Competitive Advantage in Organizations - Essay Example

Competitive Advantage in organizations Introduction: In today’s global marketplace, creativity and innovation have assumed a great deal of importance and it is important for a Company to have a fresh and novel strategy if it is to succeed in the market place, as identified by Porter (1996: 68). According to Porter (1996:64), “Competitive strategy is about being different.” Porter also states that “Strategy is the creation of a unique and valuable position, involving a different set of activities……different from rivals.” (page Porter 1996: 68). In order to attain such a competitive advantage over its rivals, an organization needs to implement several measures, such as gaining customer loyalty. Interactive management through effective leadership is an essential part of ensuring that the employees of a Company are motivated and through their efforts, succeed in transforming the prospective client who enters into a business transaction with an organization into an active and loyal customer.(Dufour and Maisonnas, 1997). Weiss (2002) supports the position that innovation promotes sales, as she points out that in order to achieve success in an increasingly global market, more and more firms are turning to innovation firms to help in determining how successful long term decisions are likely to be in assuring a firm’s success. An organization can also gain a competitive advantage through the synthesis of information within itself, which help in the acquisition of skills among an organization’s workers which are not easily replicated by others. Similarly, an organization can also adapt to the challenges and changes in the global environment by transforming itself into a learning organization that is in a constant state of learning and adapting to the environment. The importance of knowledge: According to Zeithaml, Varadarajan and Zeithaml (1988), the existing situational factors play a significant role in how organizations are managed, and must be taken into account in order to arrive at one best way in which an organization can be managed for optimum performance and output. One of these factors is the management of knowledge within the firm. The traditional approach to knowledge is that it may be used freely by everyone without limitations. According to von Krohg et al (1994), knowledge is subjective, but it enables an individual to interpret and give meaning to the information he receives. According to Nonaka and Takeuchi (1995:6) codified knowledge is described as something that is formal and systematic and may be easily communicated – for example hard data or scientific formulae. However, there may be certain kinds of knowledge which cannot be easily communicated, such as knowledge which may be known but cannot be told to another and such knowledge is classified as tacit knowledge. Tacit knowledge provides an advantage to the person holding such knowledge because it imbues him with superior skill in that informational area which may not be available to others. When such tacit knowledge is collectively owned, for example by the manner in which a group of individuals within a firm share it (Lam 1997), it becomes equivalent to the organizational memory of that Company or industry. This may lead to the development of production processes or technical skills that may be difficult for others to duplicate because they do not possess the same tacit knowledge that generates such expertise. The SECI Model proposed by Nonaka and Takeuchi is comprised of three elements: (a) SECI – Socialization, Externalization, Combination and Internalization (b) Ba – the shared context within which knowledge is shared and created, and (c) knowledge assets, which interact with each other dynamically and organically. The process of knowledge creation is a continuous dynamic interaction between tacit and explicit knowledge which occurs through (a) socialization or face to face communication or shared experience (b) externalization – of the tacit knowledge (c) combination – of various types of knowledge, as in building a prototype and (d) internalization – learning by doing where the explicit knowledge becomes part of the individual’s knowledge base and an asset to the organization.(www.12manage.com). This Model serves to explain how an organization can enhance its performance by modifying the manner in which knowledge is created, understood and shared within the firm. Such organizational ability aids its competitive stand in the marketplace by imbuing it with an internal advantage not possessed by others. Knowledge that exists in one social context may be difficult to replicate in other locations, because knowledge is often specific to the location (Lam 1997) and helps faster diffusion of skills. Certain organizations may therefore also enjoy competitive advantages due to the levels of tacit knowledge that they possesses, by virtue of the interactions within the organization and the organizational context or geographical location within which it operates. The importance of Learning: . One of the most important aspects of staying competitive in an uncertain environment is that of creativity and learning. As identified by Linstead et al, if an organization is to stay in a state of preparedness, then its employees must be in a state where they are learning continuously in order to avoid stagnation. (Linstead, Folop and Lilley, 2004:39-55). They have also identified the weakness in the traditional bureaucratic systems of control where top down authority is exercised in making decisions, which does not work very well in a globalized atmosphere. The benefits of remaining in a state of continuous learning are that it enables an organization to be receptive to the changes in the environment, to constantly modify and adapt itself to meet the challenges posed by a competitive global environment. Peter Senge (1990:3) has identified the importance of learning in his definition of a learning organization as one where “people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured….”According to Finger and Brand (1999:136), a learning organization may be defined as an “ideal towards which organizations have to evolve in order to be able to respond to the various pressures [in the environment].” Hence, organizational learning contributes to the acquisition of a competitive advantage by enabling it to respond quickly and successfully to changes in the environment. Within a competitive, global environment that is characterized by rapid changes, it is only those organizations that are flexible and adaptable that are likely to excel. A significant part of acquisition of this versatility and adaptability is ensuring that people within the organization are learning at all levels, learning to re-create themselves every now and then, in order to meet new challenges. For an organization that wishes to succeed, it is not enough to merely survive, rather it must be able to re-create itself and this may only be achieved by enhancing the individuals’ generative learning skills, or learning the ability to create. (Senge 1990:14). Therefore an organization which is a learning organization will be constantly undergoing the learning process and changing and renewing itself to keep abreast of challenges in the environment. When an organization is unable to successfully adapt to changes in the environment, it is placed at a disadvantage as compared to other firms. Senge identifies a learning organization as one where employees are trained in the following disciplines (a) systems thinking - this is the ability of the individual to comprehend the entire system of the organization as well as being able to understand the interrelationship between its various parts. (b) Personal mastery: where individuals endowed with a high level of personal mastery are constantly learning new skills and abilities, and learning becomes a lifelong discipline (c) Mental models – this is another aspect where individuals need to learn to face their deeply ingrained mental attitudes, images and generalizations, and the need to understand these thinking systems and subject them to scrutiny where necessary (Senge 1990:9) (d) Lastly it is also important that in a learning organization, a shared vision is built, through the development of shared pictures of the future that can ensure commitment and dedication to achieving those goals. Therefore, when an organization is receptive to the environment and is in a constant state of learning, this enables it to adapt to the changes and challenges in the environment, so that it is able to emerge with a competitive advantage as compared to other organizations that are imbued with similar constant learning patterns. One example that may be cited here is the development of technology, which has become an ubiquitous feature of the global environment. Another is the increasing trend towards multinational enterprises, where challenges are posed in a foreign environment with different Government regulations and different kinds of resources available. Unless the employees within an organization are able to constantly adapt and learn new skills, the organization cannot compete effectively with other organizations that are able to milk the benefits of technology. Similarly, it is only when an organization is constantly learning that it develops the level of adaptability and flexibility required to come up with new and creative solutions to problems encountered in the global environment. Bibliography * Dufour, J-C., & Maisonnas, S. (1997). “Marketing et services: Du transactionnel au relationnel”. Sainte-foy, Quebec: Les presses de lUniversité Laval. * Finger, M. and Brand, S. B. (1999) “The concept of the learning organization applied to the transformation of the public sector” IN Easterby-Smith, M Araujo, L and Burgoyne, J (eds.) “Organizational Learning and the Learning Organization” London: Sage. * Lam, A, 1997. “Embedded Firms, embedded knowledge: problems of collaboration and knowledge transfer in global cooperative ventures.” Organization Studies, 18: 973-996 * Linstead, Fulop and Lilley (2004) - Management and Organization: a critical approach.” London” Macmillan * Nonaka, I and Takeuchi, H, 1995. “The Knowledge Creating Company” New York: Oxford University Press * Parasuram, A., Zeithaml, V., Berry, L. (1994). “Reassessment of Expectations as a Comparison Standard in Measuring Service Quality: Implications for further research.” Journal of Marketing, 58: 111-124. * Porter, M.E. (1996), What is Strategy? Harvard Business Review, Nov-Dec.: 61-78 * Senge, Peter (1990) “The Fifth Discipline: The art and practice of the Learning Organization” London: Random House * SECI Model. [online] available at: http://www.12manage.com/methods_nonaka_seci.html * Von Krohg, G, Roos, J and Slocum, K, 1994. “An Essay on corporate epistemology” Strategic Management Journal, 15: 53-71 * Weiss, Laura, 2001. “Developing Tangible Strategies” Design Management Journal, 13(1): 33-39 Read More