Competitive Advantage:

Sustaining and the Origins

 Introduction
 Under the dynamic of perfect competition, no competitive advantage will be sustainable.
Most firm’s profits will converge to the competitive level.
 Di bawah dinamika persaingan sempurna, tidak ada keunggulan kompetitif yang
berkelanjutan. Sebagian besar laba perusahaan akan menyatu ke tingkat kompetitif.

Market Firm A Firm B

Price, P
Supply
MC

MC AC
AC
AVC
AR=M AR=M
R=P=D R=P=D

AVC
Demand

Quantity, Q Quantity, qA Quantity, qB

 When a firm earns a higher rate of economic profit than the average rate of
economic profit of other firms competing within the same market, the firm has a
competitive advantage in the market --> (the same level of price, but get higher
profit = low cost?).
 Ketika suatu perusahaan menghasilkan tingkat laba ekonomi yang lebih tinggi
daripada tingkat rata-rata laba ekonomi perusahaan lain yang bersaing dalam pasar
yang sama, perusahaan tersebut memiliki keunggulan kompetitif di pasar -> (tingkat
harga yang sama, tetapi dapatkan laba yang lebih tinggi = biaya rendah?)

 Evidence suggests that the profits (shown by the return on assets, ROA) of high-profit
firms decline over time, while those of low-profit firms rise over time. But, they do not
converge to a common mean.
 Bukti menunjukkan bahwa laba (yang ditunjukkan oleh pengembalian aset, ROA) dari
perusahaan-perusahaan dengan laba tinggi menurun dari waktu ke waktu, sementara
yang dari perusahaan-perusahaan dengan laba rendah naik seiring waktu. Tapi,
mereka tidak bertemu dengan rata-rata bersama.

 We will examine what makes a competitive advantage sustainable.

 Kami akan memeriksa apa yang membuat keunggulan kompetitif berkelanjutan
 Threats to Sustainability
 The threats are: imitability, entry and price competition. Why?
 Ancamannya adalah: persaingan, masuk dan persaingan harga. Mengapa?

 Different cost of production: Cost A < Cost B < Cost C

 Biaya produksi berbeda: Biaya A <Biaya B <Biaya C

 Efficiency frontier shows the optimum relationship between unit cost (price) and quality.
 Batas efisiensi menunjukkan hubungan optimal antara biaya unit (harga) dan kualitas
Firm C
Cost Firm A Cost Firm B Cost MC
MC MC AC

AC AC AVC
AVC
AVC

Quantity, qA Quantity, qA Quantity, qB

 Assume: consumers have Efficiency
Price, Cost
identical tastes. Frontier
 Asumsikan: konsumen memiliki
selera yang identik A
PA
PB B
 Efficiency frontier
 Perbatasan efisiensi
E

 At E, economic profits are zero,

and no other price-quality position
simultaneously results in greater
consumer surplus and higher
profit.
 Di E, laba ekonomi nol, dan tidak
ada posisi kualitas-harga lainnya
secara bersamaan menghasilkan
surplus konsumen yang lebih qA qB
Quality, q
besar dan laba yang lebih tinggi.
 Sustainable Competitive Advantage: Resources and Capabilities

Benefit position relative Market Economics

to competitors Economic
Profitability
Cost position relative to Value created
competitors relative to
competitors
 The Resource-based Theory of the firm: Competitors or entrants can not duplicate or neutralize. Firm must possess
different resources (firm-specific assets and factor of production, such as: patent, brand-name reputation and human
assets) and distinctive capabilities (i.e. activities that the firm does better than competitors). Resources and capacities
must be scarce and immobile.
 Teori Berbasis Sumberdaya perusahaan: Pesaing atau peserta tidak dapat menduplikasi atau menetralisir. Perusahaan
harus memiliki sumber daya yang berbeda (aset khusus perusahaan dan faktor produksi, seperti: paten, reputasi merek-
nama dan aset manusia) dan kemampuan khusus (yaitu kegiatan yang perusahaan lakukan lebih baik daripada pesaing).
Sumber daya dan kapasitas harus langka dan tidak dapat bergerak.

 Isolating Mechanism: the economic forces that limit the extent to which a competitive advantage can be duplicated or
neutralized through the resource-creation activities of other firms:
 Impediments to imitation: legal restriction, superior access to input or customers, market size and scale of
economies, intangible barriers.
 Early-mover advantage: learning curve, reputation and buyer uncertainty, buyer switching costs, networks effect.
 Mekanisme Mengisolasi: kekuatan ekonomi yang membatasi sejauh mana keunggulan kompetitif dapat diduplikasi atau
dinetralkan melalui kegiatan penciptaan sumber daya perusahaan lain :
 Hambatan untuk meniru: pembatasan hukum, akses unggul ke input atau pelanggan, ukuran pasar dan skala
ekonomi, hambatan tidak berwujud.
 Keuntungan penggerak awal: kurva pembelajaran, reputasi dan ketidakpastian pembeli, biaya peralihan pembeli,
efek jaringan
 Impediments to Imitation and Early-Mover Advantages

Unit Unit Unit

Cost Cost Cost
Initial cost-quality Initial cost-quality Initial cost-quality
position of all firms position of all firms position of all firms
C0 C0 C0
G

G
CG CG CG
G

Quality Quality q0 q Quality

q0 q q0 q
(A) G (B) G
(C) G

 (B) Impediments to imitation (Hambatan untuk meniru)

 (C) Early-Mover Advantage (Keuntungan Penggerak Awal)
 Impediment to Imitation
 Legal restrictions: patents, copyright,
trademark, license, certificate, quota, etc. Inputs Process of Output
 Pembatasan hukum: paten, hak cipta, merek Production
dagang, lisensi, sertifikat, kuota, dll
Cost
 Superior access to input or customers: raw
material, information, etc.
 Akses unggul ke input atau pelanggan: bahan
baku, informasi, dll

 Market size and scale economies.

 Ukuran pasar dan skala ekonomi

 Intangible barriers: causal ambiguity (causes

are obscure), dependence on historical AC
circumstances, social complexity.
 Hambatan tak berwujud: ambiguitas kausal
(penyebab tidak jelas), ketergantungan pada
keadaan historis, kompleksitas sosial
 Early-Mover Advantage
Average
Cost
 Learning Curve
 Kurva Belajar

 Reputation and Buyer Uncertainty

 Reputasi dan Ketidakpastian Pembeli AC

 Buyer Switching cost

 Biaya Pengalihan Pembeli Product Sale Cumulative
Production

Growth
 Network Effect

Introduction
 Efek Jaringan

Compete “for the market” --> dominance, or

Maturity

Decline
Bersaing "untuk pasar" -> dominasi, atau

Compete “in the market” --> sharing a

common standard
Bersaing "di pasar" -> berbagi standar
bersama
 The Origin of Competitive Advantage:
Benefit position relative Market Economics
to competitors Economic
Profitability
Cost position relative to Value created
competitors relative to
competitors
Economic
Profitability Economic
Profitability
The origins:
 Creative
destruction:
Innovation
(entrepreneu
rship)
Time
Development Erosion of  Evolution
of Advantage Advantage Time
 Environment
Sustenance
of Advantage
 A dominant established firm’s incentive to innovate may be weaker
than that of smaller firm or a potential entrant, due to:
 The sunk cost effect and the replacement effect.
 Insentif perusahaan mapan yang dominan untuk berinovasi
mungkin lebih lemah daripada perusahaan kecil atau calon peserta,
karena :
 Efek biaya hangus dan efek penggantian

 The efficiency effect encourage the dominant firm’s incentive to

innovate.
 Efek efisiensi mendorong insentif perusahaan dominan untuk
berinovasi
 The modern “multi-sequentialist”
Flying Geese paradigm
One country (Japan)
follows sequential
industrial development
from textile – chemical
–iron and steel –
automobile - electronic

One inefficient
domestic industry is
transferred from one
country to the other
countries:
Japan  ANIEs 
ASEAN  China 
Vietnam/India

Source: Yamazawa’s framework as presented in Kwan (1996: 162). 12

 Evolutionary Economics and
Dynamic Capabilities
 Evolutionary economics considers the firm decisions as
determined by routines (well-practiced pattern) rather
than profit maximization.
 Ekonomi evolusioner menganggap keputusan
perusahaan ditentukan oleh rutinitas (pola yang
dipraktikkan dengan baik) daripada maksimalisasi
keuntungan
The Environment and the Origin of
Competitive Advantage
Competitive
Rivalry

Factor Demand
Conditions Conditions

Related Supplier or
Support Industries