Literature Review of Competitive Advantage 1. Introduction The technological trends have changed the mode of life on the planet. Conventional business processes and operations have been replaced with newer forms of strategic planning that have become essential for organizations to meet the challenges of the changing times…
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The concept of competitive advantage has evolved over the past few decades and has now become an integral part of strategic management of any organization. Much research has been conducted on the attainment of competitive advantage and effective ways to sustain it. This literature review aims to explain the concept of competitive advantage in the light of different authors, along with their proposals of effective strategies to sustain it. Few examples have been chosen from the available literature to highlight the practical implementation of the concepts of competitive advantage. 2. Literature Review The concept of competitive advantage was introduced in the study of strategic management by Ansoff (1965). His ideas and propositions are known to form the basis of vital aspects of the development of growth strategy of any organization. Lowy and Hood (2004) quoted Ansoff (1965) and stated that his extensive experience and research in the field of diversification planning, highlighted relevant aspects and issues that should be considered for an effective growth strategy. Hindle (2008) also discussed the contributions of Ansoff and stated that some of the valuable contributions of Ansoff’s work in the field of strategic management are related to the attainment of competitive advantage and core competencies. Priemand and Butler (2001) pointed out that Ansoff’s work seemed to stress on the relevance of industry-based factors (threats and opportunities) more than the resource-based ones (weaknesses and strengths). Dix and Mathews (2002) provided a basis of strategy formulation and explained the attainment of competitive advantage; he stated that the development of strategic decisions involve the analysis of the core competencies and resources of the company. Prahalad and Hamel (2003) also considered the identification of core competencies as an important aspect of competitive advantage. The core competencies, that are unique and distinguishing from the competitors, can serve to become the competitive advantage if they are availed in the presence of good opportunities in the market. The concept of competitive advantage was further researched upon by Porter (1998). Porter explained the formulation of a competitive strategy as the broad plan of how businesses should compete in the market (in the presence of various environmental factors) to meet their goals. It also involves the policies according to which goals and objectives of the organization can be met. Porter also stated that competitive advantage can be explained as the combination of having low expenses, differentiation value for the company and a strategy that enables the company to focus on their main objectives. Porter (1998) accumulated all the aspects that might be related to the attainment of competitive advantage onto a single page. He described it as the ‘Wheel of Competitive Strategy’. The underlying bases of the strategy are the basic goals that are aspired to be achieved by the company and the vision which is set as the main direction of the company. Various aspects on the rim of the wheel, like marketing, product line, finance and control etc have to be considered to attain competitive advantage in the market, while being influenced by the main vision of the company.
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The business environment has undergone tremendous transformation over the last few years. There has been a fundamental shift from just concentrating on economic profitability to a business mode. The key to competitive advantage is through value creation and addition to the offerings to the stakeholders.
In the present day and age, it is even more difficult to find sources of sustainable competitive advantage than it was ever before, with constant changes in strategy to cater for changing realities and frequent action to take advantage of emerging opportunities.
The expansion of businesses has given customers greater choice of products and services, instead of just relying on their local organizations to fulfill their needs. This creates greater competition for the companies in the market and makes them strive harder to attain their market share and success.
It is the economic rent that makes most competitors imitates other companies competitive advantage thus it becomes impossible for any given company to sustain its competitive advantages a longer duration of time. However, a company can have some positions, strategies and processes that are hard to be copied by other companies.
One such factor contributing to the competitive advantage to an organization is the Human resource. And the companies tries to retain this source by adopting performance appraisal systems, however may be the rate of success that leads to many assumptions and chances of doubt on the Performance Management system.
In so doing the organization tries to look into the costs it incurs in the whole production process and the amount of control it has over each and every process. When considering vertical integration strategy, for example, an organization looks into managing its supply chain from both the supplier’s and the client’s sides.
This ensures that the most productive people are brought to the front and appreciated accordingly. In most other workplaces, all people earn equal salaries whether they work equally or not.
On the downside, the worker’s pays are not