By Arun G. Pillai

This millennium's dynamic markets and changing technologies threaten to render the concept of competitive advantage useless. With entry-barriers being effectively dismantled by new entrants everyday, a new dogma of equalisation of competitive advantage has emerged which says that an enduring competitive advantage is a myth. Yet, many companies are continuing to prosper. What, then, is the reason for their success? To answer this, an understanding of the context in which business will be done in this millennium is necessary. International business trends such as globalisation, the emergence of new markets, deregulation, dramatic shifts in the balance of power from manufacturers and distributors to consumers, and disintermediation have created an indeterminate competitive landscape, with traditional geographical and industrial boundaries blurring.

These trends have increased the complexity of the competitive environment. However, the tools of business management have not altered in sync. Managers across the world continue to use traditional management tools like benchmarking, time-based competition, Total Quality Management, outsourcing, right-sizing, decentralising, and reengineering. Some of these may not be relevant in the context of sustaining a competitive advantage.

The building blocks of competitive advantage in this millennium will be competencies, not tools. These competencies will revolve around critical resources and organisational capabilities. Critical resources include privileged assets like infrastructure, intellectual property, distribution networks, brands, reputations, and customer information. Capabilities comprise growth-enabling skills such as envisioning, expertise in restructuring, and skills in managing M&As that are transferable across markets and businesses with broad applicability, and relationship-building skills with key customers, suppliers, competitors, government, and society at large.

However, to be a source of sustainable competitive advantage, such competencies must be grouped in unique bundles that resist easy and quick duplication and substitution, and deliver value to products and services .The grouping will have to be done in the context of specific industry and market scenarios as well the core competence of the company.

The imperatives for Indian companies are slightly different. For, the Indian context itself is unique. Till 1991, the regulated economy did not allow competition to evolve in the local business environment. Consequently, when deregulation and liberalisation did happen, most Indian companies were caught napping and were forced to wake up to the phenomena of privatisation and globalisation. The subsequent entry of transnationals armed with substantial financial resources, advanced technology and powerful brands changed the profile of competition, challenging the traditional framework of business management in India. Indian companies had to do 2 things simultaneously: improve operational effectiveness to merely survive, and acquire the capabilities necessary for long-term sustenance.

I believe it is possible for Indian companies to chalk out a different strategy plan altogether to achieve the holy grail of sustainable competitive advantage. Which necessitates a shift in their basic mindset. Rather than looking at competition as a threat, they should look at it as opportunities, and leverage their unique resources and capabilities to fight it. For enduring competitive advantages in a global economy today lie increasingly in local attributes, namely knowledge, relationships, infrastructure and skills, which foreign entrants would find difficult to match.

Take knowledge. Many a transnational has gone awry in its calculations assuming that India would be a market for old products and technologies, and failing to understand consumer behaviour patterns. This has led to relegation of some of them-like Revlon, Levi's, and Ford Motor-into high-end niches. It is here that the local knowledge of the Indian companies provides them with a competitive advantage. Consumers in India are usually loyal to local customs, habits, and even brands. Indian companies need to harness this loyalty to build competitive advantage. For instance, Arvind Mills has built strong brands by virtue of its knowledge of Indian consumers' tastes and aspirations.

Most Indian companies enjoy long-standing relationships with suppliers, distributors, and government officials which will take years for transnationals to replicate. The control of the distribution network is a key success factor in India. This control has enabled Bajaj Auto to fight the threat of Honda in the scooters market. Similarly, the relationships with suppliers and support agencies like transporters and government officials provide Indian firms with an edge over their foreign rivals.

The most obvious resource waiting to be harnessed is the high degree of technical and professional competence, language skills, strategic thinking, and problem-solving capabilities of Indian engineers and managers-attributes that have already been exploited by transnationals who use India as a source of skilled talent. Indian companies should invest in innovative talent management to retain and leverage their human resources to build and sustain competitive advantage.

Thus, Indian companies need to convert these capabilities into a sustainable competitive advantage. In doing this, they need to distinguish between the capabilities that influence competitive success from those that are less critical. Capabilities that are less critical can be outsourced or controlled by others. But they have to acquire and develop a unique bundle of capabilities that influence competitive advantage. These can either be built in-house or borrowed through alliances or by outright acquisition. It is their key to sustainable competitive advantage. It is also a key to survival.

Arun G.Pillai is a second-year MBA student at the Indian Institute of Management, Bangalore

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