Organizational Resources and Establishing Competitive Advantage - Essay Example

? Organizational resources and establishing competitive advantage Introduction The potential of organizations to develop a competitive advantage is depending on a series of factors. Most commonly, the level of achievement of the organizational goals and the profitability of a firm are regarded as key criteria in order to evaluate whether a company is successful or not. Organizational resources, in their various forms, may also constitute a firm’s competitive advantage, but only if certain terms are met. This issue is explored in this paper. Emphasis is given on the prospects of an organization’s resources to become a competitive advantage but also the challenges that such process may face. On the other hand, it has been made clear that not all organizations are able to effectively develop their resources. Also, the continuous increase of competition in the global market is a factor that can negatively influence the efforts of organizations to improve their position in the market using their resources and capabilities. It seems that in the long term, the transformation of organizational resources into a competitive advantage has to be carefully managed since the challenges in the internal and the external organizational environment are likely to be many; as the conditions in the organizational environment become more hostile, under the influence of the global market pressures, the support that an organization has to provide to its resources has to be increased, otherwise their chances to become a competitive advantage are significantly reduced. At this point, the following issue appears: how an organization can secure that its resources will become, even in the long term, competitive advantage? It seems that such prospect cannot be considered as guaranteed, especially in industries where competition is high. This issue is further analyzed in the sections that follow using the literature published in this field. 2. Organizational resources and their use for the establishment of competitive advantage 2.1 How an organization can establish competitive advantage from its resources The identification of the exact characteristics of competitive advantage in modern organizations is a challenging task. Researchers and theorists have tried to identify the criteria under which organizational resources can become competitive advantage, but the results of their studies seem to be contradictory. Most commonly, emphasis is given on the balance between the firm’s strengths and weaknesses, as the specific relationship can also affect the firm’s opportunities and threats. The interaction of the above sectors in the context of organizational growth is reflected in the SWOT analysis framework. The above framework is based on the view that firms that are likely to emphasize on their internal strengths and control their weaknesses are more able to face environmental threats, a fact that can help them to develop competitive advantage towards their rivals (Barney 1995). However, the terms under which the specific effort would be successful should be further explored. Indeed, even if effectively organizing its internal environment and if it tries to avoid major market risks, a firm has still to face the threat of an unexpected downturn if there are no other strategic alternatives in place, as for example strategic alliances with other firms that control an important share of the relevant industry. On the other hand, Peteraf (2006) noted that there are certain conditions that can increase the potentials of an organization to develop a competitive advantage. These conditions could be described as follows: ‘superior resources (heterogeneity within an industry), ex post limits to competition, imperfect resource mobility, and ex ante limits to competition’ (Peteraf 2006, p.179). It is assumed that organizations that seek to develop a competitive advantage should focus on the particular conditions. This view can be criticized as of the lack of explanations regarding the potentials of these conditions to exist in all organizations, meaning especially those organizations operating in different industrial sectors. From another point of view, Powell and Dent-Micallef (1997) suggest that there are certain organizational resources, like technology, which are more likely to become competitive advantage than other organizational resources. However, again, the success of the relevant projects is depended on a series of factors, such as the flexibility of the organization in terms of culture but also the ability of the firm’s planners to develop integrate strategies, i.e. strategies that can address, simultaneously, different organizational needs. From this point of view, organizations that aim to increase their competitiveness towards their rivals should focus on those organizational resources that are most appropriate for being used as a competitive advantage. In any case, it seems that the potential of organizations to develop their resources as competitive advantage is closely related to the effective management of knowledge across the organization. Indeed, knowledge has been found to be the most important organizational resource, in terms of its potential use as competitive advantage (Grant 1996). However, the transformation of knowledge into competitive advantage can be achieved only if certain issues are addressed: a) emphasis should be given in regard to all phases of knowledge management in the organization, i.e. not just on the acquisition or the exchange of knowledge, b) knowledge cannot become competitive advantage unless it is transformed to organizational practices; the terms of this transformation have to be clearly defined by the organization’s managers. Knowledge stored but not used within a particular organization cannot become competitive advantage even if it is not shared with other organizations (Bohlander and Snell 2009).. The potential of organizational resources to become competitive advantage are analyzed in the study of Powell and Dent-Micallef (1997). In the above study, reference is made to the potential use of different strategic tools for achieving similar organizational aims, such as the involvement of organizational resources in the increase of the organization’s competitiveness. At this point, it seems that disputes exist in the theory regarding the factors that most contribute in the increase of competitiveness of modern organizations. Certain theorists highlight the need for increasing market share and for promoting cooperation within the organization while other theorists believe that organizational competitiveness is mostly depended on employee performance (Harrison and Caron 2009). In other words, managers can set different priorities when trying to develop the competitiveness of their organization (Maier, Hadrich, and Peinl 2009); emphasis can be given on specific organizational capability, such as the IT systems involved in a particular organizational activity, or on employees, as individuals who are appropriately trained and who are able to respond to all the needs of their position (Hoskisson, Hitt and Ireland 2008) . 2.2 Organizational resources as sources of competitive advantage in practice In accordance with the issues discussed above the potentials of organizational resources to become competitive advantage are significant. At this point the following issue should be reviewed: which could be the most common types of organizational resources that can become, under certain terms, competitive advantage? In accordance with Hitt, Ireland and Hoskisson (2010), those factors that could be traditionally used as competitive advantage, i.e. ‘labour costs and superior access to financial resources’ (Hitt, Ireland and Hoskisson 2010, p.91) can, still, be competitive advantage. From another point of view, when a firm operates in the global market then ‘the time required to integrate, coordinate and control its processes’ (Kozminski and Cushman 1993, p.74) can be the organization’s competitive advantage. Also, the cost of production can be another element of the organization’s competitiveness in its industry; indeed, organizations that can offer their products/ services in low cost (as a result of the low cost of production), they are more likely to keep their competitiveness high ((Kozminski and Cushman 1993). At the same time, Murmann (2003) focuses on technology as the organizational resource, which is most likely to become competitive advantage. The above view is also highlighted in the study of Porter (1998) where reference is made to the market’s power to alter the terms of competition worldwide either directly or indirectly. All the above resources could become competitive advantage under the terms that organization’s managers can understand the relevant potentials of the specific resources (De Wit and Meyer 2010). 3. Conclusion The increase of competitiveness of modern organizations can be achieved only if the relevant plans are carefully designed. The potential responses of the organizational environment to the relevant initiatives should be taken into consideration. Reference is made to the employee resistance, which is a common problem in organizations worldwide. Indeed, if the participation of employees in the relevant projects is not secured, then the chances for success are decreased. The transformation of organizational resources into competitive advantage can be achieved only under the terms that conflicts in the internal organizational environment have been eliminated. Moreover, the potentials of organizational resources to become competitive advantage can be differentiated among markets with different economic and cultural characteristics (Murmann 2003). Therefore, firms that wish to stabilize their position in the international market should primarily identify the strengths of their resources (McIvor 2005); the evaluation of these resources, especially regarding their potential performance in the long term should follow. Managers that organize the relevant initiatives should be able to understand the needs of employees but also the needs of the organization, in terms of its financial stability both in the short and the long term (King and Cushman 1994). Managers that have the qualities of a successful could support more effectively the development of their organization’s resources at such level that these resources could easily become competitive advantage. References Barney, J. 1995. Looking inside for Competitive Advantage. The Academy of Management Executive. [Online]. Available at [Accessed: 29 November 2011]. Bohlander, G., Snell, S. 2009. Managing Human Resources. Belmont: Cengage Learning. De Wit, B., Meyer, R. 2010. Strategy: Process, Content, Context, An International Perspective. Belmont: Cengage Learning. Grant, R. 1996. Prospering in Dynamically-Competitive Environments: Organizational Capability as Knowledge Integration. Organization Science. [Online]. Available at http://www2.sa.unibo.it/summer/testi/9_munari_longo/grant_1996.pdf [Accessed: 29 November 2011]. Harrison, J., Caron, J. 2009. Foundations in Strategic Management. Belmont: Cengage Learning. Hitt, M., Ireland, R., Hoskisson, R. 2010. Strategic Management: Competitiveness & Globalization, Concepts. Belmont: Cengage Learning. Hoskisson, R., Hitt, M., Ireland, D. 2008. Competing for advantage. Belmont: Cengage Learning. King, S., Cushman, D. 1994. High-speed management and organizational communication in the 1990s: a reader. New York: SUNY Press. Kozminski, A., Cushman, D. 1993. Organizational communication and management: a global perspective. New York: SUNY Press. Maier, R., Hadrich, T., Peinl, R. 2009. Enterprise Knowledge Infrastructures. New York: Springer. McIvor, R. 2005. The outsourcing process: strategies for evaluation and management. Cambridge University Press. Murmann, J. 2003. Knowledge and competitive advantage: the coevolution of firms, technology, and national institutions. Cambridge: Cambridge University Press. Peteraf, M. 2006. The cornerstones of competitive advantage: A resource-based view. Strategic Management Journal. [Online]. 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