The following essay is going to attempt to assess the above proposition and try to find if it is possible to add value continually over a period of time. I will first discuss what competitive advantage is and what it means to a firm. Then I will explain the sources of competitive advantage and how the distinctive capabilities of a firm allow it to sustain added value. The discussion is based on a number of viewpoints from different authors who will be clearly indicated and acknowledged. I begin with explaining what competitive advantage is.

So, what is Competitive Advantage? In a number of industries, the average performance of the industry is usually no better than the average performance of industries' as a whole. However particular firms or groups of firms manage to do considerably better than average. In this case, the high performing firm or sub-group has something special and difficult to imitate to offer which allows it to outperform it's rivals.

Porter (1985) refers to such special assets as the firm's competitive advantage. "A firm's competitive advantage are those characteristics that allow it to

Strategic assets fall into three broad categories. The first is that some companies have a natural monopoly in the market. The second, is a firm may benefit from some sort of regulation ruled by the government. The third is the cost structure of the industry, with a substantial component of sunk cost which may confer incumbent advantages. A natural monopoly ensures that there is only one firm in a market. A firm with a modest competitive advantage can easily knock out an incumbent firm whose strategic advantage is natural monopoly. So a natural monopoly on its own may find it difficult to sustain added value over a period of time. Almost all natural monopolies are associated with sunk costs. In a market where costs are substantially sunk are readily sustainable. A natural monopoly becomes a far more sustainable competitive advantage if it is combined with a strategic advantage based on sunk cost. From this, added value can be yielded over time.

Some topics in this essay:
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