Sustainable Competitive Advantage and Value Creation
Two cafés sell the exact same mug of coffee. In one, people happily pay double. What's going on? We saw strategy's big question is a sustainable competitive advantage; in this lesson we'll see what makes an advantage 'sustainable', and how you create value a customer will actually pay for.
A sustainable advantage is something good you do that rivals struggle to copy — so it stays yours. You create it by giving the customer more value: either cheaper, or more unique.
- value creation
- Offering a product or service the customer perceives as more valuable than rivals'.
- perceived value
- Value as the customer experiences it — not necessarily the product's actual cost.
- imitability
- How easily rivals can copy the advantage; the harder it is, the more sustainable it is.
- stakeholders
- Everyone with a stake in the firm: customers, employees, shareholders, suppliers and the community.
- willingness to pay (WTP)
- The most a customer would pay for a product; you raise it through uniqueness, quality and experience.
- value stick
- A picture of WTP, price and cost stacked; total value created is WTP − C, split between customer and firm.
- consumer surplus
- The share of value left with the customer: the gap between willingness-to-pay and the price paid (WTP − P).
