Firm Resources and Sustained Competitive Advantage
Understanding sources of Sustained Competitive Advantage is extremely crucial to survive in the industry and this has become a major area of research in the field of strategic management. This paper correlates the relation between firm resources and sustained competitive advantage, based on the presumption that strategic resources are distributed across the firm.
The following framework (SWOT Analysis) is designed to model the structure of this research, showing how a firm can sustain its competitive advantage by implementing strategies that: Exploit Strengths, respond to Opportunities, neutralize Threats and avoid Weaknesses.
This framework is based on two assumptions: Firms within an industry control the same strategically relevant resources and pursue the same strategies, making them identical to each other. Secondly, if resource diversity develops in the industry, it will be short-lived as the existing resources used by the firms to implement their strategies are very mobile.
This paper defines some key concepts and analyze the role of individual, immobile firm resources in creating sustained competitive advantages.
Firm Resources:
All assets, capabilities, organizational processes, firm attributes, etc which are controlled by firms, can be used to implement strategies more efficiently and effectively. These firm resources can be classified into three important categories: Physical Capital- e.g. technologies, infrastructures; Human Capital- e.g. training, experience, worker and manager skills; and Organizational capital- e.g. a firm’s formal reporting structure, formal and informal planning, etc. These resources can be helpful in specific conditions , thereby enabling a...
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...dvantage. Few of the examples applying this framework has been shown in this paper: Strategic Planning, Information Processing System and Positive Reputation.
Limitations and critical reflections:
The paper has been written almost 24 years ago and a lot of the methods and conventions, especially regarding technology, has changed over the years. Most of the firms are extremely dependent on technology, so Information processing system is crucial in today’s world for S.C.A. Moreover, if having the four criterion is important for S.C.A, how do companies like Coca Cola and PepsiCo, Adidas and Puma, have survived over the years and maintained their profitability? In today’s world, isn’t it difficult to come up with resources that match all four criteria for S.C.A.? Do the sources have to be Heterogeneous and Immobile, or can they be homogeneous and mobile resources now?
Even though a myriad of tools and techniques learnt in the Strategic Cost Management and Strategic Business Analysis courses are not fully exploited in this essay, it is generally recognised that those techniques are useful for a corporate to formulate strategy, do strategic planning, control costing and quality, as well as eventually elevate its values, regardless the nature and size of organizations.
The SWOT analysis (abbreviation for Strengths, Weaknesses, Opportunities and Threats) is an essential tool in marketing for understanding and supporting decision-making in all kinds of situations in business and organisations. In brief, it provides an accurate context for studying strategies, positions and directions of a company proposition. It is used mainly for business planning, competitor evaluation, marketing, business and product development and research reports. SWOT analysis is also a widely recognised method for gathering, structuring, presenting and reviewing extensive planning data within a larger business or project planning process. (Chapman, 2014)
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Arthur, A., Thompson, Margaret, A., Peteraf, John, E. Gamble, A., J., Strickland III. (2014). Crafting & Executing Strategy: The Quest for Competitive Advantage 19e: Concepts & Cases. C6-C25.
A SWOT analysis is simple exercise that could be implemented on multiple subjects including an individual or a whole corporation. The SWOT analysis is an operational tool for managing change, defining strategic direction and setting realistic goals and objectives according to Simoneaux and Stroud (2011). Discovering new opportunities and manage and eliminate threats that are present in the company and the surrounding market. SWOT is a valuable technique that leads to a better understanding of the strengths, weaknesses, opportunities and treats both internally and externally. The strengths and weakness are to be considered internal factors and opportunities and threats to be e...
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Pitts and Koufopoulos (2012) argue that resources and capability are highly important internal factors that should be taken into account by the organization in order to obtain the successful performance in the long run.
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Carr distinguishes between proprietary technologies and what he calls infrastructural technologies. Proprietary technologies can provide a strategic advantage as long as they remain restricted through "physical limitations, intellectual property rights, high costs or a lack of standards," but once those restrictions are lifted, the strategic advantage is lost. In contrast, infrastructural technologies provide far greater value when shared. Although an infrastructural technology might appear proprietary in the early stages of buildout, eventually the characteristics and economics of infrastructural technology necessitate that they will be broadly shared and will become a part of the broader business infrastructure. To illustrate his point, Carr uses the example of a proprietary railroad. It is possible that a company might gain a competitive advantage by building lines only to their suppliers, but eventually this benefit would be trivial compared to the broader good realized by building a railway network. The same is true for IT - no company today would gain a cost-effective competitive advantage by narrowing its focus and implementing an Internet only between their suppliers to the exclusion of the rest of the world.
Resource Based View (RBV) is a theory representing a principle stating that a firms’ source for competitive advantage lies in its internal resources. Hence within a firm there certain types of resources owned and controlled which have the potential to breed competitive advantage and increase the performance through the rareness and imitability of the resources (Ainuddin et al., 2007). The competitive value can be improved or eradicated by the factors of the external environment (Songonuga, 2007). According to Barney (2002), firm resources consist of possessions, abilities, organisational ...
IT has a strong consequence on competitive advantage, which allows firms to exploit into the competitive scope. It is the function of the value chains that affects competitive advantage by achieving performance in a business. A firm achieves the scope of value activities if they use common strategies. The first one is reducing costs in production and activities that affect physical processing which can no longer affect costs. This is due to the use of the abundant information-processing component. A low cost producer might want to exploit cost advantage for sources like the economies of scale and favored to access to raw materials. The economies of scale are beneficial to firms because more products or services are produced with lower input costs. It is also a source of barrier to entry for competitors making them move to a larger scale. The second one is a differentiation strategy and its impact on IT allows a firm to easily customize their products. They present new features that many buyers see as important, which meets their needs for the product. The last one is the change of competitive scope where technology allows companies to adjust its activities everywhere. As IT becomes more popular, the opportunities of the competitive scope for firms become higher. A well-organized strategy for IT will give firms these opportunities to progress. For a company to sustain their competitive advantage, they must attain a well-thought strategy to make it harder for competitors to beat. A corporate example of a competitive advantage can be Coca Cola’s Business Model. They have a sustained competitive advantage due to their smart allocation network and business model. It is a recognized soft drink worldwide and has sustained its competitive advantage for more than 100 years. Their secret recipe is a reason behind their
...M. E. (2008). Competitive advantage: Creating and sustaining superior performance. New York: Simon and Schuster.
In this report, we adopt SWOT analysis to determine the strategic fit between the company’s internal, distinctive capabilities and external threats in the current market. Recommendations were provided in the later part of the report on the possible approach to tap on external market opportunity and our suggestion to resolve current issues faced by the company.