Competitive Edge Sustainability Evaluation Essay Example

  • Category:
    Management
  • Document type:
    Essay
  • Level:
    Masters
  • Page:
    5
  • Words:
    3252

Introduction

In the wake of rising global competition, there is increasing need for organisations to develop sustainable competitive edges. In this regard, such competitiveness edges are aimed at ensuring that the organisation retains an upper hand over its market competitors. However, in the development of such a market competitiveness edge, it is vital that an organisation understands its internal systems correctly. This essay offers a critical evaluation of what constitutes a sustainable competitive edge in an organisation. This is achieved through the four specific criteria of value, rareness, immutability difficulty, and organisational ability to exploit the competitive edge. This criterion is often represented through the VRIO model. In a further attempt to ensure that the organisational sustainable competiveness aspect is understand, the essay lays as strategic foundation through an exploration of the elements of resources, capabilities and core competencies. The main focus at this point is to establish how they relate to one another and essentially their relation and contribution to the formulation and development of sustainable competitive edge.

Background Analysis

This essay section offers an analysis of the different competitive sustainability elements in n organisation, as well as their relation and connection to one another.

Resources

In the review and analysis of organisational resources, the resource based theory (RBV) is a key analysis tool. The theory argued that an organsiational resource is any asset in an organisation that enables the venture meets its mission and vision goals. In this regard, unlike earlier perceptions of organsiational resources the RBV model argued that the resources can be classified into two main categories, namely the tangible and the intangible assets respectively (Enders, 2004, p.12). On one hand, the tangible resources are the most obvious and the commonly seen in an organisation. Such assets include the organisational financial stability levels, premises and capital assets among others. On the other hand, there are the intangible resources in an organisation. In this case, the intangible resources are the resources that are not seen in an organisation and at times are hard to quantify (Enders, 2004, p.12). However, they play a critical role in building the overall organsiational brand equity. In this context, organisational brand equity elements include the perceived brand quality, brand awareness and image among others. It is the role of the organisational intangible resources to develop these brand equity elements. Such resources include the human resource skills and experience levels and an organsiational culture among others.

Capabilities

As Ulrich and Lake (1990, p.27) discussed, organsiational capabilities are mainly drawn and derived from the existing organisational resources. A capability is described as the activities at which an organisation does best and effectively exceeds its competition. Moreover, an organisational capability could be described as the existing internal systems and features that enable organisations meet their customer needs and expectations better than the competition. Therefore, based on the above understanding, we can deduce a number of organisational capabilities form the existing resources. For instance, the existence of a financial resource base for an organisation creates a financial capability. In this context, a financial capability means that the venture has the ability and potential to operate under the economies of scale.

As such, through such an operational system, it delivers products qualities that are equal or even exceed the competition at lower production costs. As such, this implies that at the same production level and quality on products, finial capacities offers ventures an additional and higher profitability margins than the competition. Second capability is technological capability. In this regard, if an organisation has a trained workforce that is technology literate, and a pool of technological systems as its base resource, it acquires a technology capability (Ulrich and Lake, 1990, p.29). The possession of such a capability implies that the venture has the added advantage of producing and developing its products through the use of modern technology, skills and resource that the competition lacks. As such, this has potential implications of increasing the products quality, reducing the production periods required, as well as reducing the overall production costs for a venture.

Core competencies, competiveness, and Sustainability

An organisational core competency is a combination of existing capabilities. In this case, once a number of capabilities are combined they develop a unique organsiational aspect. For instance, in the examples above, the existence of a financial capability and technological capabilities combine to form a low cost production core competency. In theoretical definition, a core competency is an organisational set of capabilities that sets it apart from the market competitors. In this case, the core competency serves as the key differentiation aspects for a venture and its market competition (Hafeez, Zhang and Malak, 2002, p.16). It is imperative to understand that an organisation can posses more than a single core competency, such as low cost production and services automation among others. In the development of a market competitive edge, organisations rely on their most profound and dominant core competency element. Thus, this means an organisational competitiveness edge is derived from the existing core competencies.

However, it is imperative to understand that not all core competitiveness edges are applicable in the long run period. In this case, this essay asserts that there are two forms of competitive advantage, namely the sustainable and the unsustainable edges respectively. On one hand, an unsustainable competitive edge is an edge that is easily imitable by the competition, and that an organisation is likely and at the risk of losing at any time. These include elements such as financial competitiveness, as the competitors can easily acquire required finances through the exiting alternative capital generation methods. On the contrary, a sustainable competitive edge is one that can be retained and relied upon in the long run period of time (Hitt, Ireland and Hoskisson, 2007, p.81).

The above analysis offers the definitions for resources, capabilities, core competencies and competiveness edges. Moreover, it elaborates and indentifies the relationship and connection between them. It is based on this analysis foundation that the essay seeks to evaluate hoe a competitiveness edge is described as sustainable.

Competitiveness Edge Sustainability four specific criteria

In the Evaluation of the evaluation of the sustainability of an organisational competitiveness, this essay uses the Jay B. Barney VRIO model. The model has four main components, namely the value, rarity, immutability, and organisation respectively. These are the four specific criteria used for the analysis. In order to ensure the analysis clarity, each of the four elements is discussed as a sub-topic under this section.

Competitiveness Value

A core competitiveness value is analysed based on two major fronts. On one hand, the value of competitiveness is gauged on its ability to support a form in exploiting an environmental opportunity. In this case, external market changes across the industries present changing market conditions. As such, it is imperative that organisations effectively respond and exploit such offered market opportunities. However, capabilities constraints are a major setback in organisations exploitation on the opportunities (Hitt, Ireland and Hoskisson, 2007, p.29).

On one hand, there is global challenge in the lack of required flexibility as well as skills and capacity to exploit new opportunities. As a result, a majority of the organisations are late adopters and exploiters of new market opportunities. However, the possession of unique competitiveness edges makes such an exploitation process instant and seamless in an organisation. For instance, the existence of an organisational learning culture is one such competitiveness. This represents a situation in which an organisation has a learning culture where new ideas and systems are encouraged. They include the elements of innovation and creativity. In this case, organisations that have this key competitive edge have low bureaucracy for the authorisation of new creative and innovative strategies and practices. This means that once the employees are aware of any new market opportunities and chances, they can exploit and try the new opportunities integration in the existing organisational systems.

In this regard, such a competitiveness edge is valuable as it enable an organisation exploit and incorporate changing market needs to its operations. The above valuable essence analysis could be illustrated through the Zara Company case study. The venture has emerged as a market leader in the fast fashion industry. In this case, unlike other fashion companies that have seasonal fashion trends, Zara works on fast fashions that last and emerge in months and even on weekly intervals. This has led to the belief that customers are bound to see new fashions every week they visit the Zara Company. This case study is an illustration that Zara is able to effectively respond and exploit the external fashion industry changes within less periods of time as contrasted to its industry competitors (Ruddick, 2014). This is essentially based on the organisational use of an innovative and creativity culture. In this case, the store managers regularly collect the views and opinions of the customers on the existing dress designs and their proposed and desired changes. Once this information is relayed to the design and development earns, they are acted upon through the creative and innovation culture, and tested in the market within weeks. The fact that the existing highly innovative culture enables Zara exploits the existing market opportunities over its competition makes it valuable.

The second value essence of a competitiveness edge is its role in enabling ventures overcomes emerging external market threats. In this case, a valuable competitiveness is one that supports an organisation to overcome and mitigate threats better and with much ease than the competition. In this case, the competitive edge should not only reduce the cost of mitigating environmental threats, but also reduce the time and any potential negative threats. In this case, an evaluation of the Zara Company fast fashion design edge illustrates its value (Denning, 2015). The competitiveness edge enables the organisation overcome and mitigates any potential seasonal fashion variations, as it supplies up to date fashions on a weekly basis, covering for any customer preference changes. On the contrary, other fashion ventures could incur huge costs if the expected and projected fashion trends, always manufacture in mass fail to trend, as they lack such immediate and fast design change and supply systems.

The second criterion for evaluating the sustainability of an organisational competitive edge is the aspect of rarity. In this case, rarity implies to its current possession in the market. In this case, of the competiveness edge is a common aspect in a majority of the organisations in the industry, then it fails to meet the threshold of being a rare competitiveness. This is because, although a viable tool, if it is a common practice in the market, it means that all the other competing organisations can easily apply it, leveraging on any acquired gains for its use by the organisation in question (Hitt, Ireland and Hoskisson, 2007, p.31). On the contrary, if the resource and capability in question is only under the control of a few or just a dingle organisation in the industry, it qualifies as rare. This is because, the control of the resource by the few organisations is a measure for ensuring that the other organisations lack access to it. One such a rare competiveness edge in the market is the element of copyright and patent rights in the production of specific market products. Once an organisation acquires the patent and copy rights to a product, it means that the other organisations cannot easily manufacture, produce or supply such a product in the market. Therefore, this means that the product is bound to be rare in the long term period.

An illustration of a rare competiveness edge could be illustrated in the Dell Computer Company. The Company manufactures personal computer for the global market. However, although it has already established competitors such as Lenovo and Apple among others its adopted production model is unique and rare. Currently, a majority of the organisations in the PC manufacturing industry manufacture standardised quality products that have features befitting specific customer segments. These products are then sold through a push strategy to the market. However, the Dell Company production model is different. The company has established a market reputation for the manufacturing of customised computers for its client base. As such, a special client segment can order for specific PC with unique features that are best suited for them and requesting the elimination of some PC features that would add no value to their operations, rather than making the PCs operation a challenge (Altekar, 2005, p.151). Thus, through its customised PCs production, Dell has established rare market competitiveness. It has structures and value chain support systems right from the customers to the manufacturing centres, avenues that the other industry players lack. Consequently, the fact that it is a unique competiveness edge to meeting customer needs makes it a rare and thus a sustainable competitive edge.

Imitability

The third criterion for evaluation sit he element of competiveness edge immutability. This implies the ease or difficulty at which a competitive edge can be imitated by the competition. It is vital to understand that the imitation of competiveness edge occurs in two main approaches. First is the duplication. Under this imitation approach, the competitor organisations acquire a similar competitive edge to the company (Wang and Carayannis, 2012, p.20). For instance, if an organisational competitiveness was on its use of a shared online and offline platform for selling its products, the competitors can duplicate this by establishing their similar and equal online platforms. If this happens, it indicates that the competitive advantage is easy to imitate and thus does not qualify as sustainable. Secondly, an organisational competitiveness edge can be imitated through substitution. Under this system the competitor organisations develop alternative systems that deliver the same benefits as the exiting organisational competitive edge. For instance, if an organisational use of social media offers it an appeal and competitiveness to reaching out to the targeted customers, others could use the alternatives of search engine optimisation or pop up advertising as their substitutes. Thus, if the applied systems enables the competing organisation achieve similar benefits, the existing system is easily imitable and thus does not qualify as a sustainable edge.

However, if the existing competitive edge is hard to imitate, then is emerges as a sustainable competitive edge. An example of a hard to imitate competitive edge can be cited in the case of the Apple Company. The organisation has developed a market reputation and image through its innovative culture. In this case, this is supported through the adoption of an employee learning and empowerment culture (Apple Company, 2016). As such, rather than using the traditional functional management system, the organisation uses a project by project management system. To this effect, the employees shift form one project to the other. The ideal situation is where the next project is more challenging and demanding than the previous one. In this case, the organisation has developed a high motivational and self driven employee culture, where the employees push beyond their limits to innovate and develop new designs. In order for the competition to emulate this innovative management culture, a number of changes are required. First, such organisations should change their existing management systems form functional to project systems respectively, a process that takes a long period of time and huge cost implications on the organisations.

Secondly, they should change their employees culture to inculcate a self driven employee culture, which is often not an easy task and unachievable in the short period. Therefore, based on the above analysis, it is apparent that the Apple innovation culture competitiveness edge is not easily imitable in the market, qualifying it as a sustainable competitive edge.

Organisation

The final criterion element for establishing whether an organisational competitive edge is sustainable is the aspect of organisational systems. In this case, the criterion is based on the understanding that an organisational competitive edge is only useful if it can be practically applied. However, as Diaz (2014, p.82) noted, the application and execution of key competitive edges face the challenge of inconsistent organisational structures, systems and policies respectively. As such, if there lacks a seamless relationship and interaction between the competitive edge and the existing organisational systems, it implies that the competitiveness cannot be applied in the long term period making it unsustainable. However, if there is a supporting organisational system and policies, the resulting impact is the application of such a competitiveness edge in the long run period, making it sustainable. Thus, this section indicates that in the evaluation of a sustainable competitive edge, its congruence and interaction with the existing systems is imperative.

This can be illustrated through an evaluation of the discussed Apple Company innovative culture model. As discussed, the company sues its employee innovation as a key component to support its market reputation and image for quality and differentiated products. However, in order to ascertain the sustainability of this practice, it is vital to evaluate its relationship and interaction with the other organsiational systems. First, the organisation uses a project management approach as already indicated. This enables the employees to interact with different functional staff in different projects, thus promoting the quality and diversity of brainstormed ideas respectively. Secondly, the organisation has a strict employee’s recruitment and selection system. As such, rather than just relying on interviews, it uses work assignments’ as a key selection tool. The use of the work assignments ensures that an employee’s team playing skills, communication skills, and talents are practically evaluated and ranked (Apple Company, 2016). Consequently, only the most team playing and talented employees are recruited into the workforce. The above two examples, through few, illustrate that indeed, the existing management system and workforce policies

Conclusion

The essay offers an analysis of how organisations can evaluate and establish the sustainability of their key competitive edges. In order to lay the right foundation, the essay offered the different descriptions for organisational resources, capabilities, and core competencies and how they relate and combine to enable venture formulate competiveness edges. Moreover, on the sustainability evaluation, it applied the VRIO framework, that comprises of the value, rarity, imitation, and organisational aspects respectively. The essay concludes that an organisational competitive edge can only be described as sustainable if it meets and delivers on the expectations of all the four VRIO framework elements. If in any case an edge fails to meet even a single on the variable, a conclusion must be drawn that the competitive edge is not sustainable in the long run period.

References

Altekar, R. V. 2005, Supply chain management: Concepts and cases, Prentice-Hall of India, New Delhi

Apple Company, 2016, Inclusion inspires innovation, [Online] Available at: < http://www.apple.com/diversity/> [Accessed: 22nd March 2016].

Denning, S., 2015, How Agile and Zara Are Transforming The US Fashion Industry, Forbes. [Online] Available at: < http://www.forbes.com/sites/stevedenning/2015/03/13/how-agile-and-zara-are-transforming-the-us-fashion-industry/#79ce8de2c557> [Accessed: 22nd March 2016].

Diaz, P. 2014, Tourism as a tool for development, WIT Press, Southampton

Enders, A. 2004, Management Competence: Resource-Based Management and Plant Performance, Physica-Verlag, HD Heidelberg

Hafeez, K., Zhang, Y., & Malak, N. (2002, ‘Core competence for sustainable competitive advantage: A structured methodology for identifying core competence’, Engineering Management, IEEE Transactions on, vol. 49, no. 1, pp. 28-35.

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. 2007, Strategic management: Competitiveness and globalization : concepts, South-Western Mason, OH

Ruddick, G., 2014, How Zara became the world’s biggest fashion retailer, Telegraph. [Online] Available at: < http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11172562/How-Inditex-became-the-worlds-biggest-fashion-retailer.html> [Accessed: 22nd March 2016].

Ulrich, D., & Lake, D. G. 1990, Organizational capability: Competing from the inside out, Wiley, New York

Wang, V., & Carayannis, E. G. 2012, Promoting balanced competitiveness strategies of firms in developing countries, Springer, New York