Competitive advantage free essay sample

Competitive advantage(CA) is an advantage competitors gain by providing or offering customers or consumers greater value for their money through product and service differentiation or through lower prices. Maintaining competitive advantage is crucial to many businesses or organizations success in order to survive in the market. Competitive advantage is characterized by superior performance which could be an attribute to outperform the competitors whether current or potential; or gaining a higher market share in a particular industry thereby ensuring market leadership; or ultimately, maximization of profit. This essay will critically analyze how competitive advantage is created i. e. Porters 3 generic strategies: differentiation, cost leadership and focus: giving theories and practical examples. It will examine the essence of choosing a competitive strategy that best suits a business. Furthermore, the sources of CA and how to sustain it will be discussed. A company cannot just boast of providing superior performance or quality, it has to actually deliver the said quality and the customers or consumers have to be able to perceive and see it as well, which is what sets it apart from other products. This source of finance remains available despite the tightening credit conditions. Plant operations We have comprehensive power station operational experience and skills. Through-life engineering and maintenance plans, meticulously implemented, ensure maximum availability and efficiency in the operation of our plant and are key for delivering value in both our merchant and long-term contracted markets. Effective plant operations are enhanced by ensuring information is shared across the portfolio and key operational staff are rotated to different assets on a regular basis. Safe behaviour and environmental best practice are cornerstones of International Powers operations, and we share best practices across the portfolio to ensure all of our assets operate to the highest possible safety and environmental standards. Trading We operate in a number of merchant markets. We have the skills necessary to maximise our returns in these markets, with a practical focus on closely co-ordinating trading and plant operations to optimise value. For us, trading predominately means selling the physical output generated by our plants, which we call asset-backed trading. Our traders operate within strict guidelines and risk policies to ensure our traded position is carefully monitored and managed. This includes matching fuel purchases with power sales and carrying out only a very limited amount of non-asset backed trading. Where possible we will forward sell output if we consider the return is favourable, which secures earnings and cash flow. For example, a large proportion of Rugeleys 2007 output was forward sold during the high prices of 2006, ensuring good financial returns during 2007, despite market dark spreads falling during the year. Long-term power contracts expertise We have strong commercial skills to structure and negotiate long-term power and water contracts in regulated markets such as Asia and the Middle East. Under these contracts, key cost risks such as fuel and turbine maintenance are mitigated through long-term hedging and supply arrangements. Availability bonuses incentivise us to keep the plant well maintained in order to minimise the risk of forced outages. Overall, the contracts provide visibility and stability of earnings and cash generation over the long-term.