Achieving the Competitive Edge - Essay Example

Governing Business Activity Competitiveness is a critical aspect of corporate management. Consequently, it is imperative for managers to evaluate the competitiveness of an entity. Competitiveness entails the ability of a business to offer output, which meets both internal and global standards. The products should be priced appositely enabling the entity to make adequate returns that will cover its costs and resource expended. Competitiveness of an entity exemplifies if the entity can sustain its operations based on its incomes. Currently, there are countless competitors in any sector. Therefore, organizations must ensure that they have a competitive edge that will guarantee prosperity of the firm. Notably, competitiveness varies with certain factors. First, the industry in which the entities operate. Secondly, the size of the firm affects competitiveness significantly. Evidently, these factors have significant implications on competiveness. This write–up will discuss competitiveness in relation to the size of the entity. This write-up will also relate competitiveness to adaptation of large or small organizations to changes in the business environment (Harry & Normand 1996, p. 122). Competitiveness encompasses the ability of an entity to manage factors such as government, suppliers, rivals and customers. Suppliers provide an entity with inputs required to create products. Therefore, an entity should manage suppliers to ensure that costs do not spiral out of control thus, reducing an entity’s profitability. The government affects an entity’s competitive edge by the policies it enacts (Pfeffer 1995, p. 234). Higher taxation reduces competitiveness. Conversely, tax cuts increases competitive edge since they entity can offer its clients products at reduced prices. Rivals are other partakers in the sector that are in direct competition with an entity for clientele or any other factor that is central to the undertakings of an organization e.g. raw materials. Therefore, rivalry reduces competitive edge since some competitors may opt for price cutting strategy to eliminate competition. This is a strategy utilized by large monopolistic entities, which seek dominance. The above factors influence competitiveness immensely as revealed above. However, their impact on competitiveness varies owing to the size of an entity (Pfeffer 1995, p. 231). A large firm has massive resources. As such, the entity has an enormous bargaining power, large market segment, and it operates on a massive scale. The above factors contribute significantly to the competitiveness of an entity. A large entity has the resources to undertake a far-reaching marketing. This will enhance its chances of boosting its sales. In contrast, a small organization does not have the resources to fund such campaigns. This reduces the chances of such an entity boosting its sales. An entity requires input to create its merchandise. Acquiring such inputs is tricky for smaller firms. Suppliers prefer large-scale purchasers. Consequently, large firms receive discounts form supplier decreasing their overheads. Contrary, small firm incur the full cost of their purchases. This means they do not benefit from discounts from supplier. The suppliers also treat large-scale purchasers in preference. If a shortage emerges, the smaller organizations will not receive any inputs. Large firms operate on a colossal scale allowing the entities to capitalize on economies of scale. Consequently, such entities incur minimum cost per unit product (Pfeffer 1995, p. 123). This allows such entities to offer reduced prices since they incur minimal costs. However, smaller firms incur higher costs per product. This reduces the ability of such to offer reduced prices. This decreases the competitiveness of smaller firms. In the analysis of the competitive edge, it is essential to evaluate the competitive advantage of firms based on innovation. A large firm has the means to invest in research. The research will contribute considerably to innovation in the entity. Nonetheless, smaller entities have minimal funds to expend on such an undertaking targeting creativity and innovation (Pfeffer 1995, p. 56). Therefore, large firms can easily provide quality products in contrast to their smaller entities. Additionally, huge firms have the resources required to motivate their workforce through higher remuneration. Nonetheless, smaller firms do not have such resources. Therefore, they cannot motivate their employees through remuneration. Overall, large firms are more competitive than their counterparts are. The above details reveal the inability of small firms to be competitive against larger organizations. The large firms have a competitive edge owing primarily to their scale of operations and resources (Pfeffer 1995, p. 45). The current business environment entails government, suppliers, rivals and customers. These factors contribute significantly towards the fortune of any entity. Large entities have the capability to ensure that those factors suit them as shown previously. However, small entities do not have the influence that will ensure that the above factors are in their favour. The utter size of some firms will necessitate policy change to ensure that the firm survives. The policy change occurs to ensure that large firms survive despite poor management and unfeasible operations (Porter 1985, p. 98). First, such firms are market leaders hence; the government is afraid that the failure of such a firm would affect that sector negatively or erode consumer confidence. Additionally, such firms employ countless employees. Therefore, the administration will ensure that the organization does not fail by enacting policy that guarantees the survival of such enormous entities. Nonetheless, authorities fail to realize that the failure of a major player in an industry will facilitate the rise of more efficient and well-managed firms. The rising firms will create additional competition, which largely benefits the clientele. Accordingly, the size of a firm contributes significantly to the fortune of an entity since large entities have more bargaining power (Porter 1985, p. 67). Currently, firms face an unpredictable business environment where governments are raising taxation. Furthermore, governments are cautious on spending. This reduced the funds circulating culminating in contraction of consumption. The current business surrounding is also characterized by stiff competition. As such, firm are expending significantly on marketing to retain and expand their niche (Harry & Normand 1996, p. 122). Subsequently, the smaller firms’ market proportion is always under threat from their large counterparts. Additionally, the willingness of enormous firms to commit funds towards research allows them to improve their products continuously. The smaller organizations cannot afford to undertake such innovations owing to their minimal resources. Consequently, their market segment keeps dwindling. However, smaller firms can sustain their market proportion by offering lower prices. Therefore, smaller firms only make enough revenues to cover their overheads. Ultimately, the current market setup seems to favour the large entities immensely despite their inefficiencies and infeasible objectives (Porter 1985, p. 130). Despite the current business setup favouring the larger firms, it is imperative to acknowledge that there are factors that also favour the smaller entities. Most analysis only evaluates the competitiveness that arises due to resources that entities can expend, and their market influences. However, competitiveness is dynamic. Therefore, there are certain characteristics that the smaller firms posses that offer them a competitive edge. First, such firms are flexible. Large firms are devoid of this characteristic owing to their scale of operations and numerous management levels. This makes decision-making slower due to bureaucracy. Contrary, smaller firm are flexible. Flexibility is multidimensional. Therefore, such firms are flexible in numerous ways. Flexibility manifests itself operationally, structurally, and strategically (Harry &, Normand 1996, p. 85). First, the smaller entities can alter their operations considerably on the short run. Conversely, such attempts by a large firm would culminate in enormous losses. Consequently, any alteration of the operations of a large firm would require a lengthy timeframe. Secondly, smaller firms can make structural adjustments to their employees’ hierarchy to suit their operations. Nevertheless, large firms would require a lengthy period to accomplish this. Large entities have countless personnel. Subsequently, such an undertaking would require proper planning to ensure apposite reassignment of employees. Lastly, smaller entities can alter their strategic objectives rapidly since they do not have massive investments. Contrary, any change in the strategic objectives of a large entity would have catastrophic implications. If a large organization wants to undertake such alterations, it would require lengthy planning and a period for implementation of the changes (Harry & Normand 1996, p. 45). Flexibility seems to manifest itself in three dimensions that are critical to any organization. This gives the smaller firms an edge over their larger counterparts in a business surrounding which changes rapidly. The large firms would suffer countless losses in such a business setup. The enormous scale of operation seems to be advantageous. However, in relation to flexibility, it seems to be an impediment towards adapting to the changing environment. Conclusively, the smaller firm seems more suited towards adapting to the business setup. Their ability to adapt emanates from their flexibility, which large firms lack. Conversely, large firms have the capability to control an industry. This capability emanates from their scale of operations, massive resources and bargaining power. Subsequently, with such an advantage in any sector, large firms should focus their effort towards controlling the industry. This would minimize any losses they would incur if the business setup changes. As such, controlling the sector would enable large firms to changes the industry in a manner that suits their operational, structural and strategic objectives (Harry & Normand 1996, p. 122). In conclusion, competitiveness is a critical aspect of any entity irrespective of its size. It enables any entity to sustain its operations. Competitiveness emanates primarily from the ability of an entity to reduce cost thus, offering its clientele merchandise at lower prices. However, large firms seem more competitive than their counterparts do. Nonetheless, the above analysis shows that the smaller firms have an enormous competitive advantage. Bibliography Jackson, Harry & Frigo, Normand 1996, Achieving the Competitive Edge: A Practical Guide to World-class Competition, John Wileys & Sons, Canada. Porter, Michael 1985, Competitive Advantage: Creating and Sustaining Superior Performance : with a ...,Free Press, New York. Pfeffer, Jeffrey 1995, Competitive Advantage Through People: Unleashing the Power of the Work Force, Harvard Business School, USA. Read More