INTRODUCTION

Competitive advantage is a superiority gained by an organisation when it can

provide the same value as its competitors but at a lower price, or can charge
higher prices by providing greater value through differentiation. Competitive
advantage results from matching core competencies to the opportunities. It
is the favorable position an organisation seeks in order to be more profitable
than its competitors.
Competitive advantage involves communicating a greater perceived value to
a target market than its competitors can provide. This can be achieved
through many avenues including offering a better-quality product or service,
lowering prices and increasing marketing efforts. Sustainable competitive
advantage refers to maintaining a favorable position over the long term,
which can help boost a company's image in the marketplace, its valuation
and its future earning potential.
According to Michael Porter, there are five major principles of competitive
advantage which are;
value chain analysis
cost analysis
differentiation analysis
the relationship between technology and competitive advantage
competitor analysis
For the sake of this discourse, the writer will use Econet Wireless in order to
discuss the issues considered in creating a competitive advantage for that
firm relative to the above mentioned principles. Econet Wireless is a
telecommunications company in Zimbabwe that has been operating for the
last fifteen years. It is the current market leader in the industry with about
65% market share. Econet as a mobile network provider has an array of
products and services for its customers, such as voice, data bundles,
broadband, Ecocash and Econet solar.
Value Chain analysis

By definition, value chain is a chain of activities that a firm operating in a

specific industry performs in order to deliver a valuable product or service for
the market. The goal of these activities is to create value that exceeds the
cost of providing the product or service, thus generating a profit
margin.Michael Porter introduced the value chain analysis concept in his
1985 book The Competitive Advantage. Porter suggested that activities
within an organisation add value to the service and products that the
organisation produces, and all these activities should be run at optimum
level if the organisation is to gain any real competitive advantage. If they are
run efficiently the value obtained should exceed the costs of running them,
that is, customers should return to the organisation and transact freely and
willingly. Michael Porter suggested that the organisation is split into;
a) primary activities
b) and support activities
Primary activitiesare those that are directly concerned with creating and
delivering a product e.g. component assembly. These consist of five
elements detailed below;
Inbound logistics: Refers to goods being obtained from the organisation's
suppliers and to be used for producing the end product. Econet Wireless
imports electrical and network specialised equipment from China and
Sweden through its partners, ZTE, Huawei and Ericsson. These are the
components used to construct base stations that provide mobile network and
data to their customers. In order to create a competitive advantage, Econet
has to sign contracts with the suppliers so that they can buy the equipment
directly from them. Currently, they are sourcing the equipment through
authorised dealers in South Africa and Europe. Buying directly from the
suppliers means that Econet will reduce their buying costs of the equipment
as they would have gotten rid of the middle-man margin. This ensures they
can produce their base stations at a much cheaper price and therefore pass
that lowered price to the end consumer. Econet Wireless also imports FG
Wilson generators from China as backup power for their base stations during
load shedding. This has improved their inbound logistics by cutting down on
the cost of the generator. To import the generator directly from FG Wilson will
cost approximately US$160 000 yet to buy it from China costs about US$120
000. This is because the Chinese import genuine FG Wilson engines from FG
Wilson UK and assemble them in China and then sell to Econet. This
reduction in the cost ensures Econet also competitively prices their products
thus gaining a competitive advantage.
Operations: Raw materials and goods are manufactured into the final
product. Value is added to the product at this stage as it moves through the
production line. For Econet, this involves the actual assembly of their

equipment into base stations that provide network to customers. There is

need to ensure that the cost of assembling base stations is reduced by doing
it at a large scale. The use of specialised expertise ensures the tasks are
done in the shortest possible time and in the best of methods. This ultimately
ensures Econet gives a quality product to its customers, in turn giving it an
edge in the telecommunications industry.
Outbound logistics: Once the products have been manufactured they are
ready to be distributed to distribution centres, wholesalers, retailers or
customers. Distribution of finished goods is known as outbound logistics. The
equipment that Econet buys from its suppliers should be delivered to
decentralised warehouses. This ensures that after the assembly of the
equipment, minimal costs are incurred in transporting them to their intended
areas of service. A centralised storage system will increase the
transportation costs. If all the equipment is warehoused in Harare, it will
mean that for base stations that are to be deployed in areas like Gweru and
Masvingo, Econet will incur a heavy transport cost. However, if these are
delivered initially to their respective towns of deployment, the transport cost
is reduced tremendously. This will translate to reduced price in providing the
service, hence lower market prices. These will then give an edge over their
rivals in the telecoms market.
Marketing and Sales: Marketing must make sure that the product is
targeted towards the correct customer group. It is vital in making sure that
brand awareness is created to the targeted market. With Econet, there is
need for them to continue with their vigorous marketing that they have
implemented. Everyone in most places is aware of the Econet brand because
they market their products aggressively. An aggressive marketing scheme
has a huge cash outflow but guarantees an equally or better huge cash
inflow in the long run because of increased brand awareness. This has drawn
the market to use Econet products despite the fact that some of them do not
perform well. The marketing mix and strategy implemented has already
given them an advantage over their competitors as evidenced by their
subscriber base.
Services: After the product/service has been sold the organisation has to
offer support services to its customers. This may come in the form of after
sales training, guarantees and warranties. Econet has to consider offering
such services in order for it to be better than its industry rivals. A call to a
new subscriber, enquiring on quality of service rendered so far after they
have just started using an Econet line will go a long way in giving the
customer the comfort that Econet is concerned about them. For handset
sales, guarantees of reasonable periods like one year are also good to
introduce as these are non-existent at Telecel and Netone. The assurance
that the customer gets if they know that their product, if damaged, will be

attended to in that period for free is vital in creating the competitive

advantage.
With the above activities, any or a combination of them are essential if the
firm are to develop the "competitive advantage" which Porter talks about in
his book.
Support Activities
Support activities assist the primary activities in helping the organisation
achieve its competitive advantage. They are not directly involved in
production, but may increase effectiveness or efficiency. They include:
Procurement: This department must source raw materials for the business
and obtain the best price for doing so. The challenge for procurement is to
obtain the best possible quality available (on the market) for their budget.
With this function, Econet must consider offering long term contracts to its
suppliers. Long term contracts guarantee the suppliers of business over a
certain period of time and volumes in terms of their supplies. Once large
volumes are certain, Econet can then get discounts from its contracted
suppliers and reduce its procurement costs. This will give them a
considerable advantage over other industry players as they will be able to
give end customers reduced prices for the products and services that they
offer.
Human resource management: The organisation will have to recruit, train
and develop the correct people for the organisation to be successful. Staff
will have to be motivated and paid the market rate if they are to stay with
the organisation and add value. Econet Wireless has to continue paying its
employees the prevailing market rates in SADC region as it has been doing.
This ensures very low staff turnover rate, which will then cut down on
recruitment, training and development costs. The employees are the ones
responsible for rendering the services. Once the Econet employees are
happy and motivated, they will deliver a quality service to the customers,
thus creating a competitive advantage.
Firm infrastructure: Every organisations needs to ensure that their
finances, legal structure and management structure work efficiently and
helps drive the organisation forward. Inefficient infrastructure is waste
resources, could affect the firm's reputation and even leave it open to fines
and sanctions. Econet Wireless needs to invest their revenue in investments
that have a high rate of return. Short term investment options can help the
organisation ensure that it grows its revenue, which will in turn strengthen its
financial base and structure. This will help Econet to be able to expand and
offer more services to its customers as it will be able to fund these. As an
organisation, they will be ahead of their competitors in terms of

implementing new innovative products into the market as they will have the
finances to do so. Econet also needs to ensure that their legal department is
always current with the development of laws that affect its operations in the
industry. New laws always come into play as the telecoms industry is
dynamic in nature. These are there to protect organisations and consumers
in line with the new technologies that crop up daily. Being compliant at all
times ensures the organisations daily operations will not be affected by any
legal walls. Econet also needs to buy and not rent any of the offices that it
uses. Using rented offices may disrupt business if at any given time the
organisation is evicted from the operating premises. If Econet has the
assurance that their premises are for permanence, their daily operations will
go on without any disruptions, ensuring no wastages are incurred in terms of
productive time. This will increase their labour efficiency and therefore put
them in a better position compared to their rivals in the industry.
As elaborated above, the value chain encompasses the whole organisation. It
looks at how primary and support activities can work together to help the
organisation create a superior competitive advantage. If an activity is
performed well it is said to add value.
Cost Analysis
This principle is looking at the breaking down the costs of some operation
and reporting on each factor separately. The telecommunications industry
requires heavy capital investments to create wired, wireless, or broadband
infrastructure and networks. It is a capital-intensive business with high fixed
costs and lower variable or incremental costs. Customers pay for a share of
the fixed costs apart from the variable costs in their fees. Companies in the
industry are continuously looking for new customers so they can distribute
these fixed costs among many payers. This helps companies remain
competitive under price pressures and profitable in a fiercely competitive
market. However, in order for Econet Wireless to reduce its costs, it can
effectively manage its reverse logistics.
Reverse logistics is defined as the process of planning, implementing, and
controlling the efficient flow of materials, in-process inventory, finished
goods, and related information from the point of consumption to the point of
origin for the purpose of recapturing value or proper disposal (Rogers
&Tibben-Lembke, 2001). With regards to reverse logistics, Econet Wireless
can take advantage of this concept to reduce their costs. For their generators
at base stations, they can drain and collect the used oil during services. This
used oil can then be sold to other businesses that require it in their
processes, thereby realising income from material that could have been
thrown away without any income generated. The revenue generated from
the sale of this oil can then be channelled back to development of the

network. This ensures Econet has lower costs incurred in developing their
network as some of the cost chunk would have been covered by income
realised from the sale of the used oil. Lower costs mean that Econet can
lowly price their products thereby attaining a competitive advantage over
their competitors. Econet must also dispose of the used oil in an
environmentally friendly and legal way. Doing so ensures that their brand is
not tarnished in the community and the political and legal framework in
which it operates, thus boosting its corporate image, and ultimately a
competitive advantage. Old cables, old parts of generators and base station
equipment can also be recycled and used again in the deployment of new
base stations. This also cuts down on the set up costs of the organisation and
a lesser price is passed on to the consumer in offering the service.
In cost analysis, network cost optimisation becomes paramount to create a
competitive advantage.At times continually increasing the revenue of an
organisation on a year-to-year basis may be a very difficult task after a
certain number of years. However, in order for the organisation to increase
its profit, there is need to implement cost cutting measures. The revenue
remains constant but lowered costs mean that the net profit increases thus
enabling the company to be competitive. Econet Wireless can optimize its
costs by outsourcing some of the functions that it currently handles
internally. The function of fuelling of generators at base stations and their
servicing can be outsourced in order to reduce the costs associated with the
tasks. Currently using internal personnel is costly as there is no routing and
scheduling forrefuelling of generators. Generators are refueled in a
haphazard manner that is costly to the organisation. An engineer can
transport fuel to a base station in Kariba today and then the next day
another person may need to go back to Kariba to refuel another base station
that may have not been refueled. This becomes expensive on the mileage
that the business has to pay. If it was being done by a contracted party, they
would just go to Kariba once and refuel all base stations in that area in a well
routed scheduling system. This reduces the costs that Econet incur thereby
giving them a competitive advantage as they have the comfort of reducing
their product prices without incurring any losses, but maintaining a healthy
profit margin. The servicing of generators is currently being done as and
when a generators has developed faults. This is because with the number of
personnel available, it is difficult to service the generators regularly, say
monthly considering Econet has more than 1 200 of these nationwide. The
use of an outside partner will ensure generators are serviced regularly and
therefore reducing the number of faults reported at generators. When faults
are reduced to a minimum, it means network availability is increased thus
offering a high quality product to the customer. This then gives Econet an
edge in the market.

Differentiation analysis
Differentiation analysis is an in-depth look at how an organisationor fi rms
attempt to gain a competitive advantage by increasing the perceived
value of their products and services relative to the perceived value of other
firm's products and service(Charles W.L. Hill, Gareth R.Jones 2000). An
organisation offers a product as unique in industry by proving that it provides
a distinct advantage over other products by setting it apart from other
competitors brands in some way or the other, besides price.Differentiation
can be achieved through competitive pricing, enhancements to functional
design or features, distribution timing, expanded distribution channels,
distributor location, brand reputation, product customization, and enhanced
customersupport. Econet Wireless has managed to achieve differentiation of
its products and services in the following ways;
Timing
Introducing a product at the right time can help create product
differentiation.The key issue that has been achieved by Econet is to be the
first mover to introduce a new product before all other firms. First moving is
an important determinant of perceived differences in the quality of
education. For instance, Econet recently introduced the Ecofarmer product
towards the planting season as there is most likely to be high demand for it.
This then sets apart Econet from the rest of the players in the industry as
they will already be ahead of other competitors. If any other competitor then
launches a similar product, they will need to first catch up with Econet before
they can then start grappling for a better market.
Location / convenience
Econet is conveniently located close to its customers. Itsmajor offices and
service shops are located close to its customers. It has these in the central
business districts, outskirt shopping centres like Westgate, Sam Levys Mall
and Avondale shopping Centre. Even in small towns like Norton, Chegutu,
Gokwe and Marondera to mention a few, Econet ensures that it has service
shops and offices that bring convenience to its customers. Econet is always
located at a place that is easy for customers to get the products, so that it
may have a product differentiation advantage compared to the other firms.
Distribution channels
Products have been differentiated on the basis of alternative distribution
channels. For example, Econet Wireless now distributes its products and

services through a network of independent agent shops. These agent shops

give it a competitive advantage in that they create product awareness and
availability even in the most remote parts of the country. They have also
created avenues for employment and income generation to most
communities throughout the nation of Zimbabwe. This has boosted the
corporate image of Econet and strengthened its brand in the market. People
who have been afforded the opportunities of employment and income
generation have become loyal to the Econet brand as they perceive it to
have bettered their lives. Their competitors are not engaging any agents but
only have shops that they run under the parent company.
Brand Reputation
One of the most powerful bases of product differentiation is the reputation of
a firm and of its products. Reputation is often very difficult to develop in the
market but Econet Wireless has earned such a good reputation. Its ability to
consistently be the first to launch new products in the telecoms industry has
given it a good reputation of being highly innovative. Corporate social
responsibility programs undertaken by Econet that include educational
scholarships to orphans and sponsoring the cricket national team have also
gone a long way in giving it a good reputation not only in the
telecommunications industry, but across all industries in the Zimbabwean
economy. Above all, its ability as an organisation to offer customers a wide
range of products that satisfy the different market tastes has also
strengthened its brand reputation.
The relationship between technology and competitive advantage
In this present age, technology is the driving force behind the genesis,
growth and sustenance of any organisation across the globe. The use of
technology to obtain a competitive advantage is very important in todays
technological driven environment. Technology can be used in many ways
including production to reduce cost thus add value, research and
development to develop new products and the internet so customers have
24/7 access to the firm. The business world has been turned into a seamless
global village where there is need for constant interaction between
organisation, suppliers, customers and all stakeholders in the business
environment. Decision making is made easier and faster when information is
availed at all times through various technologies. Without the technology
that provides you with the vital information to make decisions in an
organisation, the business becomes disadvantaged and will eventually
collapse.
With Econet Wireless, there have introduced the Oracle ERP solution which is
an enterprise-wide IT system that integrates all facets of the business on one

platform. Any transactions carried out by the business, be it under

procurement, HR, planning, finance and networks department are recorded
through this system and updated in real time. This ERP solution is internet
based and allows for interaction with suppliers and contractors of Econet
Wireless. Introduction of this technology has given Econet a competitive
advantage in that most of its processes are now automated. For
procurement, it is no longer necessary for procurement personnel to phone
suppliers to bring in any raw materials because the suppliers are now
connected to Oracle ERP and receive auto-generated orders when the
supplies have reached a pre-programmed reorder level. This ensures that
Econet at any given times has all the supplies that they need for them to
offer a high quality product to their customers. The supply chain is made
smoother by eliminating bottlenecks of human error like forgetting to place
orders on time, poor follow up on supplies ordered and even inaccurate
inventory management. Just-in-time ordering has been smoothly
implemented and this has cut down the storage costs of Econet thus giving
them an edge over their competitors.
Information for decision making is made readily available 24/7 as managers
have access to the system at any given time and place where they have
internet connection. Decisions can be made at home, thus ensuring the
business is not hampered by geographical distance between the manager
and the office. Econet Wireless has also taken advantage of technology by
availing its products and services on Facebook. This enables it to get
feedback from customers in real time, which is very vital in making decision
quickly. Facebook has also enabled Econet to reach a wider market for its
products. It has enabled the organisation to market its products across the
whole globe thereby having access to wider markets compared to its rivals.
Another key technological advancement that has been taken abode by
Econet is the Kentrox Fuel Management system. This system has been
installed on all generators at base stations across the country and is used to
monitor the fuel levels of these generators remotely from a central point.
This technology has greatly reduced the costs of Econet as they now
timeously refuel their generators after receiving low-fuel alarms via Kentrox.
This eliminates the element of network downtime during load shedding, thus
ensuring continued in flow of revenue and quality network signal to Econet
subscribers. For Econet competitors, they have not implemented such a
system and they only refuel base stations after they would have run out of
fuel. This creates a lot of downtime and ultimately poor service to the
customers.
There has also been the use of technology by Econet for movement of
money. The introduction of Ecocash has given Econet Wireless a competitive
advantage over its rivals in Zimbabwe.

Competitor Analysis
Competitor analysis in marketing and strategic management is an
assessment of the strengths and weaknesses of current and potential
competitors. This analysis provides both an offensive and defensive strategic
context to identify opportunities and threats. Profiling brings together all of
the relevant sources of competitor analysis into one framework in the
support of efficient and effective strategy formulation, implementation,
monitoring and adjustment.
The strategic rationale of competitor profiling is powerfully simple. Superior
knowledge of rivals offers a legitimate source of competitive advantage. The
raw material of competitive advantage consists of offering superior customer
value in the firms chosen market. The definitive characteristic of customer
value is the adjective, superior. Customer value is defined relative to rival
offerings making competitor knowledge an intrinsic component of corporate
strategy. Profiling facilitates this strategic objective in three important ways.
First, profiling can reveal strategic weaknesses in rivals that the firm may
exploit. Second, the proactive stance of competitor profiling will allow the
firm to anticipate the strategic response of their rivals to the firms planned
strategies, the strategies of other competing firms, and changes in the
environment. Third, this proactive knowledge will give the firms strategic
agility. Offensive strategy can be implemented more quickly in order to
exploit opportunities and capitalize on strengths. Similarly, defensive
strategy can be employed more deftly in order to counter the threat of rival
firms from exploiting the firms own weaknesses.
For Econet Wireless, it is key to know exactly what their competitors are up
to in the market. Econet must be able to know the products that Telecel and
Netone are currently offering the market. This will enable them to make
decisions on whether to improve their current products or launch completely
new products. Knowing the products and services being offered by rivals, and
how they are faring in the market will help Econet understand the
preferences of the customers. If they were about to launch a certain product
but discover that another rival is offering it and the market is not receptive of
the product, this may be an indication for them to either postpone or cancel
the launch of the product. This will save them the losses of giving the market
a product or service that they do not want.
Conducting competitor analysis is also key for Econet as this enables them to
identify gaps in the market for products, services and initiatives. If they have
all the information about the products that the other organisations are
offering, and what their market is saying about the products, Econet will be
able to come up with products that address the shortcomings of their rivals
and thus create a competitive advantage for themselves. Competitive and
strategic pricing of products and services can be effectively aided by having

in-depth knowledge on how rivals also price their goods and services. This
will help Econet know prices being offered by their competitors and help
them decide how to price their services so that they are at an advantage. If
Econet also conduct their competitor analysis well, it can reveal to them the
new technology and methodology that are being used by other
organisations, hence it will give them ideas of the technologies and
methodologies that could be applied. If the technologies and methodologies
being used by Telecel are effective in cost containment, Econet can then
adopt them but slightly customize them to be a perfect fit for Econet.
In terms of convenience and distribution channels, an understanding of
Telecel and Netones positioning in relation to these will help Econet know
how to strategically locate their shops. They should be able to locate them
where there are very few rival shops or where the rivals are enjoying a
segment of the market. This will enable Econet to compete in those arenas
and thus increase their customer base and ultimately create a competitive
advantage. It is however imperative for Econet not to focus too much on the
activities of competitors as this may lead them into becoming reactive
instead of proactive. This results in a lack of innovation and a lack of unique
identity in the market. Flawed analysis of competitors must also be avoided
by Econet at all costs as this might result in making poor decisions in order
to compete.

Conclusion
It is imperative, from the above discourse, to understand that Potters five
principles of competitive advantage have to be considered and articulated
well for them to create a competitive advantage. Taking them one at a time
may most probably yield better results that trying to look at them
simultaneously. This may be more costly as each refinement needs some
form of financial support.These principles can also be exploited hand in hand
to create better prospects of a competitive advantage.

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2. Porter, M.E., "Competitive Strategy: Techniques for analyzing industries
and competitors" New York: The Free Press (1980)
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1999
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