Relationship between Strategic Management and Factors of Competitive Advantage - Case Study Example

Table of Contents Introduction 2 Competitive Advantage 2 Four factors of competitive advantage 3 Competitive Performance Issues 5 Relationship between strategic management and factors of competitive advantage 6 Example of four factor of competitive advantage 7 Conclusion 11 References 13 Introduction This report dwells on the concept of competitive advantage and looks to present the manner in which business can be more competitive in comparison to others. The paper looks at presenting the different factors of competitive advantage and the competitive performance issues which needs to be addressed for better performance. This would help to understand the underlying potential of business and help to develop the required framework through which business development would become possible. The report then looks at determining the relationship between strategic management and different factors of competitive advantage so that performance of the business is shaped and improved results are achieved. The report then looks at providing an example from the industry which would help to understand the concept of competitive advantage and the manner in which the four factors would contribute towards better efficiency. The report thereby will help to understand the concept of competitive advantage and would broaden the horizon which would be beneficial while looking to formulate strategies for long term success of the business. Competitive Advantage Competitive advantage is one where the business looks towards having certain attributes which cannot be easily copied by competitors and thereby provides a long term advantage for the business. The sustainable competitive advantage is one which is achieved through the process of long term customer loyalty, improved supply chain network, better relation with the suppliers, high bargaining power and similar other attributes which helps to improve the overall business prospective (Jeffrey, 2003). An important point to consider while looking at sustainable competitive advantage is to look at long term prospect and aim towards improved business performance over a longer period of time. This process has enabled the business to ensure better advantage which will help them over a longer period of time and would thereby provide the business with an imperative to deal with the difference issues which the business environment presents (Mason and Gerard, 2007). Sustainable competitive advantage is thereby an important area where the business looks to work on as it looks towards providing the required competitive advantage through which overall business would be better shaped. Four factors of competitive advantage The different factor which helps business to gain a competitive advantage and differentiates the business from its competitors is important dimensions which business looks at. Having the different factors of competitive advantage in the working culture provides business the required gains. The different factors which helps business to gain a competitive advantage is as Capabilities: Competitive advantage can be achieved if the business has the required capabilities through which they are able to use the surrounding environment towards their betterment. Business needs capabilities with regard to technology, human resource, finance, operations and other areas to gain advantage. Based on the business model which the business tends to follow the capabilities needs to be identified so that it can be used to shape the performance of the business (Caralli, 2004). Along with it having a quality workforce which tends to understand the different needs and wants of the customer will help to formulate better strategies through which the different needs will be managed. Using the capabilities in a positive way will help to use the resources in a better way and will shape the performance in such a manner that the overall results which will be achieved would have a positive impact on the performance and give the advantage which the business is seeking. Core Competencies: Business needs to identify the competency which they have and it is gradually identified over a longer course of the business. For example business have core competency with regard to cost due to high bargaining power and better control of the market. This provides the business the required insights through which performance can be shaped (Firoziyan, Hasangoli & Stiri, 2009). Working on the core competency and looking to preserve it for a long period of time helps the business to grow and ensures that the degree of competition which the business faces is also reduced. Eventually the process leads towards better use of resources and minimal loss thereby multiplying productivity and improving business gains. Tangible Resources: Business needs to have the required tangible resource with regard to human, finance, supply chain, operations, marketing and other areas which can be continuously worked on so that performance can be improved. Working on the tangible resources is an add on factor which helps the business to be more competitive and provides the advantage which the business is seeking (Laric & Lynagh, 2009). Identifying the needs of the tangible resources and working towards fulfilling those tangible needs helps the business to be better monitored and governed which thereby would lead towards the required advantage which the business seeks. Intangible Resources: In addition to the tangible resources the business also has to look at improving the intangible resources so that productivity is improved. This would require that business focuses towards brand image, customer loyalty, and similar other factors which would provide them the required advantage (Chen, 2003). This will help to improve their overall position in the market as it would enable the business to work on areas through which improvement can be achieved. The process would lead towards better customer satisfaction and would thereby provide the required advantage which will help to deal with competition in a better way. Competitive Performance Issues Sustainable competitive advantage helps the business to be competitive as it shapes the overall performance and helps to work on the required core areas through which resources are better used. This helps the business to be able to differentiate their business from other players in the market and ensures that business is a step ahead and thinks forward. The phenomenon of being innovative and being able to deal with the changing business environment emerges from it as it provides the different attributes which will help over a longer period of time (Teece, 2009). Attributes contributes towards improved performance but it also raises different competitive issues which business needs to address so that appropriate strategies are developed which would help the business to flourish. Some of the issues which sustainable competitive advantage raises are Identifying the attributes which will help the business over a longer period of time is difficult to find out. Even managing those attributes and ensuring that those attributes are copied and duped by the competitors becomes difficult (Peng & Luo, 2000). As a result the process tends to be very lengthy and would have an impact on the normal functioning of the business. This makes it difficult as the performance needs to be matched to those levels so that better results are achieved Managing those attributes for a long period of time is difficult as competitors look to copy the same and thereby makes the business to lose the advantage which they have garnered. This mechanism also tends to make the overall process difficult as the business fundamentals are thereby shaped on different grounds and leads to performance issues. Businesses are faced with the risk of over spending as looking to control the factors which tends them to provide a competitive advantage at times lead towards giving more focus towards those. This results in impacting the business as the other core areas are not looked at which thereby would lead towards impacting the long term performance. Also, the mechanism tends towards determining the manner in which performance needs to be analyzed thereby having an impact on overall performance. Relationship between strategic management and factors of competitive advantage Strategic management and factors of competitive advantage are interlinked to one another. Businesses while looking to plan directly or indirectly consider the different factor of competitive advantage in their planning process. The interlink between the different factor can be easily seen from the fact that business work on core competency and capabilities by looking towards having a properly designed process which ensures better workforce (Gooderham & Nordhaug, 2003). Businesses continuously seek towards having an efficient workforce who can carry out the different roles which is entrusted to them. This helps them to improve productivity as it provides the business with an opportunity through which changes can be made in the working environment. The different factors of competitive advantage are one of the corner stone based on which the success of business is guaranteed. This thereby becomes imperative part of the overall business strategy and businesses focuses towards determining the manner through which they gain competitive advantage. Businesses plan and carry out their strategy based on business model which they adopt which is again based on the factors like capabilities and core competencies (Mathews, 2003). The focus is thereby towards identifying the mechanism through which business would be able to improve the performance so that overall growth becomes better. An important thing to understand is that business planning process is based on what they look to achieve over a longer period of time which thereby focuses towards preserving the different resources. This helps the business to focus on area where they will be able to lead the market and act as market leader (Fletcher and Crawford, 2011). The process eventually leads towards shaping the performance and determines the pillar based on which business dimensions would be shaped. As a result the business fundamentals will be governed based on principles through which overall efficiency and effectiveness will be achieved. Thus, there exist an interlaying relationship between strategic management and factors which impacts competitive advantage and business needs to continuously look towards those factors so that performance is better shaped up. This will have an impact on the long term performance of the business as it will shape the business fundamentals and would provide the business with the required dimensions through which competition would be better dealt with. As a result the business will be able to bring the required change in the business fundamentals and would shape the overall long term performance of the business. Example of four factor of competitive advantage Competitive sustainable advantage is a situation where the business is able to use the surroundings in such a manner that they get an added advantage in comparison to other players in the market. Woolworth working in the Australian market is a good example which can highlight the manner in which it has been able to garner sustainable advantage in its business (Van Buren III, Greenwood & Sheehan, 2011). This will help the readers to understand the manner in which the different factors have a relevance on shaping the performance and results in bringing the required sustainable gains. Since, sustainable competitive advantage provides with an opportunity where the business is able to stay ahead of competition due to different attributes which becomes difficult to copy and provides the required leverage through which business management and performance is improved. The details in relation to Woolworth is as Tangible resources Woolworth has a strong brand presence and covers nearly 30% of the market which makes it difficult for the competitors to deal with (Czinkota & Ronkainen, 2004). This has given them a huge market and has made it difficult to the competitors to copy the same as getting the same market presence is difficult and has given them a sustainable competitive advantage as they are present everywhere. The range of products which Woolworth deals is huge which has again provided the required leverage as it has helped the business to attract all type of customers. The ability to attract all type of customer is an attribute which is distinctive and helps them to ensure better presence within all people (Cohen, 2007). This has helped them to consolidate their overall position in the market. The business further works on the model of bulk purchasing and selling in smaller quantity which has helped them to provide goods at lower cost. This mechanism has helped them to be a low cost provider and provides goods to customers at lower cost than otherwise available. This has helped them to improve their market presence and ensure products for all section of the society at lower price. Woolworth further looks to be innovative and aims at continuously improving their supply chain and tying up with new players so that new products can be availed at a lower rate (Rousseau & Barends, 2011). This has helped them to come up with new products and idea through which the overall business growth has been strong. This process has also helped them to differentiate their offerings from customers and has thereby provided the required competitive advantage through which business fundamentals have improved. Intangible resources The brand has become a strong brand due to recognition at different regions of the world. This has helped them to ensure bigger markets and capturing every segment of the society so that business is improved and long term prospects is better shaped up (Cook & Dave, 2004). Strong relation with customers and after sale service has also helped them to improve their brand name. The process has helped to ensure that customer satisfaction rates have improved and the process has mitigated better working conditions for the organization thereby garnering competitive advantage for the business. Capabilities Very high bargaining power shown by Woolworth has ensured that they are able to purchase products at low price and ensure that the same can be passed on to the customers. This has helped them to work on the concept of low cost provider and aims towards ensuring that the customer needs are better met. This has given them a sustainable competitive advantage and ensured that the capabilities provide them better leverage for the business. The ability of the organization to be competitive has ensured that the product line is continuously added and new and better mechanism has helped them to improve the supply chain (Hooley, Piercy & Nicoulaud. 2012). This has ensured that the capabilities of the business are better used. This has been helped by the fact that the human resource is strong and understands the need of the business which has thereby enabled them to get the required competitive advantage. Woolworth has further ensured that they understand the evolving working environment. This has enabled them to be competitive as the business based on the model has ensured better consistency. The process of continuously being innovative and understanding the changes has ensured competitive advantage for the business. Core Competencies Rare: Very high bargaining power shown by Woolworth has ensured that they are able to purchase products at low price and ensure that the same can be passed on to the customers (Cateora, Mary & Graham, 2009). This has helped them to work on the concept of low cost provider and aims towards ensuring that the customer needs are better met. This has given them a sustainable competitive advantage and ensured that the capabilities provide them better leverage for the business Non substitutable: Working in the industry for a long period of time has helped them to get the required experience and knowledge which cannot be substituted. This has enabled them to develop their business based on important fundamentals and has shaped the working scenario (Banaji, Bazerman and Chugh, 2003). As a result Woolworth has been able to work on the different fundamentals and has provided them the required competitive advantage which has shaped their performance and ensured better productivity over a long period of time. Differentiating factor: Woolworth further aims to sell the products directly to the customers and purchases the same directly from suppliers thereby looking to eliminate the middle men. This is a differentiating factor as it has enabled the business to be governed on strong fundamentals (Cable & Judge, 2006). This has helped them to ensure low cost and thereby enabling the business to be developed on fundamentals which provides them a sustainable competitive advantage as compared to other players in the market. Working on the different factors which have a bearing on competitive advantage and shaping those factors has helped them to gain a sustainable competitive advantage. The process has enabled Woolworth to be able to understand the surrounding and use them in a manner which would help them to be ahead of competition. Working on the different capabilities and core competencies and developing those has enabled Woolworth to shape their performance and has thereby improved the overall working style to achieve better and positive results. Conclusion This report thereby provides complete information on the concept of competitive advantage and presents the manner in which business can be more competitive in comparison to others. The paper presents the different factors of competitive advantage and the competitive performance issues which need to be addressed for better performance. This will help to understand the underlying potential of business and help to develop the required framework through which business development would become possible. The report also determines the relationship between strategic management and different factors of competitive advantage so that performance of the business is shaped and improved results are achieved. The report provides an example from the industry which would help to understand the concept of competitive advantage and the manner in which the four factors would contribute towards better efficiency. The report thereby helps to understand the concept of competitive advantage and would broaden the horizon which would be beneficial while looking to formulate strategies for long term success of the business. The overall concept of sustainable competitive advantage thereby shapes the manner in which the results which will be achieved will be positive and would shape the overall business prospects. References Banaji, M., Bazerman, M. and Chugh, D. 2003. How (un)ethical are you? Harvard Business Review, December, 1-9 Cable, D. & Judge, T. 2006. 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