Donna O.

O’Connor Carrietta Brown Pauletta Welsh McDonald

GROUP 1

QUESTION
Competitive

advantage based on heavy investment in human assets is more sustainable than investments in other types of assets. Discuss.

 Actual term “sustainable competitive advantage” emerged 1985 . “implementing a value creating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy” (Barney. 102). Day  different types of strategies that may help an organization to “sustain the competitive advantage. p.Michael Porter  the basic strategies firms can have in order to achieve sustainable competitive advantage.SUSTAINABLE COMPETITIVE ADVANTAGE  Surfaced in 1984 by George S.  Defined in1991 – Jay Barney  .

WHAT IS SUSTAINABLE COMPETITIVE ADVANTAGE?  “A long-term competitive advantage that is not easily duplicable or surpassable by the competitors. .” BusinessDictionary.com (2011) A protracted or extended benefit or gain  Implementing some inimitable and matchless value creating strategy  No current or potential competitors are implementing or able to copy the benefits of this strategy.

J.ACHIEVING SUSTAINABLE COMPETITIVE ADVANTAGE An organization is a cohesive organism that learns to adopt or find better ways of doing things in response to its environment. Child (1972)  Where should it focus its attention?  Its financial situations?  Its Technology?  Or its human resources?  . the organization must focus on various types of assets. In order to maintain or optimize its situation in its environment.

 .  Guest 1990 says that if management trust their workers and give them challenging assignments.ACHIEVING SUSTAINABLE COMPETITIVE ADVANTAGE Coff 1994 argues that human assets are a key source of sustainable advantage because of causal ambiguity and systematic information making them inimitable. high commitment and high performance. workers in return will respond with high motivation.

 and the integration of the business into a global network.  the core capabilities of the management team.  its ability to build and maintain alliances.ACHIEVING SUSTAINABLE COMPETITIVE ADVANTAGE  Gratton 1997 identified six factors for success:  the commitment of top management.  the team’s aspiration. .  the motivation and aspirations of recruits.

ACHIEVING SUSTAINABLE COMPETITIVE ADVANTAGE Innovation Productivity Outstanding Service Human Resource Special Skills Unsual Quality .

 Success does not depend primarily on the size of the budget or the products supporting technologies.ACHIEVING SUSTAINABLE COMPETITIVE ADVANTAGE Sources of competitive advantage have shifted from financial resources to technology resources and now to human capital. competencies and skills.  Success depends on employee’s attitudes. communicate aspirations and work in complex relationships. their ability to generate commitment and trust.  .

incomparable) and non-substitutable. the resource must add value to the organization.  The resource must not only be rare.  Human resource has that quality that makes it a source of sustainable competitive advantage. matchless.  .ACHIEVING SUSTAINABLE COMPETITIVE ADVANTAGE If a resource is to meet the criteria to be a source of sustained competitive advantage. but it must also be inimitable (unique.

not just as a cost to be minimized or avoided. Firms that take this different perspective are often able to successfully outmaneuver and outperform their rivals. It entails seeing the workforce as a source of strategic advantage.WHY HUMAN RESOURCES?  Achieving competitive success through people involves fundamentally altering how we think about the workforce and the employment relationship. not by replacing them or limiting the scope of their activities. It means achieving success by working with people. Jeffrey Pfeffer .

but on how they manage their workforce.WHY HUMAN RESOURCES  What successful firms tend to have in common is that for their sustained advantage. . they rely not on technology. patents. or strategic position.

for instance. its employees. Consider. . and how they work. the example of Nordstrom.THE IMPORTANCE OF THE WORKFORCE  As other sources of competitive success have become less important. differentiating factor is the organization. what remains as a crucial.

THE IMPORTANCE OF THE WORKFORCE  The example of Nordstrom. changing the compensation system produced employee grievances and attempts to unionize when the new system was viewed as unfair or arbitrary. many of its competitors. nor did it provide many benefits to the competition. Indeed. . after finally acknowledging Nordstrom’s success. By itself.     the department store chain. and the fact that it was attributable to the behaviour of its employees. Nordstrom compensates its employees in part with commissions. has enjoyed substantial success both in customer service and in sales and profitability growth over the years. in some cases. changing the compensation system did not fully capture what Nordstrom had done. instituted commission systems.

flexibility and continuous selfrenewal.  a decade of organizational delayering.  The new game requires: speed. service-intensive economy. knowledge-driven.  Somewhere between theory and practice. restructuring and reengineering has produced employees who are     more exhausted than empowered. destaffing.  Skilled and motivated people are central to the operations of any company that wishes to flourish in the new age. wasted or lost.THE IMPORTANCE OF THE WORKFORCE Most managers today understand the strategic implications of the information-based. . in many companies only marginal managerial attention is focused on the problems of employee capability and motivation. HOWEVER. more cynical than self-renewing. precious human capital is being misused.

. many companies continue to have outmoded strategic perspectives.THE IMPORTANCE OF THE WORKFORCE  At the heart of the problem is a failure to recognize that although the past three decades have brought dramatic changes in both external strategic imperatives and internal strategic resources.

In the late 1980s. all the planning and investment were unable to stop the competition from imitating or leapfrogging their carefully developed product-market positions. They recognized that development of resources and capabilities would be more difficult to imitate: The corecompetency .THE MODELS – COMPETITIVE STRATEGY  Many of today’s leaders were trained in this model     sophisticated strategic-planning systems were supposed to help senior managers decide which businesses to grow and which to harvest. adaptive and sustainable advantage led many to supplement their analysis of external competition with an internal-competency assessment. the search for more dynamic.

and strategy must be built on a human-resource foundation.THE MODELS – COMPETITIVE STRATEGY focused attention on the importance of knowledge creation and building learning processes for competitive advantage.  . LIMITATIONS  Companies recognized that their people were not equal to the new knowledge-intensive tasks. and personal relationships with key clients are at the core of flexible market responsiveness. CONCLUSION  people are the key strategic resource.  competency-based strategies are dependent on people:  Scarce knowledge and expertise drive new-product development.

holds an advantage over its rivals. which can’t easily be copied by others.  For example. . Thus the firm with superior access to physical resources. which others cannot buy. Instead of focusing on positioning in the product market. firms achieve sustainable competitive advantage by developing resources. which add unique or rare value. holds a superior advantage.THE MODELS – RESOURCE-BASED MODEL   Presently being touted as an alternative theory of strategy to that developed by Porter 1985. which invents a superior process technology. a manufacturing firm.

Firm resources can be conveniently classified into three categories:    physical capital resources. its formal and informal planning. Human capital resources include the training. relationships and insight of individual managers and workers in a firm. experience. firm attributes. as well as relations among groups within a firm and between a firm and those in its environment (Barney 1991: 101). Firm resources are strengths that firms can use to conceive of and implement their strategies. controlled by a firm that enable the firm to conceive of and implement strategies that improve its efficiency (doing things right) and effectiveness (doing the right things). its geographic location. judgment. The organizational capital resources include a firm’s formal reporting structure. knowledge. intelligence. controlling. information. and coordinating systems. organizational processes. etc. human capital resources and organizational capital resources. capabilities. a firm’s plant and equipment.    Physical capital resources include the physical technology used in a firm. and access to raw materials.THE MODELS – RESOURCE-BASED MODEL  What are the firm resources?    Firm resources include all assets. .

.THE MODELS – RESOURCE-BASED MODEL  meet the criteria for being a source of sustainable competitive advantage. causal ambiguity and social complexity.  not all firms can successfully develop human resources as a sustain competitive advantage through imitating the HR practices of firms that have successfully developed human resources.  Human resources add value to the firm.  are rare and cannot be imitated  they are characterized by unique historical conditions.

PFEIFFER SIXTEEN PRACTICES OF COMPETITIVE ADVANTAGE THROUGH PEOPLE                 Employment security Incentive pay Participation and empowerment Symbolic egalitarianism Long-term perspective Selectivity in recruiting Employee ownership Teams and job redesign Wage compression Measurement of practices Cross-utilization & cross-training High wage Information sharing Training and skill development Promotion from within Overarching philosophy .

IN CONCLUSION  Sustainable competitive advantage can best be achieved by seeking improvement in the management of people.  . through better utilization of human resources  the resource-based view of the firm provides a framework for examining the role of human resources in competitive success and forces us to think more clearly about the quality of the workforce skills at various levels and the quality of the motivation climate created by strategic human resource management (Boxall 1996).

BIBLIOGRAPHY        Barney. “The strategic Human Resource Management debate and the resource-based view of the firm” Human Resource Management Journal Child. Vol. J. G. R. J. Olin School of Business Washington University.based view” John M. 1994. (1985). MITSloan Management Review. M. Competitive Advantage: Creating and Sustaining Superior Performance. 2 Porter. 1996. Strategic Market Planning: The Pursuit of Competitive Advantage. USA: West Publishing Company. Day. Paul.W.”Human Assets and organization control: implication of the resource. . environment and performance: the role of strategic choice”. Coff. 17. Winter 2002. MN. Volume 43.. New York: The Free Press. Sociology. P. (1984).”Firm resources and sustained competitive advantage” Journal of Management. E. S. 1991. St. No 1 Boxall. 1972” Organisation structure. No.

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