Free Essay Sample on Sustaining Competitive Advantage

Introduction

Sustaining the global competitive advantage has become a significant problem for multinational corporations because the external environment is turbulent, as well as complex to understand. Organizations can increase their competitiveness by enhancing their understanding about the external environment (Hitt, Ireland & Hoskisson, 2015, p. 40, para. 2). Factors, such as rapid development and globalization have contributed to this challenge. However, many organizations have turned to innovation as the primary source of sustaining their competitiveness globally. For example, companies, such as Zara continuously develop new products through innovation to give customers fresh designs and reasons to continue buying from the brand. People are vital resources, contributing to the achievement of long-term goals and objectives. Business managers must continuously engage critical thinking on how to maximize employee potentials to add value to their products and services. Additionally, organizations remain competitive by assessing internal resources, capabilities, and competencies to identify their strengths and weaknesses, as well as potential opportunities in the market (Hitt et al., 2015, p. 75, para. 5). Internal resources and competencies should define the ability to exploit a spotted opportunity in the international market. Based on chapter three from strategic management: competitiveness and globalization, the essay analyzes internal organization, resources, capabilities, and core competencies, building core competencies, and outsourcing.

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Internal Organization

Traditionally, organizations conducted an internal analysis based on factors of production. However, these factors are now less likely to create a source of competitive advantage since they use them to sustain their superiority (Hitt et al., 2015, p. 75, para. 4). Nowadays, business leaders should have a global mindset where they conduct an internal analysis, taking into account global competitiveness. Through effective internal analysis, organizations understand their global competitors better and devise ways of outshining them. Therefore, internal evaluators must assess the company’s resource portfolio and capabilities (Hitt et al., 2015, p. 76, para. 2). However, the challenge for managers is internationalizing the findings. Making and implementing decisions effectively is a challenge for managers. Therefore, firms should hire competent managers with a global view to help in implementing international strategies.

Resources, Capabilities, and Core Competencies

Every organization requires vital resources to succeed in its operations and create a competitive advantage (Wahl & Prause, 2013, p. 69, para. 2). The above three elements are the foundations of competitive advantage for any organization. Resources alone do not help firms to add value to their products and services but are consolidated to create capabilities. Tangible resources for an organization include financial, reporting procedures, physical and technological (Robert, 2015, p. 3, para. 2). Intangible resources include human, innovation and reputation (Hitt et al., 2015, p. 82, para. 2). For instance, learning is one of the crucial resources that focus on individual and organizational development. It helps to understand and solve complex problems. A combination of the resources ultimately creates capabilities. For example, innovation and having a skilled and talented workforce improves the ability of an organization to develop new products and services that are superior to the competitors. Consequently, they give customers reasons to buy items and develop brand loyalty.

Additionally, organizations combine their resources to develop capabilities used to complete tasks as intended (Hitt et al., 2015, p. 83, para. 3). Examples of tasks include producing and distributing finished products to meet market demand. For instance, having a self-motivated and competent workforce would engage in the development of new designs that add value to the existing products and services. Also, the abilities of employees help to build positive relationships with the customers; thus, building brand loyalty. Other examples of capabilities include the ability to attract and retain skilled and talented employees, the effective use of inventory, and appropriate logistics management.

The extent of innovation in an organization depends on internal resources, such as the levels of employee motivation (Ismail, Rose, Uli & Abdullah, 2012, p. 164, para. 2). The executive management must support and empower employees to engage in research and development, aiming to develop new features that add value to the existing products (Hitt et al., 2015, p. 84, para 2). For example, there should be a program of rewarding employees developing new products, as well as rewarding external innovators. It is a perfect way of combing resources to create capabilities, and eventually core competency that creates a source of competitive advantage. A combination of capabilities and resources develop avenues for competitive advantage. They create a source of competitive advantage for an organization. They differentiate a company from the competitors. For instance, innovation is one of the core competencies of Apple (Hitt et al., 2015, p. 84, para. 2). The best way to develop a superior business model is through competitor profile analysis. It combines analysis of the business environment and internal situation to leverage resources for success (Amason, 2011, p. 120, para. 1). The company can develop new and unique designs that create value for its customers. Another core competence is offering excellent customer service to build brand loyalty. However, organizations must understand the competitiveness of their global rivals and develop superior products and services.

Building Core Competencies

The first aspect of building core competencies is to build valuable capabilities to help in exploiting opportunities in the domestic and international markets. Additionally, they help to neutralize threats from competitors. Secondly, a firm must have rare capabilities (Hitt et al., 2015, p. 87, para. 3). They should not be common among competitors. For example, designs and marketing techniques should be rare. The third aspect is developing costly capabilities. Every firm should develop capabilities that are difficult for competitors to emulate. For instance, as companies evolve, they should develop superior and costly products to imitate. Consequently, a firm will continue dominating the areas; thus, creating a competitive advantage. The last element is building non-substitutable capabilities (Hitt et al., 2015, p. 88, para. 3). For instance, firms should focus more on intangible capabilities to create a challenge for the competitors to imitate. One of the strategic decisions firm make is to decide the industry to operate and competitors that form part of its landscape (Dyer, Godfrey & Jense, 2017, p. 19, para. 3). It defines the industry and the availability of products and services. Understanding the industry helps to leverage resources and capabilities to develop competitive strategies.

Outsourcing

Outsourcing is the process of purchasing a value-adding activity. The benefits of outsourcing services include enhancing flexibility, mitigating potential risks, and minimizing capital investments. The outsourcing trend continues because of competition in the international market. A firm should consider its resources, capabilities, core competencies and engage techniques, such as outsourcing to sustain their competitive superiority (Hitt et al., 2015, p. 92, para. 1). For example, the lack of capacity and resources to effectively implement marketing techniques would lead to outsourcing. The objective is to continue offering quality products and services that meet the needs and expectations of the customers, as well as offering better value than the competitors. However, outsourcing has some concerns. They include a firm’s inability to innovate (Hitt et al., 2015, p. 92, para. 2). It is because organizations depend on outsourced services that may hinder internal development. Consequently, an organization may not achieve its long-term goals because of over-reliance on external services that may not match the organizational culture.

Conclusion

Sustaining a competitive advantage in the global market is the biggest challenge for multinational corporations. It is because of several changing factors in the global economy. They include globalization and rapid internet development. However, many firms engage in innovation to create unique products that offer better values to their customers. Therefore, sustaining competitive advantage requires analysis of an internal organization, build resources, capabilities, and core competencies. Also, outsourcing helps to access quality services due to the lack of internal capabilities and competencies. Although organizations enjoy superior services, they lose their innovation capacities and this hurts the long-term success of an organization.

References

Amason, A. (2011). Strategic management: From theory to practice. New York: Routeldge. Retrieved from
https://books.google.co.ke/books?id=eQePAgAAQBAJ&printsec=frontcover&dq=Amason,+A.+(2011).+Strategic+management:+From+theory+to+practice&hl=en&sa=X&ved=2ahUKEwimpqr77IbrAhWPxoUKHWDOAC8Q6AEwAXoECAgQAg#v=onepage&q=Amason%2C%20A.%20(2011).%20Strategic%20management%3A%20From%20theory%20to%20practice&f=false

Dyer, J., Godfrey, P., & Jense, R. (2017). Strategic management: Concepts and cases. London: John Wiley & Sons, Inc. retrieved from
https://books.google.co.ke/books?id=MSaVDwAAQBAJ&pg=PA43&dq=Dyer,+J.,+Godfrey,+P.,+%26+Jense,+R.+(2017).+Strategic+management:+Concepts+and+cases&hl=en&sa=X&ved=2ahUKEwjF8dLm64brAhVLOBoKHa3kA_IQ6AEwAHoECAUQAg#v=onepage&q=Dyer%2C%20J.%2C%20Godfrey%2C%20P.%2C%20%26%20Jense%2C%20R.%20(2017).%20Strategic%20management%3A%20Concepts%20and%20cases&f=false

Hitt, M., Ireland, D., & Hoskisson, R. (2015). Strategic management: Concepts and cases: Competitiveness and globalization, 11th edition. Stamford: Cengage Learning.

Ismail, A., Rose, R., Uli, J., & Abdullah, H. (2012). The relationship between organizational resources, capabilities, systems and competitive advantage. Asian Academy of Management, 17(1), 151-173. Retrieved from https://www.researchgate.net/publication/286042397_The_relationship_between_organisational_resources_capabilities_systems_and_Competitive_Advantage

Robert, J. (2015). Understanding Resources, Competences, and Capabilities in EU Common Security and Defense Policy (Working Paper). Retrieved from
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Wahl, M., & Prause, G. (2013). Toward understanding resources, competencies, and capabilities: business model generation approach. Entrepreneurship and Sustainability Issues, 1(2), 67-80.