Barney and Sustained Competitive Advantage.

When we left dispatch in the last seminar, we were just starting to talk ab come forth hard specialized returns. According to Barney and his article Firm Resources and Sustained Competitive Advantage, a few things are ingested to gain a cockeyed specific advantage. But also, he argues that a firm net gain a Sustained Competitive Advantage. SLIDE According to Barney, a firm has a sustained competitive advantage when it is implementing a value creating strategy non simultaneously being employ by any current or likely competitors AND when these other firms are unable to dublicate the benefits of this strategy.But what does a phoner neediness to gain such an advantage? First of all, it needs certain mental imagerys, which heap include assets, capabilities, products, information, knowledge etc. SLIDE But these resources moldiness assume four attributes 1. they must be valuable in the sense that they crop opportunities or neutralize threats in a firms environment. This goes without scaning. 2. They must be rare among a firms current and potential competition. This simply means that this resource or strategy can non be implemented by other firms at the same time. They must be amiss imitable (hard to copy for other firms) and 4. There cannot be strategically equivalent substitutes for this resource that are valuable, but neither rare or imperfectly imitable. digest anyone think of a specific firm, or a token of cable or industry, which has a clear physical exercise of sustained competitive advantage? Short discussion. SLIDE We thought about what kind of a firm could gain a sustained competitive advantage, and came to the conclusion that certain pharmaceutic companies are able to gain perfect sustained competitive advantage.To apologize why, we need to have a look at the pharmaceutical market. To attract things a bit simple, we can divide the industry into two different categories Companies which develop new kinds of medicine, and others which c opy the original medicine, and produce what is called generic drugs. about companies actully do both. SLIDE Companies which develop new medicine spend large amount of money on research and developing when making a new drug. They get the best scientists from all over the world, gather big amounts of medical information, test the drugs etc.They also need to prove the safety of a new drug, and demonstrate its effect, in special clinical trials. And of course, they need to market the new drug. This process can cost huge amounts of money. Lets say a company spends millions of dollars and ten years on developing a new drug that cures all kinds of cancer. It would be rather disappointing for that company if generic drug companies were able to copy the drug the moment it hits the market, and spending money on manufacturing the drug, but not on development and testing.The maker of the original drug would probably soon run out of business. SLIDE So, to protect the original drug, the comp any can get a patent for the new drug. For how gigantic is different between countries, but for example in the US, patents give 20 years of protection. But for as long as a drug patent lasts, the firm enjoys a finis of market exclusivity, or monopoly if you like. Under those circumstances, the company is able to set the toll of the drug at a level which maximizes profitability. The profit can greatly exceed development and production costs of the drug.Often, when the patent runs out and some(prenominal) other companies start making generic drugs, the prices fall dramatically and documentary competition starts. But to sum things upp, new developed medicine can fit Barneys theory They can be valuable, rare and not only hard to copy, but simply impossible. SLIDE The point is if a firm can develop a new important type of medicine, and get a patent so it wont be copied, it has a perfect sustained competitive advantage while the patent is hushed valid, and therefore, fits well into Barneys theory.