Competitive Advantage And Its Evolution Path

Comparative advantage is regarded as the traditional theory that can effectively explain international competitiveness. Today it can't explain as well as ever because of economic globalization but competitive advantage can effectively explain international competitiveness. What are the reasons why competitive advantage can strengthen international competitiveness? What forms competitive advantage will take in a product life cycle? Vernon used product life cycle explain foreign trade and investment but didn't give the inside reasons. All these questions will be answered in this essay.Porter puts forward the differentiation advantage and cost advantage according to surroundings and firm strategy by means of value chain. In the mean time he gives the way that competitive advantage comes true, but does not give the reasons on the economic view.In order to explain the competitive advantage on the economic view this essay sets a quantitative model to describe competitive advantage. The model originates from Porter's definition of comparative advantage under the imperfect competition market. Two changing models that are horizontal model and vertical model are deduced from the quantitative model. The competitive advantage being marginally decreasing, the changing models become the mechanism that creates new competitive advantage.This essay draws conclusions as follow. The product life cycle based on Schumpeter creation is divided four stages. There are three kinds of competitive advantage through the product life cycle. The competitive advantages that are skill innovation competitive advantage, product category & quality competitive advantage and service & cost competitive advantage exist in the order of the stages. Although the three kinds of competitive advantage decreases in a product life cycle, they are a kind of spiral rising structure in the long run. The quantitative model can explain the origins of competitive advantage and the changing models can explain the shifting among the three kinds of competitive advantage.