Strategic Management: Managing Resources to Gain Competitive Advantage - Term Paper Example

 Strategic Management – Managing Resources to Gain Competitive Advantage Introduction Strategic management is an important evolving issue within the discipline of organizational studies. Strategic management basically refers to the managerial activities that direct the enterprise towards strategic consistency with its operating environment and market place. It is an ongoing process that asks the managers to evaluate, monitor and control the entrepreneur operations and synchronize the goals and business strategies while assessing the existing as well as potential competitors. The implementation of the set strategies and goals needs to be followed by the evaluation and reassessment process to sort out the need of modification or improvement in the existing strategies(Kimio Inagaki, 2004, p2).. There are some important organizational terms and conceptions associated with the notion of strategic management that needs to be clearly understood in connection with strategic management. The terms like competitive advantage and adequate utilization of available resources are the most commonly used and relevant to the issue of strategic management because strategic management is often described as process of management of resources available to the business in a strategic manner to gain competitive advantage. This explanation shows the strong interconnectivity of these terms and importance of strategic management for gaining competitive advantage to the businesses (Wilkinson and Adrian, 1995, p99). The following essay aims to discuss the connotation and enormity of strategic management in organization of business resources to assure the attainment of competitive advantages. In this regard, the essay imparts the basic understand regarding the concept of strategic management and its significance for the business success. The essay discusses the concepts of competitive advantage and explains the possible range of available resources to the business. Furthermore, the essay elucidates the importance of the business resources in bringing competitive advantages and provides theoretical support to illustrate the position of the resources within the overall business strategy. The entire work construes the theoretical and practical significance of strategic management and reveals that the strategic management of business resources allows the businesses to gain competitive advantages while maintaining sustainability, dominance and consistency within their operating environments (Williams, 2002, p2). The concept of Strategic Management The concept of strategic management is not very new to the business world; however, the notion has been gaining importance in the era of highly competitive marketplace. Organizational studies’ experts widely believe that the field of strategic management was evolved in the end of the twentieth century and as the time passes, the realization about its importance increases with the business world. This is because, due to the spread of advanced and easy available communication and transportation technologies the pace of development of the global economy has considerable accelerated. In the technology driven market place of today the companies face tough competition and often find it difficult to survive successfully in the industry (Legge, 1995, p98). The companies operating in different sectors now have access to improved business facilities and technologies. Moreover, there is greater awareness among business people regarding the adequate management of resources. All these factors have led towards a shift in business patterns and ultimately the competition has intensely increased that demands the companies to go beyond the traditional ways of conducting business. The concept of strategic management found its broader implications in this perspective and has gained increasing attention from the business community. The resources based approach of strategic management has been originated from the concepts of distinct competitiveness and general managerial capabilities. It views the firm as a collection of skills, abilities and resources and proposes that strategic management is basically the process of analyzing the resources, skills and abilities possessed by the businesses. The stakeholder approach of strategic management evolved from the studies of business ethics and social responsibilities and suggests that the organization is a network that makes connection between the stakeholders and firms. According to this approach, strategic management refers to the process of analyzing the resources of the company (Schuler and Jackson, 1987, p207). The concept of Competitive Advantage The term competitive advantage is the most widely used and key terms in the strategic management. There is very strong relationship between the team performance and competitive advantage therefore; the strategic management tends to influence the firm performance through resources management and attainment of competitive advantages. In simple words, competitive advantage is making money while gaining sustainable position in marketplace as compared with the competitors. However, it is a very broad term that has been explicitly explained by different theorists and researchers(Legge, 1995, p98) There are different approaches presented by the social scientists and organizational studies experts to suggest the conceptual framework regarding the notion of competitive advantage and its worth for a business. Michael Porter has been regarded as the pioneering expert that institute the term of competitive advantage within the vocabulary of organizational and strategy studies. He presented the theories of genre strategies and proposed the five force model to explain the conception of competitive advantage and its implications to the business world (Schuler and Jackson, 1987, p207). Porter (1985) presents the structural approach to explain the concept of competitive advantage and proposes that a firm can create competitive advantage by adopting three methods including cost leadership, differentiation and focus. Cost leadership is attained when the organizations pick the strategy of providing same level of products or services in the market at relatively low prices. This strategy is expected to gain competitive advantage in short run and in long term, the companies can carry on with this strategy only if the competitors also tend to offer the services and products at low prices (Williams, 2002, p2). Another strategy of gaining competitive advantage is differentiation that basically refers to providing superior quality and attributes of products and services in the marketplace while making these available at same prices that the competitors offer. The provision of superior services and product attribute at similar prices works to strengthen the position of the firm in comparison with the rivals and ultimately the organization succeeds to secure high level position in the market place. These two strategies including cost leadership and differentiation are also referred as potential advantages because they work to make the firm leader in its operating industry or business sector. The third important strategy explained by Porter is the focus upon economics. This strategy allows the organizations to focus towards market niche competitive segment. The firms adopt a narrowed approach and seek local advantage rather focusing upon industry wide competition. Though these strategies allow the organizations to gain competitive advantage in their operating industries, however, they do not guarantee the sustainability of these rewards. In order to continue receiving these benefits, it is indispensable for the firms to formulate and adopt genre strategies to foster the value creating process over the time(Legge, 1995, p98). The notion of competitive advantage has been defined differently by several other theorists taking varied approaches. Powell (2001) explains that competitive advantage is attained when an organization becomes able to maintain sustainable edge over the existing as well as potential rivals operating within its industry or business sector. This superiority of the organization could not be beaten by the competitors in short term and the businesses keep on enjoying the competitive advantages in terms of economic value over time (Schuler and Jackson, 1987, p207). Barney (2009, p9) further explains the concept of competitive advantage that a business obtains competitive advantage when it succeeds to create economic value through its business activities and operations while the other companies operating in the industry also use to conduct similar activities and actions. The competitive advantage is basically attained through implementing some value creating strategies that the competitors overlooked or failed to implement. Christensen and Fahey (1984) explain the resource based approach towards competitive advantage. The theorists propose that the firms attain competitive advantage when they acquire the capabilities to impart high level performance as compared with their competitors. The organizations are supposed to attain these capabilities through their attributes and resources that are strategically managed and directed towards the attainment of competitive advantage. Competitive advantage provides wide range of benefits to the businesses. At first, it provides the organizations an opportunity to provide the product and service in the marketplace at lower prices as compared with that offered by the competitors. Moreover, the companies also become able to provide the products and services at same prices but with some superior product attributes and qualities. These opportunities bestowed by the competitive advantage allow the organizations to adopt alternative differentiation strategy that basically refers to the provision of superior services at lower prices. Porter (1985, p17) however, explains that usually the companies could avail these opportunities for some specific period of time and to continue with the rewards of competitive advantage, it is imperative that the businesses must employ some generic strategies to achieve sustainability otherwise they will face the situation of “stuck in the middle” that will ultimately affect the progression of their business(Legge, 1995, p98). This definition makes it clear that the process of human resource management starts before the hiring of employees and there are different phases of the HR practice. Lawrence S. Kleiman and Tim Barnett presented the idea of HRM phases. According to their study, the “pre hiring Phase” involves the planning practice, the “hiring phase” requires the organizations to conduct selection practice that involves a series of actions like “recruiting applicants, assessing their qualifications, and ultimately selecting the appropriate person”. The “post hiring” demands the organizations to manage people in order to maximize their performance. They suggested the organizations should take several steps for getting most of the employees like “providing them necessary knowledge and skills to perform their jobs and by creating conditions that will energize, direct, and facilitate employees' efforts toward meeting the organization's objectives” (Lawrence S. Kleiman and Tim Barnett, 2006, n.p.). Jackson and Schuler (2005) described that “Human resources are the available and potential behaviors, competencies and motivation that together can help attain the objectives of the organization’s multiple stakeholders (Jackson and Schuler, 2005, p4). Cherrington (1995) revealed that an important function of Human resource Management is to take care of the ways people are treated in organizations. He also told that Human resource management is also liable not only to bring people in organizations but also to help them in performing their duties by arranging compensations for them and solving their other problems (Cherrington, 1995, p. 5). Armstrong (2006) defines Human Resource Management as “the strategic and coherent approach to the management of an organization's most valued assets - the people working there who individually and collectively contribute to the achievement of the objectives of the business”. He further explained that the term human resource management has replaced the term Personnel Management “as a description of the processes involved in managing people in organizations” (Armstrong, 2006, p5). Wendy Murphy (2007) stated that Human Resource Management is a “key driver of organizational performance” because the efficient performance of work force could be the main factor behind the success of any business. The dramatic changes in the role of HR have alarmed the organizations to construct innovative strategies for human resource management (Murphy, 2007, n.p.). Range of Resources available to businesses There are wide ranges of resources that a company is supposed to handle in order to get competitive advantage. The most important is human resources and its importance gave rise to the concept of strategic human resource management. The concept of Strategic Human Resource Management (SHRM) is gaining importance for last some decades. Armstrong M (1992) disclosed since late 1980s there was rise of a strategic approach towards the management of people. Boxall and Purcell (2003) stated that the “Strategic Human Resource Management is concerned with explaining how HRM influences organizational performance”. Boxall and Purcell nnoticed that the importance of strategic human resource management has been accepted by the managers of different types of organizations and these people have realized that strategic human resource management is a key element in acquiring organizational success. The study of Boxall and Purcell revealed an important point that there is difference between strategy and strategic plans. According to them “Strategic planning is the formal process that takes place usually in larger organizations, defining how things will be done”, on the other hand “Strategy exists in all organizations even though it may not be written down and articulated” (Boxall and Purcell, 2003, n.p). They further point out that “it is possible to find strategy in every business because it is embedded in the important choices managers and staff of the firm make about what to do and how to do it”. (Boxall and Purcell, 2003, p28). Dee Ann Batten (1999) revealed that the HRM practitioners must focus on the establishing effective measures of Strategic Human Resource Management. He also insists organizations that they must develop a system by which they can regularly get the information about the Strategic Human Resource Management (Batten, 1999, p3). Bernthal, Rioux & Wellins (1999) highlighted that in order to cope up with the challenges and growing competition of business community the organizations are approaching towards Strategic Human Resource Management (Taylor, T. & Bennett, A., 2002). Human Resource Management is not just a process of selecting an “appropriate fit from the menu of HR strategy” but it is a process that demands the organizations to keep on shifting their priorities and policies according to the changes occurring in the market environment. Strategic HRM practices make the organizations to change with the situation “like a ship setting a course, but adapting to the weather, organizations have to continually adjust to changing conditions” (Wilkinson, Adrian, 1995, p99). Another definition of SHRM stated that “an organization’s Human Resource Management policies and practices must fit with its strategy in its competitive environment and with the immediate business conditions that it faces” (John Bratton, 2002, p2). Jeff Ericksen and Lee Dyer define the Strategic Human Resource Management as “the linking of human resources with strategic goals and objectives in order to improve business performance and develop organizational culture that foster innovation and flexibility” (Ericksen and Lee, 2002, p6). Schuler (1992) defines Strategic Human Resource Management as “All those activities affecting the behavior of individuals in their efforts to formulate and implement the strategic needs of business”. Schuler and Jackson (2005) stated that “the term strategic human resource management is used broadly to signal the view that human resource management activities should contribute to business effectiveness. This linkage between HRM activities, the needs of the business, and organizational effectiveness is the core of the area called strategic human resource management” Schuler and Jackson, 2005, p3). Strategic Human resource management is different from HRM because SHRM explains that how the HRM can influence the performance of an organization. “HRM is a coherent approach to the management of people whereas SHRM implies whatever is done on a planned way to integrates organizational goals with policies and action sequences” (Boxall and Purcell, 2003) Managing resources strategically for competitive advantage Strategic management possesses great importance in the context of adequate administration of business resources for gaining competitive advantage. The resources available to the business are usually not sufficient to gain competitive advantages for a business until and unless these resources are managed strategically (Legge, 1995, p98). Kaplan and Norton (1992, p7) argues that the rewards of competitive advantage could not be limited to the financial gains only but it offer varied nature of benefits to the businesses or organizations. The researchers explain that along with the economic perspective, the competitive advantage has the potential to influence the internal, innovative, customer relations and learning perspectives of the firms. When a firm becomes able to get competitive advantage, it becomes possible for it to manage different aspects of its business in more adequate manner while fostering the innovation and learning process that in turn supports the attainment of competitive advantage in long terms (Williams, 2002, p2). Walker (1994) revealed that there are four basic functions of Human Resource Management and the people involve in the practice of HRM mostly focus on these four areas of Human Resource Management. These four functions are “support, service, consulting, and leadership”. Schuler (1994) highlighted the link between HR strategy and business strategy and described that in order to build up this link effectively the human resource practitioners must identify the six key roles upon which the HR people must emphasis upon. These roles are “business person, shaper of change, consultant to organization/partner to line, strategy formulator and implementer, talent manager, and asset manager and cost controller”. Schuler and Jackson (1987) presented a concept that there are six main areas of Human Resource Practice. According to them these areas are “planning, staffing, appraising, compensating, training and development” (Schuler and Jackson, 1987, p207). Human Resource Management plays an important and strategic role in the success of an organization (Williams, 2002, p2). Schuler (1995) defines Human Resource Management as “is the use of several activities to ensure that human resources are managed effectively for the benefit of the individual, society and the business”. Kearney (2000) defines human resource management as “a strategic approach to managing employment relations which emphasizes that leveraging people’s capabilities is critical to achieving competitive advantage. This is being achieved through a distinctive set of integrated employment policies, programs and practices.” He further explained that human resource management is an activity that is performed to conduct various functions. The range of human resource management is very wide and it covers variety of actions to get better from the employees (Kearney, 2000, p2) Williams (2002) conducted a preliminary study and studied some main areas of human resource management that have been used in different businesses. He notices that the HR practice is now given the names of “high performance, “innovative” and “high commitment’ practices by the HR Practitioners. According to him the main areas or functions of Human Resource Practice in an organization are “employment security, rigorous selection process, incentive pay, effective communication systems, participation schemes, team working, personal training and skill development programs, egalitarian and internal promotion”. He also presented the idea that all the functions of HR Practice are interrelated with each other and an organization is required to understand the importance and connectivity of all these areas to gain success (Williams, 2002, p2). References Armstrong. M. (2006) “A Handbook of Human Resource Management Practice”, 10th edition, (Kogan Page) London Armstrong M (1992) Strategies for Human Resource Management: A Total Business Approach. 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