The Resource-Based Management and Maintenance of Competitive Advantage

Bolaji Akinyemi

Introduction
Generally speaking the achievement of organizational objective depends on the approach of the management in the planning, controlling, organising, directing, coordinating, staffing, and budgeting for the resources of the organization, how managers are able to apply their knowhow in combining these management functions in the achievement of short and long term achievement of organizational objectives is what strategy is all about. Furthermore, how they are able to do this in a dynamic environment underscores the level of competence possessed by the organization’s management. According to Pitts & Lei (2000), strategy refers to all the ideas, plans and support that firms employ in order to compete successfully against their rivals, although de Wit & Meyer (2004) decided to approach strategy from the dimensional perspective of process, content and context, and they still believed that strategy is a process which consists of thoughts, formation and change processes. In the field of organizational management, the application of strategy in the functional and operational aspects of the entire organization are basically a means to an end (Thompson & Martin, 2005). The ‘end’ referred to by Thompson & Martin (2005) above can mean different things to different people, depending on the stated objective clause in the organization’s memorandum and articles of association. Thompson & Martin (2005) posited that an organization usually has a range of strategies in its functional and operational areas, and they are managed in a variety of ways, but then have one common feature which is that they all have life cycles and are ever dynamic. The ever changing environment of business has required the delicate mix of management and strategy in driving its processes, which management has used to respond to different situations of market demand and supply rules as well as competition. A good strategy is one through which a company can acquire sufficient ground ahead of its competitors at an acceptable cost to itself (Thompson & Martin, 2005), this can be achieved in four main ways (Thompson, 2001) which includes identifying key success factors and directing resources to exploit any area where the company enjoys relative superiority, also the company should aggressively try to change the key success factors by thinking through known assumptions and challenging them and also innovating new markets and products.

The Concept of Strategic Management
From some time now, the large-scale management of business processes have become significantly complex, especially since the beginning of the twentieth century as shown by the collapse of mega-corporate entities such as Enron, Parmalat, WorldCom in the early 2000s and more recently in 2008, AIG, Lehman Brothers, Merrill Lynch, etc. Most of these companies have collapsed as a result of the increased sophistication of the customer who are ever more aware of want they want from the market, the increase in the number and forms of competition, as well as the expanding role of government as a buyer, seller, regulator as well as competitor in the free enterprise world (Thompson, 2001; Pearce & Robinson, 2003), in addition, the increased involvement of business in international trade also contributed to this increasingly complex and competitive business environment. According to Lynch (2000), late 1970s saw to the introduction and mix of the concept of “longrange planning” with other concepts such as “new venture management”, “planning, programming, and budgeting” and “business policy” has called for an increased emphasis on environmental forecasting as well as other external considerations while formulating and implementing plans for the organization. The combination of all these activities and approaches within an organization has been referred to by Pearce & Robinson, (2003) and Wheelen & Hunger (2008) as strategic management. Based on the preceding discussion, the definition of strategic management can now be discussed. Strategic management has been described as those set of managerial decisions and actions that determines the long-run performance of an organization (Wheelen & Hunger, 2008), according to Johnson (2001), strategic management is a complex and fascinating process with no ‘right’ solutions, and where it blend with the resources, skills and competences of an organization can easily lead to the organization’s success. As a process, strategic management can help organizations to determine their purpose, objectives required levels of accomplishment; it also facilitates decisions on how to achieve the stated objectives within the preferred time-scale within constantly changing environment (Johnson, Scholes & Whittington, 2008). Strategic management also helps to implement the actions, assess the progress as well as results and is also formulated in such a way that whenever there is a deviation from the planned, there are already procedures in place for correcting suct deviations. According to Wheelen & Hunger (2008), since strategic management includes internal and external environmental scanning, long-range planning, strategy implementation, evaluation and control, it follows therefore that

the application of the concept within the scope of organizational activities (Pitts & Lei, 2006), underlines the monitoring and evaluation of external opportunities and threats with regards to the organization’s strengths and weaknesses (De Wit & Meyer, 2004). According to Thompson (2001), the strategic management process can be seen from the perspective of ‘The 12-question figure’ (see Figure 1 below), which consists of the strategic awareness and strategic change management questions which an organization needs to ask, if it wants to get its strategic management activities right first time.

Strategic Awareness

Strategic Change Management

Where are we going?

What are our future opportunitie s and threats?

How can we improve our competitive strategies

can What cannot should we do? should not

How are we doing?

Where do we want to go? What future objectives are realistic?

How might we manage the changes?

How can we capitalize on our strengths and reduce our weaknesses? Where are we doing well? Badly? –and why? How good is our information?

What corporate strategic change alternatives might we pursue?

What are the criteria for effective change?

Figure 1: The 12-question Figure Source: Thompson, J. L. (2001) Strategic Management. 4th edn. London, UK: Thomson Learning. The questions in figure 1 above are relevant questions which can help an organization in its strategic management activities, such an organization will be able to determine their strengths which will help them access the opportunities in the environment, also it helps to highlight their weaknesses so that they can address the threats which they face in the market (Thompson, 2001).

Competitive Advantage
When applied to the individual functional and operational areas of an organization, strategic management help firms achieve competitive advantage (Pitts & Lei, 2006). According to Porter (1985), competitive advantage is not a company-wide concept; rather, it is the result of firms’ isolated activities in different areas of its endeavours such as design, production, marketing, advertising, logistics and human resource. However, Ohmae (1982 as cited by Thomson 2001) argued that competitive strategy encompasses all of a business’ strategy, and that an industry devoid of competitors means there is no need for strategy, since strategic advantage simply aims to give an organization a ‘sustainable edge over its competitors’ by altering the relative strength of the company as against that of its competitors. The question of how a firm obtains and sustains its competitive advantage has been asked by professionals in the industry, government and academic sphere. Conventional opinions are divergent, regarding how organizations develop and maintain its competitive advantage. Some of these opinions include competitive analysis within the specific industry in which the organization operates (Porter, 1980; Lynch, 2000), resource-based view (RBV) perspective which emphasizes the use of specific resources (Wernerfelt, 1984; Barney, 2001). However, Teece, Pisano, & Shuen (1997) are of the opinion that for an organization to create and guarantee the continuation of its competitive advantages, it needs to establish its dynamic capabilities in most of the resources available to it.

Business Resources
The resources available to a business can be categorized into different categories, and they include financial resources, human resources, physical resources, intangible resources, research and development, and marketing (Joyce & Woods, 2003). The financial resources include all cash and cash equivalents available to a company to finance its preferred strategy, and this includes bank overdraft, shareholders’ funds, working capital, and creditors, it also includes the firm’s ability to raise new funds (Lumby & Jones, 2003). The human resources are the management and staff of the business and this include the various skill which they bring to bear on the operations of the business, it also includes the current staffing resources and the improvements needed to keep them relevant in the competitive environment in which the organization operates (Huczynski & Buchanan, 2007). The physical resources of an organization is the backbone of the organization (Mullins, 2005), and it refers to the various operational resources which an organization employs in the delivery

of its strategy and these include its production facilities, its marketing facilities and the information technology system. Lastly, the intangible resources include the organization’s goodwill, reputation, brands and intellectual property, also included in this is the organization structure along with the duly assign responsibility and authority (Pepall, Richards & Norman, 2005). Also, an organization’s resources is the organization’s research and development activities which serves as the main centre for the development of potential new strategic capability, the marketing activities relates to how the products and services are positioned in relation to competitors and how they are priced, advertised and distributed (Thompson & Martin, 2005). While adapting the conceptual framework (see figure 2) presented by Kelly & Kelly (1987 as cited by Thompson & Martin, 2005), Thompson & Martin, (2005) presented the relationship between environmental forces and internal resources of an organization, and with it showed how the resources of a business may fit into the overall strategy of a business. The framework highlighted selected products, services, and markets are seen as dependent on the environment, while stakeholders are shown with resources and values as four key strategic elements linked to corporate objectives. As explained by Thompson & Martin (2005), the organizational resources influence the achievement of corporate strategy since they are shaped in various ways by the different stkaeholders, and specific stakeholders who have considerable influence on specific functions may have little direct importance for the others, and likewise specific stakeholders may impact individual functions in different ways. Therefore, their impact on the whole organization is affected by the orgnmization structure and relative power and influence within the firm, the framework also shows the strategic value of functional managers taking a more holistic view of the organization and their role and contribution (Thompson & Martin, 2005).

Competitive environment Marketing

Company resources

Human Resources Corporate Objectives

Organization Structure

Research and development

Finance

Stakeholder expectations

Manufacturing

Culture and values

Figure 2: Matching the Organization and the Environment
Source: Thompson, J. & Martin, F. (2005) Stragic Management: Awareness and Change. 5th edn. London, UK: Thomson Learning.

An organization’s ability to successfully apply its sources of competitive advantage to new business areas such as new products, businesses as well as new market segments is determined by how well it has developed its resources to produce a set of distinctive competences and resources which are completely different from those of its competitors (Pitts & Lei, 2006). In the field of corporate strategy, firms need to pull together their resources in order to understand how each one is able to influence corporate strategy. According to Johnson & Martin (2005), corporate strategy that it able to win the market for an organization is supported by the identification of the resources that allow a firm to build an organization-wide advantage in all the different parts of the business, such that competitors find it difficult to copy those areas of advantage. Where the organization is able to maintain such absolute control over its, corporate strategy can allow the company operate successfully It is not all of an organization’s resources that may be strategically significant, Thompson & Martin (2005) highlighted that where an organization lists all its resources as its strength, then that attempt will be misleading because, an organization needs to evaluate its resources in terms of strategic significance, and the factors which can help determine this significance have been identified to include:

 Competitive superiority: this refers to the relative value of a resource when compared to the value it provides to other organizations, where a resource is possessed by all other competitors, then the company no longer has competitive superiority in that resource;  Barriers to replication: If rivals can be held back from replicating a valuable resource, then an organization can emphasize the strategic significance of that resource to the organization, other wise, it will just be another utility common to all industry competitors;  Durability: Durability of a resource that is of strategic significance refers how long it remains as a resource of competitive superiority and for how long competitors can be held back from copying the resource, therefore a resource can only be a durable resource of strategic significance, for as long as the organization possesses competitive superiority and competitors are held back from imitating the resource;
 Substitutability: Where competitors can reduce the effect that an organization’s

strategic resource has on its competitive standing relative to other industry actors, then that resource is no longer a resource of strategic significance.
 Appropriability: the argument here is based on that of Kay (1993) who argued that the

benefits which arise from a resource of strategic significance must accrue to the organization which possesses the resource benefits from it (Thompson & Martin, 2005). Lynch (2000) and Thompson & Martin, (2005) highlighted that an organization’s resources can be analysed in a three stage process as follows: a. An evaluation of the profile of the principal skills and resources of an organization;
b. A comparison of this resource base with the requirements for competitive success in the

industry; and
c. A comparison with competitors to determine the relative strengths and weaknesses of

any significant comparative advantage (Lynch, 2000; Thompson & Martin, 2005). The results of the analysis must show how well the organization’s resources are being managed, since their value to the organization depend on their efficient and effective management, while the analysis is being conducted, it is necessary to consider the functional areas of the business where resources such as human financial and physical resources are

deployed (Thompson, 2001), they should be analysed with respect to their level of integration in the organization’s control systems (Thompson & Martin, 2005). Furthermore, Thompson & Martin, (2005) emphasized that control systems such as production and financial control including the processes adopted by managers in their interaction with one another influence the efficiency and effectiveness of the organizational processes, therefore they must be analysed in terms of thier existence and the ways in which they are utilized, as well as the control systems that are applied in managing them. For instance efficiency measures of managers might be span of control which explains the number of subordinates a manager is expected to supervise compared to the number he actually supervises. Also, Thompson & Martin, (2005) highlighted that the marketing activities can be looked at from the perspective of managing activites which have to do with the marketing function. These issues are important areas to concentrate on if a firm’s resources are to be applied for the creation and sustenance of competitive advantage, however, Thompson & Martin, (2005) presented Kay’s (1993 as cited by Thompson & Martin, 2005) proposition on the evaluation of strategic resources, his three strand framework empasized the following factors:  Organizational architecture: this highlights internal and external relationships and connections;  Organizational Reputation: this highlights the power of the organization’s reputation, the corporate image as well as its brands; and
 Innovation: which involves continuously improving everything within the organization

such as the products, services and processes (Thompson & Martin, 2005: pp: 215).

Conclusion
The formulation and implementation of strategy involves all efforts directed at finding an appropriate fit between the strengths and weaknesses of an organization on one hand and the opportunities and threats on the other, it is highly essential for an organization to identify a firm’s strenghts and weaknesses relative to those of competitors in order to continue in business for the forseeable future. Where this is not done, then the only outcome being faced by a complacent organization is that it will fizzle into extinction in no time since the environment of business is today ever more dynamic and competitive.

In order to successfully formulate strategies which are effective enough to drive the organization’s business forward, the oppotunities and threats which appear in a firm’s external environment need to be identified as this goes a long way in enhancing shareholder value which is the ultimate goal of the business.

References

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