Competitive Advantage

Answer

MGT3SMG-All Instances-S2-2015

Assignment 2 – [GroupWritten assignment] [1,500 words per person]

Instructions and Topic :

1. The group assignment is 1500 word per person assessment item attempted in groups of no more than five (5) persons. This assignment requires students to engage with material presented in lectures, explored in tutorials and researched in academic journal articles, in relation to the contemporary organisation.

1. Each student will reference no fewer than 10 scholarly journal articles within in the paper and the Mendeley research software must be used. Students must attach screenshots of their Mendeley libraries as appendices to the assignment, clearly labelled with their name and student number.

1. Students will use the following topic construct a paper describing how contemporary organisations are using the theories and knowledge discussed in tutorials, presented in lectures and identified in their own scholarly research:

Strategic management is critical to the success of the contemporary organisation. Using any five (5) international organisations, who deliver multiple products or services across geographic boundaries as examples, describe how the concept of the four criteria of sustainable competitive advantage relates to organisational success.  Your answer should take into account diversity, corporate level strategy and business level strategies in each case discussed. 

This item must be referenced, use the Mendeley research software and conform to La Trobe essay writing and style guidelines.        .  

Campus:[Insert here]Lecture time: [Insert here]

Lecturer: [Insert here]Tutor:[Insert here]

Tutorial Time: [Insert here]

Word Count: [2200]

[Type your 200-250 word introduction here]

Case Study: Competitive Advantage

Organizations control resources including knowledge, processes, capabilities and information. One of the primary roles of resources is that they help the firm in improving organizational efficiency and effectiveness (Lazzarini 2015).  More importantly, resources are critical as they enable the business to form and sustain a competitive advantage in the industry. Through utilizing resources to create greater value for their customers in comparison to competitors, a firm can be able to gain a competitive advantage (Hashai & Buckley 2014). Majority of strategies adopted by organizations are geared towards helping the business to create a sustainable competitive advantage.

A competitive strategy is defined as sustainable if the other players in the markets are not able to duplicate the value that a particular firm has created for its customers.  In essence, competitors have tried in vain to reproduce this advantage in vain and have given up trying (Hashai & Buckley 2014).  Notably, not all the resources in the firm can help it in achieving a competitive advantage. In fact, it is the strategic assets with a competitive value that helps it to gain an advantage over other players in the market.  Moreover, not all the organizational capabilities are deemed as core competencies that will help the firm to gain a competitive advantage (Hashai & Buckley 2014). A firm resources and capabilities need to meet four criteria to help it in achieving a sustainable competitive advantage. They must be valuable, non substitutable, and imperfectly imitable. All of these concepts will be discussed further in this paper.

References

Lazzarini, S 2015, 'Strategizing By The Government: Can Industrial Policy Create Firm-Level Competitive Advantage?', Strategic Management Journal, 36, 1, pp. 97-112, Business Source Complete, EBSCOhost, viewed 1 October 2015.

Hashai, N, & Buckley, P 2014, 'Is Competitive Advantage a Necessary Condition for the Emergence of the Multinational Enterprise?', Global Strategy Journal, 4, 1, pp. 35-48, Business Source Complete, EBSCOhost, viewed 1 October 2015.

[Type your first 300-500 word paragraph inclusive of references in the Harvard style here]

Valuable capabilities can be defined as those that permit a business to make use of opportunities or reduce the effect of the threats that exist within its external environment (Collis 1994). A firm uses valuable capabilities effectively in exploiting the available opportunities thereby creating value for its customers than any of their competitors in the market. A good example is the how iPod and ITunes helped Apple Inch to gain a competitive advantage and also create great value for its customers. The afro mentioned uniquely combined elements of quality, design and price. Apple Inc was the first firm that created a legal digital platform where customers could download music into their devices. Before this, customers could only use illegal means, such a swapping to download music. Apple understood the financial potential that could be gained from the music industry and took advantage of this opportunity. The firm negotiated with majority of the record labels and signed agreements that allowed them to create a central library known as ITunes that could distribute songs on behalf of artists (Lowry, & Burrows 2005). Through this platform, people from all over the world could legally download music and at the same time the artists were making monetary gains. Apple ITunes site was not only easy to navigate, but also provided customers with free downloadable software that they utilized in managing and arranging their digital music library.  

During the economic downturn of 2009, most companies went under and employment opportunities were lost. However, luxurious goods makers like Gucci and Louis Vuitton reported an increase in profits and sales in 2011 despite the economic downturn (Hoskisson & Hoskisson 2013). Economic analysts commented that the luxury goods market was doing well in the midst of a global economic downturn. It was an unexpected phenomenon considering that most people had undertaken cost cutting measures and industries, such as hotels and airlines were adversely affected. However, Gucci and Louis Vuitton used their valuable capabilities to create luxurious goods that still managed to maintain a strong global demand.

References

Collis, DJ 1994, 'Research note: how valuable are organizational capabilities?', Strategic Management Journal, 15, pp. 143-152, Business Source Complete, EBSCOhost, viewed 1 October 2015.

Lowry, T, Grover, R, & Burrows, P 2005, 'Apple May Be Holding Back The Music Biz', Businessweek, 3964, p. 40, Business Source Complete, EBSCOhost, viewed 1 October 2015.

Hoskisson, R. E., & Hoskisson, R. E. 2013, Competing for advantage. Mason, OH, South-Western/Cengage Learning.

[Type your second 300-500 word paragraph inclusive of referencesin the Harvard style here]

Rare capabilities are those that only a few companies in the industry or future competitors possess. In essence, the firm that has these competencies can use them comfortably to dominate the market without fear of current and future players (Baraldi 2008). A firm is able to sustain a competitive advantage over other in the industry if it exploits rare capabilities that vary from any other players in the market.

IKEA is a renowned furniture company in the world that offers a wide selection of quality and functional home furnishings at low prices (Baraldi 2008).   Due to this business strategy, majority of people in the globe can afford to buy their quality products. IKEA has managed to remain competitive despite stiff threats from other players in the market by using innovative and cost effective production methods.  By so doing, they guarantee customers quality products at affordable prices (Lewis 2008).  IKEA constantly uses its rare capabilities to update its products to conform to the new trends and rapidly make them available in all its stores in the world.

 Another rare capability that IKEA uses to maintain a competitive advantage is that its furniture is dissembled and packed in boxes, making transportation easier for customers. Once they get home, the customers can easily assemble the parts with the guidance of the company’s support staff (Lewis 2008). Majority of other firms must transport the bulky furniture to the customers’ homes, which means it will take some time to deliver the products after making a purchase.

Consequently, Apple used its rare capabilities when it introduced the IPod to the market.  In designing the iPod, the firm used the hard-drive technology that was already available in the market, which no other portable music devices exhibited it. Immediately, the firm gained a competitive edge because it fulfilled the desire of customers of carrying numerous songs using a portable device. Other new platforms, such as MP3 systems and personal CD players could not carry a lot of music yet the iPod was so elegantly designed using the existing technology, making it highly desirable to the customers. 

Refrences

Baraldi, E 2008. 'Strategy in Industrial Networks: Experiences From IKEA', California Management Review, 50, 4, pp. 99-126, Business Source Complete, EBSCOhost, viewed 1 October 2015.

Lewis, E. 2008, Great IKEA!: a brand for all the people. London, Marshall Cavendish.

[Type your third 300-500 word paragraph inclusive of references in the Harvard style here]

Imperfectly imitable capabilities imply that other competitors cannot easily imitate them because they are quite costly. A firm is able to create such capabilities because of various reasons, such as unique historical conditions.  As firms evolve through history, they acquire resources, skills and abilities that help them to develop costly to imitate capabilities. Another factor that makes it costly for firms to imitate capabilities is when there is an ambiguous link between its competitive advantage and its capabilities. Thus, it becomes difficult for competitors to understand the capabilities that they should imitate so that they can gain a competitive edge.

Coca Cola is the market leader in the soft drinks market in the world.  The company has achieved this status by using its imperfectly imitable capabilities to sustain a competitive edge for over a century (Crittenden & Pierpont 2015).  Started late in the 19^th century, Coca Cola advertised their products and became a global household name within a short time. Although Pepsi has been competing with Coca Cola for many decades, the latter has still emerged as a global leader. Its stock is still among the most sought in the New York Stock exchange (NYSE) though the company has been in business over the last 120 years (Crittenden & Pierpont 2015).  

Although Pepsi has over the years tried to imitate the Cola recipe, majority of customers intimate that the one from Coca Cola still tastes much better. The superior taste is attributed to the secret recipe that Coca Cola uses in making its cola drinks and they end up tasting better than others in the market. More so, the firm also uses the comprehensive distributor system that it has developed over the years that makes its soft drinks accessible to billions of customers all over the globe (Crittenden & Pierpont 2015). For instance, it is not surprising to find Coca Cola products being sold in a shop in an extremely remote village in Africa. Although Pepsi has undertaken massive expansion over the past decades, it has not been able to imitate these comprehensive accessibility capabilities by its rival.

References

Crittenden, W, Crittenden, V, & Pierpont, A 2015, 'Trade secrets: Managerial guidance for competitive advantage', Business Horizons, ScienceDirect, EBSCOhost, viewed 1 October 2015.   

[Type your optional fourth 300-500 word paragraph inclusive of referencesin the Harvard style here]

Non substitutable capabilities mean that competitors cannot use their resources to gain a competitive edge or give customers a similar value. One of the biggest threats to any business is substitutes that are of similar or superior quality and come at an affordable cost. Wal-Mart is one of the companies in the world that has managed to use this strategy to gain a competitive strategy. The firm is known for its low pricing strategy that has endeared it to most customers in the world (Glandon & Jaremski 2014). By so doing, Wal-Mart has been able to gain a sizable retail market. Other competitors in the market are unable to meet these low prices because Wal-Mart is a large corporation that can sell in products in bulk at discounted prices. More, Wal-Mart also provides its customers with a range of items, making it possible for customers to get most of their items from a single location (Glandon & Jaremski 2014). Majority of customers find the combination of convenience and low prices appealing. Both of these are non substitutable capabilities that have made Wal-Mart to sustain its competitive edge.

Microsoft is another firm that uses its non substitutable capabilities to maintain its competitiveness in the midst of serious threats. Microsoft Office is one of the commonly used applications in the world (Microsoft Corporation 2015).  Despite stiff competition in the market, Microsoft Office that was invented a few decades ago still manages to maintain an advantage over other applications.

References

Glandon, P, & Jaremski, M 2014, 'Sales and Firm Entry: The Case of Wal-Mart', Southern Economic Journal, 81, 1, pp. 168-192, Business Source Complete, EBSCOhost, viewed 1 October 2015.

 Microsoft Corporation' 2015, Microsoft Corporation Marketline Company Profile, pp. 1-41, Business Source Complete, EBSCOhost, viewed 1 October 2015.

 [Type your 200-250 word conclusion here]

From the discussions above, it is clear that a firm has to use resources and capabilities to maintain a competitive edge.  A firm can sustain a competitive strategy by using its resources to create products that are of great value to their customers. By so doing, other players in the market are unable to make similar products and gain an advantage. Resources and capabilities used by firms must satisfy four criteria so that they can gain a sustainable competitive advantage.

First, organizations must have valuable capabilities that will enable them to neutralize and exploit threats within the external environment. Also, only a few businesses have rare capabilities that are not present in other competing firms. Imperfectly imitable resources are costly or impossible to duplicate. Lastly, non substitutable capabilities make it challenging for new firms or competitors to create products that will give them an edge in the market. Various multinational firms, such as Apple, Microsoft, Wal-Mart, IKEA, Gucci and Louis Vuitton have used these four criteria to remain competitive.  For instance, the invention of iTunes by Apple provided a legal platform for customers to download music that is stored in a central location. Additionally, the firm also launched the iPod using the existing technology, enabling customers to carry a large amount of music using a portable device.