, higher quality, lower cost and marketing. However, with the competition is ever-increasing violence rivals find a quick way to catch up with those companies who have achieved competitive advantage, even go beyond, which refers to imitation.
To keep the advantages in
Introduction
Company urges invest in something new to achieve advantage to develop their business. However with technology improving and market becoming mutual the “pie” seems not big enough for such increasing amount of investors. Many fail to gain economies of scale. Moreover, in the current market company is in the competition also turns to be fiercer. An excessive investment to unrelated and “hot” may compel company neglect their existing business developments which result in competitive advantage lose. Porter (1985) insisted that company who abandoned its core business prematurely, searching for new opportunities that only erode their core. Data from 185 companies in 33 industries shoe that market leaders earned a 25.4% return on capital, compared with 14.3% for companies in a weaker market position (Zook 2001). It is the time for company to make more affect on sustaining their competitive advantage. A prudent competitive strategy should be chosen to support this.
Managers are challenged by whether to diversify or not. Kastens (1973) believes:” Diversification is fundamentally a negative strategy…diversifiers are always run away from something.” Actually, diversification effects on performance should not be absolutely denied. A kind of prudent diversification can be of sense. This essay identify focusing on core competency diversification can be considered to be an approach to improve sustainable competitive advantage that acquire company to achieve their goal in a long-term run.
Competitive Advantage To win the business game companies have to possess advantages relative to competitors including innovation, process improvement, higher quality, lower cost and marketing. However, with the competition is ever-increasing violence rivals find a quick way to catch up with those companies who have achieved competitive advantage, even go beyond, which refers to imitation.
To keep the advantages in