Introduction
In a world driven by globalisation, multinational corporations are doing business across national boundaries. This has encouraged competition at global scale and today, be competitive is the essential key of the success or failure of firms. Competitive strategy is the search for a favorable competitive position in an industry (Porter, 1985).
However, in the competitive world we are living in, firms have to distinguish themselves from competitors. In that way, firms have to develop a competitive advantage.
In this work we are going to define what a competitive advantage is and how it can conduct to economies of scale. We are going to explain the actual situation of Ford and how the change in strategy is likely to benefit Ford’s future competitive advantage.
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I) Briefly explain the concept of competitive advantage.
A competitive advantage is a position adopted by a firm to sustain more profit than the average of its industry and thus to possess an advantage over its rivals.
Firms can add value to their products through two opposite approaches: Cost and benefit advantage. (Michael E. Porter, 1985)
On the one hand, firms can increase their production in order to reduce its costs of production. Then they pass this economy on the final price. With that method, they can offer to consumers lower prices than their opponents. (Cost advantage through economies of scale or “cost focus”).
On the other hand, a firm can offer more value to its consumers by providing greater benefits that may justify higher prices (benefit advantage).
Value create ...