Foundations of Corporate Success: How Business Strategies Add Value

By John A. Kay | Go to book overview

CHAPTER
11
Sustainability

Distinctive capabilities continue to add value only if both the capability, and the distinctiveness, are sustainable. In this chapter I draw on case studies and statistical evidence to show that many companies are indeed successful in building sustainable competitive advantages from their distinctive capabilities. Of the primary distinctive capabilities, reputation is generally the easiest to sustain, innovation the most difficult, but each poses its own particular problems. Strategic assets can often be defended over very lengthy periods, but may be suddenly at risk when there are changes in regulation or market conditions. For a firm with strategic assets, skills in handling public policy may be as important as those of business management.

In the second part of the chapter I use the test of sustainability to explain why some factors which are often cited as sources of competitive advantage rarely yield substantial added value in the long run. I look at the role of scale, of market share, of business portfolio diversification, and of market positioning in achieving corporate success. Sometimes size or scale are themselves the product of distinctive capabilities. Sometimes diversification or positioning is the reflection of a distinctive capability. But if these factors are not based on distinctive capabilities, then competitive advantages derived from them rarely persist in the face of entry by firms which do enjoy true distinctive capabilities based on architecture, reputation, or innovation.

BMW, Honda, and Glaxo built effective strategies in support of their competitive advantages. BMW has added a powerful additional source of competitive advantage in branding and reputation to its initial distinctive capability. In the last few years, it has become possible for Japanese companies to attempt to match the BMW architecture. They have an equivalent network of suppliers, and a production-line labour force of comparable quality. At the same time the growth of sophisticated production control systems has reduced the number of workers required, and the complexity of relationships

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Foundations of Corporate Success: How Business Strategies Add Value
Table of contents

Table of contents

  • Title Page i
  • Foreword iii
  • Preface vi
  • Contents xi
  • List of Figures xiii
  • List of Tables xiv
  • List of Tables xv
  • I - Corporate Success 1
  • Chapter 1 - The Structure of Strategy 3
  • Chapter 2 - Adding Value 19
  • II - Business Relationships 31
  • Chapter 3 - Co-Operation and Co-Ordination 33
  • Chapter 4 - Relationships and Contracts 50
  • III - Distinctive Capabilities 63
  • Chapter 5 - Architecture 66
  • Chapter 6 - Reputation 87
  • Chapter 7 - Innovation 101
  • Chapter 8 - Strategic Assets 113
  • IV - From Distinctive Capabilities to Competitive Advantage 125
  • Chapter 9 - Markets 127
  • Chapter 10 - Mergers 144
  • Chapter 11 - Sustainability 160
  • Chapter 12 - Appropriability 181
  • Chapter 13 - The Value of Competitive Advantage 192
  • Added Value Statements 211
  • V - Competitive Strategies 219
  • Chapter 14 - Pricing and Positioning, 1 221
  • Chapter 15 - Pricing and Positioning, 2 235
  • Chapter 16 - Advertising and Branding 251
  • Chapter 17 - Vertical Relationships 267
  • VI - The Strategic Audit 283
  • Chapter 18 - The Industry 285
  • Chapter 19 - The Firm 302
  • Chapter 20 - The Nation 320
  • VII - The Future of Strategy 335
  • Chapter 21 - A Brief History of Business Strategy 337
  • Chapter 22 - Conclusion 364
  • Value of the Ecu 369
  • Glossary 371
  • Bibliography 377
  • Index of Companies 395
  • General Index 399
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