Competitive Advantage - Research Paper Example

Competitive Advantage Introduction Comprehending the concept of competitive advantage is a progressive constraint for decision-making body. Historically, competitive advantage was seen as the organisational position, whereby the company occupied a competitive space, created, and protected its market share. In such a case, the location and services of the organisation determines organisational competitive advantage. The capacity to build a strong competitive advantage in the modern world is extremely rare and a competitive advantage hardly gained can be easily lost. Companies can only achieve and sustain competitive advantage if only their services and means of delivering them demonstrate crucial attributes that correspond to the crucial purchasing criteria of a crucial group of clients. Similarly, sustained competitive advantage results from long-term difference between goods and services of one company and the products of its rivals in the customers’ mind. I will analyze the significance of creating better core competencies, strengths of resources, and capabilities of the organisation can be a crucial way of attaining competitive advantage. It will also examine the ethics and social responsibility and its role in creating and sustaining competitive advantage in an organisation. Discussion In the modern business environment, companies compete in a dynamic and challenging environment that has been changed by various factors ranging from globalization, uncertainty, abrupt changes to increasing information technology uses (Whitley, 2007). Therefore, attaining and sustaining competitive advantage is a main concern in the mind of many leaders in the competitive and moderately growth markets that characterize various modern businesses and competitive advantage sources are of crucial interest for many organisations in the modern business. The significance of competitive advantage in determining the prosperity and growth of an organisation has tremendously increased in the past few years and this concern has resulted to resource and knowledge based theories development that investigate the linkage between core competences, resource strengths and organisational capabilities in ensuring competitive advantage and organisational performance. Core competencies are crucial for organisational competitive advantage and performance as they imply the abilities and skills for effective resource deployment through the processes and tasks of an organisation. It is a cross-functional capabilities combination and coordination, for instance, a competency in development of products in one part of the firm may be a result of integration of capabilities of systems of information management, marketing abilities and product and service production capabilities in that division. These capabilities are fundamental to an organisation attaining competitive advantage (Dosi, Nelson, & Winter, 2000). When analyzing core competencies of an organisation, managers should realize that competition among organisation is a race for mastery of competence to secure market position and power. Core competencies are increasingly crucial organisation’s ability because of its relevance in the prosperity of the organisation in the marketplace. The company can use its competences to develop their unique products and services and market them to gain more profits than their competitors. Similarly, choosing people with required skill and expertise, upgrading or expanding employee’s capacities through training enhances the competitive advantage of the company. As the experience builds up the organisation reaches the level of its ability to carry its activities effectively, at a manageable cost and the capacity to start converting it into true competitive advantage. Organisational resources and capability is crucial competitive advantage source for the success and growth of the organisation in the marketplace (Porter, 2004). This is because it focuses on how resources and capabilities can be changed to organisational competencies, which can translate to competitive advantage. Experts believe that through resources and capabilities of the firm, it can adopt core competencies that are valuable and that can translate to superior performance and growth enabling the company to gain competitive advantage over their rivals. Organisational resource strengths contribute greatly to the competitive advantage of the company, and they entail tangible resources such as physical resources, which are organisational assets like employees, finance, and projects. Intangible resources include non-physical resources like organisational image, information, and expertise (Dosi, Nelson, & Winter, 2000). Organisational resources entail physical resources like machines, structures, and organisational production abilities. Financial resources includes money, capital, creditors, debtors, money suppliers – stakeholder and bankers, while human resources entail various things such as demographic profile, workers knowledge and skills and other stakeholders in the networks of the organisation. Intellectual capital resources entails things like systems of business, databases of customers, products and patents, its value indication is that in case of business sale, “goodwill” forms its value. According to resource-based theorists, organisation resource strength enables the organisation to attain competitive advantages and excellence performances because valuable resources lead to development of competitive advantage. This benefit can be sustained for long to enable the company to protect against imitation of its resources, transfer, or replacement. Theorists assert that internal resources are crucial for the company to attain and sustain competitive performance and advantage (Porter, 2004). The performance of the internal resources of the company like workers, training, experience, expertise, skills, competences, capabilities, systems of information, trademarks, databases, copyrights determine the position of the company in the market. In other words, organisational resources aid the company in exploiting potential and available opportunities and prevent challenges or threats. Organisational capabilities or the ability of the organisation to exploit available resources consists of routines and process, which control resource interactions to produce outcomes. For instance, an organisations marketing ability depend on the interaction between specialists’ marketing, IT and capability of financial resource, therefore, marketing, manufacturing, and management of human resource capabilities influence competitive advantage of a company. Threshold capabilities are the organisational requirement to compete in a certain marketplace and these could be required resources to attain minimum requirement of customer. For instance, high demands by contemporary suppliers’ retailers imply that such suppliers must have advanced information technology skills to be able to meet requirements of retailers (Versaevel, 2007). For an organisation to attain and sustain competitive advantage, ethics and social responsibility have a role to play. Social responsibility is the way organisations combine social, economic, and environmental issues into the organisational culture, beliefs, decisions, functions and strategy in an effective and transparent way to create efficient practices in the company, generate wealth and enhance social development (Sims, 2003). Corporate social responsibility helps in positioning the organisation in a proactive position to be able to manage risks and benefit from available opportunities while securing the image of the organisation and protecting the wider reputation of the stakeholders’ engagement (Filho & Idowu, 2009). Ethics is an act or behavior that produces more benefits than harms, and it entails protecting the rights and intellectual property rights of all stakeholders – customers, organisations, employees, managers among others. Social responsibility and ethic concerns the organisational performance, and to achieve competitive advantage a company should ensure real environmental and social benefits. Therefore, Ethical behavior and CSR have various advantages for organisational success and growth. In ensuring competitive advantage, the two attract customers to organisational brands thus boosting company productivity and sales (Kilmann & Kilmann, 1991). They also make workers responsible and retain them, minimize labor turnover and thus increase a company’s ability to compete with others. CSR and ethics protect the reputation of the company and regulate the social interaction within the organisation thus attracting more customers, building brand loyalty and marketing the company products. It attracts talented workers, investors and keeps the organisational share price thus increasing business productivity. Unethical acts may destroy the reputation of an institution and minimize competitive advantage of the company. Conclusion Competitive advantage is fundamental for organisational growth and success and for an organisation to attain organisational performance and competitive advantage, various factors are critical. These include organisational capability, resource strength, core competencies, ethics, and social responsibility. Capability entails suitability and adequacy of resource of a company and competencies that allow it to growth, thrive in the marketplace, and enables an organisation to exploit available resources consists of routines and process, which control resource interactions to produce outcomes. Competence implies the abilities and skills for effective resource deployment through the processes and activities of an organisation and resources allow the company to adapt to competition and exploit available opportunities. Social responsibility and ethics influence organisational behavior, reputation, and code of conduct within the organisation. Therefore, the interaction of all these factors is crucial for competitive advantage and performance of an organisation. References Dosi, G., Nelson, R. R., & Winter, S. G. (2000). The nature and dynamics of organisational capabilities. New York, NY: Oxford University Press. Filho, W., L. & Idowu, S. O. (2009). Professionals´ perspectives of corporate social responsibility. New York, NY: Springer. Kilmann, R. H., & Kilmann, I. (1991). Making organisations competitive: Enhancing networks and relationships across traditional boundaries. San Francisco: Jossey-Bass Publishers. Porter, M. E. (2004). Competitive advantage. New York, NY: Free. Sims, R. R. (2003). Ethics and corporate social responsibility: Why giants fall. Westport, CT: Greenwood Publishing Group. Versaevel, B., & European University Institute. (2007). Production and organisational capabilities. Florence: European University Institute, Economics Dept. Whitley, R. (2007). Business systems and organisational capabilities: The institutional structuring of competitive competences. Oxford: Oxford University Press. Read More