If barriers to imitation are low, if competitors have the ability to imitate the company’s innovations and innovations are being developed all the time, then competitive advantage is likely to be short-lived. And when a company loses its competitive advantage, its profitability falls. In its extreme form, this loss of competitive advantage can lead to complete failure of the company. Three factors are thought to contribute to failure of a company: 1) Inertia, or reluctance to change strategies in order to adapt to changing conditions in the company’s competitive environment. 2) The company’s prior strategic commitments, such as investments, which may limit its ability to imitate rivals and to be flexible, causing a competitive disadvantage. 3) The Icarus paradox. The Icarus paradox is based on a Greek myth. Icarus used a pair of wings that he stuck to his body with wax to escape from an imprisonment. But he flew so well that he flew too close to the sun. The heat of the sun melted the wax holding his wings together. He plunged to his death. This same paradox can be applied to many companies if they become too dazzled by their own success. They believe that the way to attain future success is to follow the same strategies that made them successful in the past. They can become so specialized and inner directed that they lose sight of reality and of what is needed to maintain their competitive advantage.
Posted on: Thu, 04 Dec 2014 11:18:29 +0000
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