Today’s changes in marketing and business trends have put pressure on most firms to increase their competitive advantage by developing and building focus on core competencies. According to Hamel and Prahald (1994), companies with sustainable advantages make tremendous gains since they have articulated strategic intent, competencies, and resources that are non-substitutable and unique. This has been found to be possible largely due to the intensive competition and increasing uncertainty. As a result, other market competitors end up lacking similar competencies leading to a favorable business environment (Mohanty, 2011).
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It is imperative to mention that this paper will examine business capabilities or core competencies and Bowman’s competitive strategies such as low price and hybrid differentiation. These have been aptly applied by major multinationals. Case examples include Unilever, Dyson, and Toyota. In order to attain peak production and yet remain competitive and profitable, such multinational have employed innovative capacity, strategic flexibility, organizational learning, and effective technology, among other core competencies. These capabilities can be generic within a firm. They can also be broadly applied within several departments in organizations.
In order to build core competencies, it is vital for business organizations to go through a process of identifying them (Hamel & Prahald, 1994). This may be achieved through forging strategic alliances, ensuring that business units are infused with resources, and investing in technologies that are needed. Competitive advantage, capability, and competence vary across different organizations.
Hence, there are quite a number of operating areas in business organizations that are covered by the aforementioned elements. It is also pertinent to note that both Internal and external factors are vital in moving organizations towards gaining a sustainable competitive advantage against other market rivals. Nonetheless, the ability to achieve a competitive advantage, as explored in the essay, largely depends on internal organizational factors and well-connected core competencies and capabilities. Additionally, it is also necessary for management in organizations to harmonize and put into use available resources for optimum productivity (Yusuf, 2011).
Undoubtedly, competencies can either be general or specific (Fukushima & Jeffrey, 2011). The latter type is related to functional or cultural issues in firms, while the former mainly deals with managerial roles or leadership in business organizations. On the same note, the consistent provision of superior value and high-quality products to customers is determined by the firm’s ability to establish strategic business decisions as well as strategic capabilities.
By employing Bowman’s strategy, successful organizations have maintained customer satisfaction, achieved overall strategic goals, and increased their production processes. Additionally, their capabilities have been witnessed in the manner in which they have managed to combine organizational knowledge, integrated technology, and coordinated production skills (Wang, Lin & Chu, 2011). It is vital to observe that strategic capabilities should transcend both operations, which are geographically dispersed, and areas of traditional functions through the creation of supportive infrastructure via investments (Wang, Lin & Chu, 2011).
Furthermore, production capability is built by investing in people’s skills. The latter is fundamental in transforming processes of production into a competitive weapon. This essay offers a succinct exploration of capabilities, competencies, and competitive advantage that can be exercised in business organizations. In order to support arguments in the paper, three organizational case studies, namely Unilever, Dyson, and Toyota, have been incorporated in the essay.
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Core competencies as vital elements of strategic capabilities
According to Hamel and Prahald (1994), core competencies are vital elements of strategic capabilities since corporations such as Dyson use them to meet the needs of customers on services and products being offered. Dyson is also able to exploit emerging markets and also outsource new ones. Competence can be defined as a process whereby individuals or organizations coordinate and mobilize resources.
Capabilities that businesses need as part of gaining a competitive advantage over other competitors are referred to as core competencies (Chin, 2011). Core competencies of a corporation can be built. This is achievable through the building and harnessing strategic alliances, ensuring that business units are well supplied with the m8uch needed resources, innovations as well as competences. Due to globalization, the marketplace is going through intense competition.
Many organizations are striving to fit into environmental conditions that are changing at a fast pace. In order to fit into the dynamic business environment, organizations such as Dyson are swiftly changing their structures. Moreover, understanding the concept of core competencies as vital elements of strategic capabilities may not be an easy task for a company manager, especially at the implementation level. Therefore, it is important to adopt the Resource-Based View (RBV) perspective and contingency theory that organizations such as Unilever, Dyson, and Toyota are already using.
Dyson uses contingency theory that relates organizational performance with the environment. Hence, its strategic capabilities based on this theory involve using appropriate objectives in an effective way to achieve success in a business environment competitive environment (Mohanty, 2011). Unlike contingency theory, RBV focuses on strategic resources as vital elements and the main source of an organization’s competitive advantage (Chin, 2011).
However, Porter’s analyses, alongside other schools of thought that relate core competencies with environmental variables, tend to differ with Contingency theory. Even though organizational resources may be scarce and specific, it may still be possible to sustain a competitive advantage over others depending on how resources available and scarce resources are being utilized in the course of the production. In other words, the resources can be strategically used to satisfy consumer needs and to optimize the process of production.
Competence requires that strategic capabilities be controlled by an organization (Hamel & Prahald, 1994). There is a need for corporations to cultivate core competency. For instance, Dyson identifies needed investments, staff, and capital for next-generation competencies alongside the corporation’s core competencies. As such, resources are mobilized in order to improve, sustain and support organizational performance.
Companies such as Dyson and Unilever efficiently use the concept of RBV per unit of applied value to obtain the optimum amount of benefit. These companies ensure that their streams of technologies are integrated, diverse production skills are coordinated, and collective learning is practiced within the company (Yusuf, 2011). For instance, Dyson ensures that it produces better products through integrating modern technology. Through this, it streamlines cost and enhances consumer’s perceived value. Toyota’s products are competitively unique (Fukushima & Jeffrey, 2011). Over the years, its improved performance has been conceptually linked to its manufacturing skills. In addition, its competitiveness has been linked to its strategic capabilities in production, and this has given the company a competitive advantage over other companies (Mohanty, 2011).
Why core competencies as vital elements of strategic capabilities may be untrue
It is important to underscore the fact that not all core competencies give competitive advantages even though they have been regarded as important sources of competitive advantage (Chin, 2011). Some core competencies are not vital elements of strategic capabilities. Strategic capabilities through core competencies are important only where a company can use its strength in competence to surpass other competing companies over a single line of products and not a wide range of products. For instance, Dyson cannot compete with Toyota in gaining a competitive edge since their products are different. This indicates that core competence is not an attribute but a factor that is variable (Chin, 2011).
Some of the generic core competencies vital for strategic capabilities found within an organization include taking risks and challenges, visionary and creative leadership, customer management, networking, valuing others, trustworthiness, team building, proper facilitation, zeal for learning, being flexible, and able to manage change, and will to succeed. Unilever, Dyson, and Toyota have continued to sustain a high standard of service, a passion for succeeding, and demonstrating the willingness to face up to significant challenges (Spralls, Hunt & Wilcox, 2011).
To recap it all, recent research studies have indicated that a firm’s competitive advantage and performance depends on its strategic capabilities. According to competitive advantage theory, when resources are valuable, non-substitutable, inimitable, and rare, companies gain a competitive advantage. Strategic capabilities in the human resource are vital in linking workers, management, and consumers to an organization (Baker, 2011). As the definition of core competency states, it is imperative to understand that it requires organizing human resource capabilities, organizational culture and support, and continuous training (Wang, Lin & Chu, 2011).
For instance, Dyson uses its support team to give expert help to consumers using its products. Moreover, it provides guidelines, service information to workers and consumers about products. Competence can be seen at various levels as functions of intangible organizational learning versus tangible technological competencies. Needless to say, core competencies are integral in the successful running of organizations. In any case, it is apparently what separates sustained profitability and continual loss.
From capabilities to competencies to competitive advantage
A company that is delivering its products or services at a lower cost compared to its competitors is said to be enjoying a competitive advantage. This kind of advantage is referred to as cost advantage (Spralls, Hunt & Wilcox, 2011). In the same manner, a company can organize its internal sources and give products with benefits that competing companies don’t. In this case, the company will be enjoying a differentiation advantage (Baker, 2011). Capabilities are important for giving useful information and for comprehensive planning. Competitive production in a firm is influenced by strategically organizing capabilities (Yusuf, 2011).
This is vital for a company that intends to gain a competitive advantage over others. For instance, Dyson uses planning to evaluate information regarding how to meet customers’ needs, what to give as offerings as well as competitors’ offerings. For example, after careful planning, Dyson has resolved to give up to $120 to its customers who buy upright vacuums (Wang, Lin & Chu, 2011). It has also made its products less cheap and more affordable.
Gaining competitive advantage requires identifying strategic capabilities that are appropriate, comprehensive planning, and allocation of resources (Fukushima & Jeffrey, 2011). According to the competitive advantage theory, the high market price of products should be pegged on the high-quality of the products. Being able to sell these high-quality products at a low cost and still maintain a competitive advantage requires that companies restructure their production capabilities in such a way that productions are done at the low cost possible.
Furthermore, gaining a competitive advantage is easy when resources are limited, valuable, and scarce. In the same manner, sustaining competitive advantage is easier when competencies are hard to deliver, substitute, and duplicate (Yuksel, 2011). Toyota Company’s profile showcases an experienced team of executives with the management officers, the president, and a chairman. Besides, it has high-skilled personnel and human resource.
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It boasts of being able to access natural resources and inexpensive power to run the equipment. The profound impact of Toyota over the years in generating competitive advantage has been brought about by good business strategy and proper understanding of the firm’s resources (Yuksel, 2011). In the case of Unilever, rival competitors have found it cumbersome to imitate its customer service, durability, firm reputation, brand image, reliability, innovativeness, and technology, and product quality.
This can be attributed to its differentiation strategy. This has helped it gain a competitive advantage over other competing companies since it has attracted customer loyalty to its brand through its marketing techniques, quality advertising, and offerings (Fukushima & Jeffrey, 2011). It is important to note that competence and differential strategy secure companies’ market leadership through competitive advantage. Other important aspects that give companies a competitive advantage include organizational resources, human resources, innovation, and technology.
One common feature found in Unilever, Dyson, and Toyota companies is the use of innovation and technology to achieve competitive advantage (Yuksel, 2011). The commercial aspect of innovation is seen in the way these companies create new products that are of non-existent value. They achieve this through the commercialized process of research and development. They are able to dominate the marketplace due to shared value (Baker, 2011).
They create new products in the company and in the market under product innovation. For instance, Dyson has created products such as Dyson air multiplier and Dyson City. Toyota has made new products such as the Toyota SUV, new variations of Toyota Hilux pickups, and Innova minivans. Additionally, these companies have devised strategies that have enabled them to create new products at a relatively low cost (Spralls, Hunt & Wilcox, 2011). Due to increased competition in the marketplace, these companies strive to improve their capabilities while continually upgrading their core competencies.
Furthermore, capabilities in terms of human resources are important if a company wants to gain a competitive advantage. The workforce in an organization forms human resources (Yuksel, 2011). Most companies, including Toyota and Unilever that succeed in gaining competitive advantage in the marketplace achieve this through adding value to human resources in such a way that other companies cannot copy (Chin, 2011).
Creation of value can be done through economies of scale, technology, organizing natural resources and finances. In my opinion, these methods are traditional and therefore easy to imitate. To sustain competitive advantage, it is important to use HRM strategic approach. This involves profit sharing, job descriptions, employee participation, employment security, appraisals, training systems, and internal career opportunities.
Bowman’s strategic clock in Dyson, Toyota, and Unilever contexts
Low price/ Low added value
According to Bowman’s competitive strategy, low price is important as it enables companies such as Unilever, Dyson, and Toyota to gain a type of competitive advantage called cost advantage. On the other hand, the lower the price, the lower the customer’s perceived value (Baker, 2011). However, this is specific in some products and not in others. For instance, Dyson can lower the prices of some of its commodities, such as a fan but vacuums. In the same manner, Toyota may lower prices on pickups but not on SUVs.
Dyson gains a competitive edge by lowering the prices of some of their products even though the effect is that it may cause low margins and price wars between them and the competitors (Spralls, Hunt & Wilcox, 2011). Even though it would create a cost advantage and make it to be a cost leader, it must lower its production costs, control overheads, and organize its resources (Baker, 2011). Generally, lowering commodity prices lowers margins. On the other hand, Unilever and Toyota companies have maintained standard pricing for their products. They have ensured that their competitors cannot imitate them as part of the strategy of maintaining market leadership.
Dyson uses a hybrid strategy since it is important for businesses seeking to achieve and sustain competitive advantage. However, without proper planning, it may face a high risk of turnover and low margins. In these challenging economic times, Unilever depends on price-sensitive buyers who turn to their products (Baker, 2011). Applying a hybrid strategy improves the gains of these companies. For instance, Toyota applies to price and quality even amid pressure to make gains. Unilever combines low cost and differentiation in design. These organizations achieve a competitive edge through shrewd organizational management.
Differentiation and focused differentiation
Dyson seeks a competitive advantage and makes gains through differentiation in a broad range of the market. This strategy involves charging a premium for products. Due to additional production costs, Unilever and Toyota cover that cost by charging a premium price. In cases where there is no premium price, users perceive added value. With premium, products reflect a higher cost. Toyota charges a premium for added value to its products, thereby making financial gains.
In this case, Dyson creates products that are unique to a particular target market segment compared to their competitors. Toyota and Unilever create new products each day to meet different targets in the market (Spralls, Hunt & Wilcox, 2011). Toyota is making Innova minivans and SUVs to target a different set of customers who don’t prefer pickups. This helps it expand its market and enhance its gains.
Increased price standard value and low value
Dyson increases the price of its products depending on their uniqueness. For instance, Toyota charges a high price for SUV’s while Dyson for vacuum cleaners. These companies achieve a substantial competitive advantage from the high price. Standard value products attract higher price margins than low-value products.
Low value/standard price
Low-standard price results in companies losing their market shares. Even though the low price is important in gaining a competitive advantage, low-standard prices lock the door for market sharing (Baker, 2011). Dyson ensures it maintains an optimum price standard to stay in the market.
In summing up, it is vital to reiterate that core competencies such as customer responsiveness, influence, and communication are generic and prudent in managing organizations to a successful end. For instance, leadership competency in non-managerial and managerial positions in most companies is seen as integral in the sense that leaders direct or delegate duties to the entire workforce whether they report to them or not, largely due to existing group dynamics of teamwork. Additionally, depending on the expertise of workers, they can move in and out of one project or group to another and administratively report to other managers in an organization.
In a nutshell, depending on leadership levels, core competencies often change and evolve. Looking at this competency in a focused and coherent fashion may be cumbersome, but where sustainability is an issue, it keeps companies alive. Most importantly, this has yielded significant success in Toyota, giving it a competitive edge. In this company, critical catalysts giving it a competitive edge include vibrant and dynamic leadership as well as well enhanced core competencies.
The latter primarily involves companies hiring staff from within. After the hiring process, appropriate skills should be offered to them through processes of socialization and selection or through extensive training opportunities. These companies conceptualize appraisals depending on the rating of workers and performance. Additionally, they guarantee job security to their workforce through explicit or implicit policies. In addition, the working system has been structured and organized in terms of individuals, workgroups, departments, and branches, which have been allocated different core functions and varied responsibilities.
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