Answer 3:

By definition, the firm is said to possess a competitive advantage over its rivals when a firm sustains
profits that exceed the average for its industry which is not surprisingly the goal of a business strategy of
a firm

The basic types of competitive advantage are namely differentiation advantage and cost advantage.

A competitive advantage enables the firm to create superior value for its customers and superior profits
for itself. This is because the firm is able to deliver the same benefits as competitors but at a lower cost
(cost advantage), or deliver benefits that exceed those of competing products (differentiation
advantage).
Cost and differentiation advantages are known as positional advantages since they describe the firm's
position in the industry as a leader in either cost or differentiation.

The basic components of competitive advantage are:

Resources and Capabilities

in order to develop a competitive advantage the firm must have resources and capabilities that are
superior to those of its competitors. Without this superiority, the competitors simply could replicate
what the firm was doing and any edge over its competitors would vanish.
The following are some examples of such resources:
1.Proprietary know-how
2.Installed customer base
3.Brand equity
4.Patents and trademarks

The firm's resources and capabilities together form its distinctive competencies. These competencies
enable innovation, efficiency, quality, and customer responsiveness, all of which can be leveraged to
create a cost advantage or a differentiation advantage.

Cost Advantage and Differentiation Advantage

Competitive advantage is created by using resources and capabilities to achieve either a lower cost
structure or a differentiated product. A firm positions itself in its industry through its choice of low cost
or differentiation. This decision is a central component of the firm's competitive strategy.
Another important decision is how broad or narrow a market segment to target. Porter formed a matrix
using cost advantage, differentiation advantage, and a broad or narrow focus to identify a set of generic
strategies that the firm can pursue to create and sustain a competitive advantage.

In order to be a sustainable competitive advantage it needs to satisfy the following:

1. Uniqueness
2. Sustainable
3. Difficult to replicate
4. Superior to competition
Each of the above four criteria are satisfied by Disney.
On that account, the core competencies for Disneyland and other Disney theme parks and resorts are:

1. Animatronics and Show Design:

Disney has been the pioneer in the field of automated show elements – not just animatronics like Abe
Lincoln, but lighting, sound and music, and other show effects, coordinated into a customer-pleasing
package. The competency in animatronics alone has been used in many rides and shows over the years,
everything from singing Country Bears and Tiki birds to pirates and ghosts and even restaurant
entertainment such as like Sonny Eclipse at WDW. Customers seem to value this corporate ability For
eg: Pirates of the Caribbean is still popular after 30 years.

2.Storytelling, Story Creation and Themed Atmospheric Attractions:

It doesn’t necessarily mean an investment in technology like animatronics, but an investment in the
right people and having them learn ways to tell stories effectively. While it probably benefits the
animation and film studios more than the parks, the theme parks indeed benefit from compelling stories
as well. Again, Pirates of the Caribbean and Indiana Jones are examples of rides that have benefited
from their stories. Space Mountain and Big Thunder are also good examples of how the visitors value
the addition of highly-themed atmospheric elements.

3.Efficient operation of theme parks:

This is another area where Disney had the first-mover advantage. They were the inventors of the
efficiently-run modern theme park, reaching entirely new levels of cleanliness, safety and productivity
while giving a uniformly high-quality entertainment experience to very large numbers of people. A lot of
this competency was gained through trail-and-error and just plain hard knocks over the past 45 years –
but that’s exactly the point. Only a few amusement park operators have been around as long and
entertained as many visitors as Disney has. Some of Disney’s innovations here can be copied (like
keeping things clean), but it is hard for the competition to duplicate all that knowledge. One of the other
tests is whether the customers value this. The bigger problem and the key point is not just that Disney
isn’t leveraging its’ core competencies in the creation of the new park. Even if the park is the current
state-of-the-art, there is a major strategic problem here: they aren’t advancing the state-of-the-art in any
of these key areas. There is no such substantial development in the key areas in the recent past.