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Chapter: Business Science - Managerial Behavior and Effectiveness - Developing the Winning Edge

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Development of the Competitive Spirit

When a firm is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors, then we can say the firm has a Competitive advantage.

Development of the Competitive Spirit

 

In today‘s fast-paced economy competition is an issue of services and products. Much attention has been directed to a better service and the best product and how this can be achieved through utilizing the human resources. This research paper identifies the competitive advantage concepts and models, competitive strategies and the main human resource practices that have a significant impact on the employee‘s performance. Understanding sources of competitive advantage has become a major area of research in the field of strategic management. Finally a summary of practical criteria of best practice for competitive advantage is presented and a general discussion and recommendations have been drawn.

 

When a firm is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors, then we can say the firm has a Competitive advantage. And when a firm is 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, then we can say the firm has a sustained competitive advantage (Barney 1991). There are two major models that have to be considered. The first one is the position or environmental model and the second one is the resource-based view model.

 

The Position or Environmental Model.

 

In order to achieve a competitive advantage, the firm is required to make a choice about the type of competitive advantage it seeks to attain and the scope within which it will attain it. Choosing the competitive scope or the range of the firm‘s activities can play a powerful role in determining competitive advantage because it aims to establish a profitable and sustainable position against the forces that determine your industry competition.

 

Porter 1985 defines the competitive strategy as the positioning of a company in its competitive environment. Also Porter has posed two important questions:

 

1.     What is the structure or the attractiveness of the industry which the company is in?

2.     What is the company‘s position in its competitive environment?

 

 

To answer the first question a company, as an organization, should analyze their industry by focusing on the following points (industrial analysis):

 

·        Begin with understanding your industry.

·        Focus attention on significant force.

·        Watch out for industry change.

To answer the second question (competitive position), the following question should be asked:

 

·        How does a company achieve superior performance?

 

To be a superior performer in the engineering industry or any industry, the company must have a sustainable competitive advantage which its rival cannot copy or duplicate.

 

The competitive advantage can be sustained in one of the two ways (Porter 1985):-

 

1.  Either the company can be lucky enough to come up with something that its rivals cannot copy which is very rare, or

 

2. The company is improving so fast that its rivals can not catch up.

 

Porter shows that there are five competitive forces which play a major role in the company success or failure

 

1.     The entry of new competitors,

2.     The threat of substitutes,

3.     The bargaining power of suppliers,

4.     The bargaining power of buyers, and

 5. The rivalry among the existing competitors.

 

 

The collective strength of these five competitive forces determines the ability of firms in an industry to earn on average, a rate of return on investment in excess of the cost of the capital.

 

Porter also notes that a business can develop a sustainable competitive advantage by following two strategies; cost leadership strategy or differentiation strategy.

 

Cost Leadership Strategy: the primary focus of a cost leadership strategy is to achieve low costs relative to competitors. Lowering costs lead to lowering prices, which can increase demand for products or services, but if the product or services cannot be produced at a lower cost it also reduces profit margins. To compete based on cost, managers must address labour, materials, overheads, and other costs, and to design a system that lowers the cost per unit of the product or service. Often, lowering costs requires additional investment in automated facilities, equipment and employees skill.

 

Differentiation Strategy: the primary focus of a differentiation strategy is

 

Creating uniqueness such that the organization‘s goods and services are clearly

 

Distinguished from those of its competitors. In other words the focus is on creativity and innovation which have long been recognized as necessary for bringing the required

 

change to obtain the competitive advantage

 

Schuler and Jackson 1987 have emerged from Porter discussion of competitive advantage three competitive advantage strategies that organizations can use to gain competitive advantage:

 

Innovation strategy: the primary focus here is developing products or services different from those of competitors or offering something new and different. A vital component of any innovation strategy is getting employees to broaden their skills.

 

Quality enhancement strategy: the primary focus here is enhancing the product and/or services. Quality enhancement often means changing the processes of production in ways that require workers to be more involved and more flexible.

 

Cost reduction strategy: firms typically attempt to gain competitive advantage by being the lowest cost producer.

 

The question is who brings the innovation, quality and the cost reduction strategy to the firm? It comes from the right employee who is motivated by the right human resources practices. In the next sections we will deal with the issues of how the right employee is employed and motivated.

 

Competitive Advantage through Job Analysis, Job Description and Job Evaluation

 

Job Analysis

 

The job analysis looks at the behavioral needs of a particular competitive strategy (cost leadership or differentiation) role peculiar to the culture and organization of the company. It is like performing a Personal Profile Analysis on an imaginary person. The goal is to define the ideal individual for the job position from the perspective of the company and the employees that the successful applicant will work with. Job analysis is the process of collecting information and making judgments about a specific job. From the stand point of researchers, that competitive advantage only occur when employee‘s knowledge, skills and ability can add value to the firm, are rare, cannot be imitated and are not sustainable. In order to target employees with the requisite knowledge, skills and ability, the job has to be carefully defined. The HRM literature promotes careful job definition in the belief that it will have two effects. First, it is commonly believed to assist targeting and attraction of potential recruits. Second, job analysis helps potential recruits to make up their own minds about whether to apply or not.

 

Job Description

 

The job description is generally used to identify the responsibilities, the objectives associated with each specific task and the reward that associated with good performance. In order to accomplish the employment relationship effectively, work has to be designed, programmed, costed, organized and co-coordinated. In other words detailed job description, otherwise can be used by an employee to define what s/he is not prepared to (―that‘s not part of my job‖ or I‘m not paid to do that‖). In a dynamic environment it is impossible to have a good job description because anticipating the environment changes in advance is impossible. But that does not mean we should not describe the job as detailed as possible.

 

Job Evaluation

 

Once jobs have been analyzed and described, the job evaluation began by considering several job factors such as: working conditions, necessary technical KSA (Knowledge, Skills and Ability) and behavior, salaries and required managerial skills. A rating of each factor is made on a standard scale, and the total rating points can be used to rank jobs hierarchically. The recruiting and selection model appendix A can be used in the rating process by using different criteria and weights such as the above-mentioned job factors.


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