For each of the following companies, access the sustainability of its competitiv

Question

For each of the following companies, access the sustainability of its competitive advantage.

a. Analog Devices, which develops specialized applications for analog semiconductors, has invested counter cyclically to cash in on business upturns. The results: 80% faster growth and 50% higher profitability than the rest of the semiconductor industry.

b. Nike's leadership in athletic shoes is built on cheap Far Eastern labor and massive investment in product development and marketing. Over the five years between 1981 and 1986, Nike averaged three times the profitability and four times the growth of the rest of the U.S shoe industry.

Explanation / Answer

a) The Analog Devices investment strategy is not a sustainable competitive advantage. It is not sustainable because competitors can easily adjust their investment strategy to match that of Analog Devices and the growth and profitability gaps that they hold over the rest of the semiconductor industry will be eliminated.

b) Nike’s competitive advantage includes vigorous cost reductions, product differentiation and advertisement, these focused areas of their business help to create asustainable competitive advantage that is difficult for competitors to infringe upon.

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