Delivery in day(s): 4
HI6008 Business Literature Review Assessment
The topic chosen for conducting the literature review is; “Competitive advantage and sustainable advantage paradox- Case of a public sector organisation in Australia”
The business world is highly competitive in nature. Every business has to compete with each other to sustain its business operation. Competitive advantage is what every firm wants to have over the other firms. It happens when a firm develops or acquires some combination of attributes allowing the firm to outperform the competitors. Kay (1995) had presented the idea of sustained competitive edge in firms that are obtained through reputation, innovation, relational and strategic assets (Porter, 2011). Keeping this in view the present research deals with the study of competitive advantage in a public sector organization in Queensland and to explain the sustainable competitive advantage paradox.
According to the management theories, preferably the resource based theory of an organization, the fundamental base of competitive advantage surfaces up from its core competencies such as values, exceptionality, uniqueness, inimitability and administration or in general if it is to be mentioned then company’s reputation, architecture, innovation and strategic assets (Kaplan and Norton, 2013). There are successful private firms that use their core competencies to generate more values in a proactive manner and by showing suitability or the capability to realize the advantages of a unique competence for benefitting the firm instead of benefitting competitors, suppliers and consumers or customers (Porter, 2011). There is however public sector organizations and certain governmental agencies that are created to accomplish responsibilities and duties of government and they generally cooperate with the government for policy formulation and service delivery plans. In many western societies along with Australia such public sector firms are made under the guise of dealing with the market failure and are held to maintain public welfare and contribute to common good of the society (Bartlett and Ghoshal, 2013).
The public sector companies get their funds from government funds where the limitations of fixed budget and funds create rivals and opponents (other governmental firms) of every company in the industry (Bartlett and Ghoshal, 2013). Each firm is expected to have resources and competencies and they are expected to take into account their natural environmental settings and they have to negotiate for funds. Therefore, such firms are largely dependent upon their environmental settings for resources. Governmental authorities govern the companies to decide their direction and scope of business operations (Asmussen and Foss, 2013).
When we talk about gaining sustainable competitive advantage it is always necessary to talk about what helps in gaining sustainable competitive advantage? – The necessary requirements that forms its basis. It has been found that if the organization is competent in transferring knowledge from the different businesses units it gains competitive advantage (Argote, 2000).Knowledge transfer is the process of affecting the various units with the organisation to clearly understand it we may say that it is the analysis of how the application of situational knowledge acquired impacts the results of other situation either positively or negatively (Singley, 1989). Performance can be as a measure the knowledge. Organisations vary in possesing competitive advantage and the casue of this variance has been found to be the difference between the individual firms on the basis of resources and knowledge transfers rather than being industry relating performance criterias. (Rumelt, 1991)
- Hypothesis 1a:The more the firm indulges in knowledge transfer more is the sustained competitive advantage of the firm
R&D activities have become a prime source of gaining competitive advantage by having reputation through innovation. Many private sector and public sector organisations depend heavily on innovation to gain competitive advantage.
To deliver the right innovation at the right time and gain competitive advantage the companies need to have consistent interaction and analysis of the customers, stakeholders and employees(Dowling, 1986).
Gaining competitive advantage through innovation has become the necessity of the businesses in today’s scenario(Gray, 1998)
For attaining sustained competitive advantage by innovation the company should have a track record of being innovative, creative and consistent throughout its life time (Avolonitis, 1994).A company having a track record of innovation has always excited customers who keep waiting for the next product launch so they are able to create a element of query and interest in the minds of the customers
Innovation and research have shown a tremendous increase in the recent few years drawing interests of the managers and the scholars. Innovation explains the firms the means and measures it requires to improve delivery and service and have an edge of differentiation with that of the competitors
Innovation can be,
If the company has developed a new service
- Or it has introduced new methods of management
- Or the organisation has evolved and has developed a new structure(Popa, Dobrin, Popescu, & Draghici, 2011)
- Hypothesis2a: Innovation is found to be a important tool to gain sustainable competitive advantage
- Hypothesis 2b: Market performance of a firm is directly proportional to its innovation strategy
Reputation helps in creating an identity for the firm and developing sustained competitive advantage through having a prestige image and good will that is lacked or deficient in your competitors.
Reputation much takes time to develop and lesser to destruct. It requires interactions with your stakeholder’s over time
Firms keep competing for having a reputation as well and not just for acquiring customers(Fombrun, 1990).
Reputation brings about shared values in the firm(Fombrun C. , 1996). Firms may have reputations for specific contexts such as CSR, pricing aggressively and the quality of the product that it offers Reputation being an intangible resource for gaining competitive advantage is always accompanied by perceptions (Berger & Luckmann, 1966).
Reputations are like signals that initiate the shaping of beliefs of individuals and influence the way they perceive the firm(Spence, 1974).Since reputation is intangible and depends on perceptions and signalling the signalling if is not accompanied by rationalisation can be lethal to the firm as false interpretation of the reputation makes the firm in a shaky position(Rao, 1994)
Market does not provide comprehensive and complete information so, the internal stakeholders many a times rely on their reputation while deciding important parameters such as decisions related to investments, or partnership decision making etc (Dowling G. , 1986)
- Hypothesis 3a:Having a good reputation helps the firm to possess sustained competitive advantage
The positive influence of competitive advantage over performance has been attracting the interest of the researchers, scholars and the management. Competitive advantage helps to improve the financial performances of a firm and its profitability as it influences positively the way firms perform in the market.
How well a firm perform in the market is a measure of how much is the firm able to have loyal customers that are saqtisfied. (Moorman & Rust, 1999)Innovation is a tool to perform better and provide your customers superior products and services (Li, 2005).Performance is providing value to the customers which is directly proportional to their satisfaction and their perception of the quality of the product being offered to them (Zeithaml, 1988)
If the firm focuses on performing better the impact it has on its customers are they start believing in the firm and the firm delivers excellence to the customers thereby increasing the customer loyalty. Loyal customers do not bother much about the price fluctuations in the product and the firm has the option and independence of charging premium pricing to them, Which ultimately results in increase in market share and financial benefits of having a high margin of profit (Porter, 1985). Performing better helps in the creation of a good reputation in the market, which enables the firm to widen its customer base by attracting new customers as well as retaining the older ones(E.W. Anderson, 1997)
- H 4a: The more is the market performance of a firm the more is gains competitive advantages
- H 4b:Financial performance is directly proportional to the firm’s performance in the market.
In today’s world competition has become the key to success for business. Sustaining itself in the “growing global marketplace” businesses require competitive advantage. The pressure of surviving in this competitive race has increased. According to Longnecker & Ariss, (2002) competitive advantage can be gained by any practice, resource or assets of the organisation that helps it in placing in a better position in comparison to its competitors
This literaturesurvey done from the existing source of literature about the topic has made me draw the following conclusions. Competitive advantage is the factor that differentiates one firm from the other. Every firm whether private or public, differentiates itself by implementing various strategies that make it sustainable and better than its competitors. Few of the factors to gain sustainable competitive factors in the literature survey are;
- To gain sustainable competitive advantages the firm requires focusing on techniques to be better and strategically advanced than its competitors. This can be achieved by various means .One of them is ‘Gaining Competitive Advantage Through innovation’. Building a reputation of being innovative firm attracts customers as they expect upgraded products and services.
- Also competitive advantage can be gained through knowledge transfer as exchange of ideas between all levels in the management serves as a link to connect the different units of the businesses.
- For businesses the prime focus in the customers so it matters a lot that what the customers feel and perceive about you and all these compromise the Reputation of the firm. It takes lots of strategic planning to build a reputation and make customers believe in you. A good reputation differentiates one firm from another.
- Performance is a key criteria and the market performance is linked to the financial performance of the firm. The better the firm performs in the market the more it retains and acquires customers and ultimately the more is the financial performance in terms of the firm’s profit.
- So this study suggests that for gaining and sustaining competitive advantage the firm needs to focus on not just one but various parameters.
- Argote, L. (2000). Knowledge Transfer: A Basis for Competitive Advantage in Firms. Organizational Behavior and Human Decision Processes, 150-169.
- Avolonitis, G. K. (1994). Assessing the Innovativeness of Organisations and Its Antecedents: Project Innovstrat . European Journal of Marketing 28(11), 5-28.
- Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management 17(I), 99-120.
- Berger, P., & Luckmann, T. (1966). The Social Construction of Reality. New York: Doubleday & Company, Inc.
- Dowling, G. (1986). Managing Your Corporate Image. Industrial Marketing Management 15, 109-115.
- Dowling, G. R. (1986). Managing Your Corporate Images. Industrial Marketing Management 15, 109-115.