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6 questions to determine competitive advantage
March 6 2011

The ability of resources or capabilities to lead to a sustainable competitive advantage depends on the answers to these six questions.

  • A competitive advantage exists when a hotel has a significant edge over the competition.
  • Hotels work to create advantages through the development of resources and capabilities.
  • The ability of resources or capabilities to lead to a sustainable competitive advantage depends on the answers to six questions.

A competitive advantage exists when a hotel has a significant edge over the competition. Usually, this means the hotel can do something competitors can't do or has something competitors lack. While it is extremely difficult to sustain a competitive advantage, hotels work to create advantages through the development of resources and capabilities. Better resources and capabilities lead to higher levels of success. However, not all resources and capabilities are equal in their ability to help a hotel achieve sustainable performance.

The ability of resources or capabilities to lead to a sustainable competitive advantage depends on the answers to six questions:

1. Does the resource or capability have value in the market? These types of resources allow a hotel to exploit opportunities and/or neutralize threats. Marriott International, for example, has applied its skill in managing financial assets across a broad range of business segments, giving it a valued capability.

2. Is the resource or capability unique? If a hotel is the only one with a particular resource or capability, then it may be a source of competitive advantage. If numerous hotels possess a particular resource or capability, then the situation is described as competitive parity—no company has the advantage. Note that uniqueness does not mean only one organization possesses a capability or resource—only that few do. The uniqueness dimension also implies that a resource or capability is not easily transferable. That is, it is not readily available in the market for purchase.

3. Is there a readily available substitute for the resource or capability? Sometimes competing hotels may not have the exact resource or capability, but they have easy access to another resource or capability that will help them accomplish the same results.

Positive answers to the first two questions and a negative answer to the third question mean that a resource or capability has the potential to lead to a competitive advantage for the hotel. However, that potential is not realized unless two other questions also are answered in the affirmative:

4. Do organizational systems exist that allow the realization of potential? For potential to be realized, the hotel also must be organized to take advantage of it. Four Seasons Hotels and Resorts, for example, focuses on building a culture of customer care.

5. Is the organization aware of and realizing the advantages? One of the great differentiators between successful and unsuccessful companies is the ability of managers to recognize and tap into resource advantages. Starwood Hotels and Resorts Worldwide has identified economies of scale as one of several capabilities that it sees as contributing to its competitive advantage. It believes by being one of the largest hotel companies, it can use scale to reduce the costs associated with core marketing, reservation functions and purchasing.

At this point, a hotel is using its systems and knowledge to take advantage of a unique and valuable resource or capability. However, resource advantages may not be sustainable. A final question determines the long-term value of a resource or capability:

6. Is the resource or capability difficult or costly to imitate? Competing hotels should face a cost disadvantage in imitating a resource or capability. The more difficult or costly a resource or capability is, the more valuable it is in producing a sustainable competitive advantage.

Successful companies pay critical attention to developing valued, unique, difficult-to-substitute and costly-to-imitate resources and capabilities. Using these six questions can help hotel leaders determine whether given resources or capabilities have the potential to deliver a sustainable competitive advantage.

Cathy A. Enz is the Lewis G. Schaeneman Jr. Professor of Innovation and Dynamic Management and a full professor in strategy at Cornell University. She recently served as Associate Dean for Industry Research and Affairs, and served as the Executive Director of the school’s Center for Hospitality Research from 2000-2003. Dr. Enz has published over eighty journal articles, book chapters, and three books in the area of strategic management. Her research has been published in a wide variety of prestigious academic and hospitality journals such as The Administrative Science Quarterly, The Academy of Management Journal, The Journal of Service Research, and The Cornell Hospitality Administration Quarterly.

The opinions expressed in this column do not necessarily reflect the opinions of or its parent company, Smith Travel Research and its affiliated companies. Columnists published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.

8/22/2013 8:29:00 AM
better if you put an example in each questions. because it is hard for some like me to understand it....broad examples.
3/7/2011 2:02:00 PM
Dan you are right about providing a reference. The information is adapted from the latest edition of my textbook Hospitality Strategic Management: Concepts and Cases 2nd ed. Wiley Publishers, 2010. Most of the questions are based on J. Barney's paper "Looking inside for competitive advantage," in the Academy of Management Executive, 9, 4, (1995), pp49-61.
3/7/2011 11:33:00 AM
Good stuff, but nothing too new here. This is the VRIO framework from Barney back in the 80s'; a reference would have been nice. I am curious to see how this really applies to the hotel industry. I would love to see examples of uniqueness or hard to imitate resources from the hotel industry. But good stuff anyway. Dan
3/7/2011 6:03:00 AM
Great post. I liked (2) and (3). Thats sets you apart from the rest !
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