There are two necessary conditions that are required to create sustainable profits into the future.
The necessary conditions are:
- A decisive competitive advantage
- A profitable sustainable market
A decisive competitive advantage can be defined as the ability to satisfy the market’s significant need to an extent that no significant competitors can. The key words in this statement are “significant need”. There are many levels of competitive advantage and the level of competitive advantage is a function of how quickly a competitor can replicate the organization’s offer to the market. The longer it takes for competitors to replicate the offer, the greater the competitive advantage. For example, the lowest level of competitive advantage is price. A price can be given to a customer and almost immediately a competitor can match it and even offer a lower price. Therefore, lower prices (also associated as cost reductions), can never be categorized as a decisive competitive advantage. In addition, offering lower prices can create a violation of the second necessary condition, a profitable sustainable market.
Therefore, a decisive competitive advantage must be something that is difficult for competitors to duplicate and it must also satisfy a customer’s significant need.