Introduction
The very basic definition of competitive advantage can be found in its description regarding a firm’s position in comparison to another which is considered its competitor. A competitive advantage is said to have occurred when an organization develops or acquires some attributes or a combination of qualities that makes it unique and thus it performs better than its competitors. Such attributes may include but are not limited to its access to natural resources, access to higher quality of skilled human resources, or access to both within its operational niche. Competitive advantage thus becomes an ability gained by a firm to perform better than its competitors within the same industry (Porter 1985). Firms gain competitive advantage through a number of strategies that intentionally manipulate the resources at the firm’s disposal. These resources may be at the firm’s disposal or may be shared within the industry and only available to the firm due to its manipulative power. In that case, only a value creating strategy can evidently put a company on an edge if and only if it manipulates these attributes in isolation without a simultaneous manipulation by the competitors. With the development of standard business operations, only aspects of strategic use of resources, and more so technology, has a sure promise of a competitive boost to a firm. Technology is either included as part of the product or service that exalts a company to this advantage or assists in making it. Since superior results are the ultimate goal of many organizations, competitive advantage made permissible by technology has incessantly become the foundation of most strategic operations. In this paper, the effects of several orientations of an organization on its likelihood of achieving a competitive advantage over others are discussed. Special emphasis will be on organizations’ strategic use of IT/IS in the attainment or enhancement of this advantage. Centrally, it is supposed that contemporary focus on IT as a universal tool for economic progress means that only those companies utilizing the same strategically can gain sustainable competitive advantage over others.
Organizational Factors and Competitive Advantage
Within organizations, several factors act in solitude or in collection to influence production and profitability outcomes. These factors are classified as either internal or external factors (Robson, 1997). These factors, save for their effects on productivity, have enormous effect on a form’s competitive advantage.
Internal factors influencing attainment of competitive advantage
The three predominant issues that concern managers of firms are the quality of products or services to customers, roles and responsibilities of manpower and the flow of value added work. As internal factors of a firm such as distinctive exclusive licenses, patents, strong brands, teamwork, effective leadership, tacit knowledge, technical, marketing and financial capabilities are the strongest capabilities that if effectively manipulated, can maintain a firm’s competitive edge. These factors are maintained to guarantee performance and measured traditionally on the actual performance versus budget scale. Recently, shift has been towards timeliness, cost of providing services and products to customers and the quality of the goods provided. To achieve a competitive advantage through the three parameters of internal organizational competence, allocation and budgeting for resources should be moved from needs for producing individual units and toward cross-group teams. These teams jointly assess resource needs on the basis of flow of work so as to create value to customers. Through such processes, these internal capabilities become more difficult for competitors to imitate or understand. As a source of competitive advantage the capabilities should not be so simple to be imitated or so complex that they cannot be internally controlled.
External organizational factors influencing attainment of competitive advantage
As opposed to internal factor, external factors exist to shape an organization’s manipulation of its resources and are associated with a particular country or region to which the firm is inextricably linked (Porter, 1985). This setting comes with multiple contexts and capabilities that a firm manipulates to gain an edge in competition. This environment provides either facilitative or inhibitive influences that affect the firm’s performance. They form the boundaries of operation, shape how the firm defines itself and its operations, or how it articulates it positive products or how appropriate it wishes to achieve such productive ends. Legislation, technology, economic, political and socio/cultural contexts, relationship with competitors and pertinent institutions as well as the needs of external clients and stakeholders, all contribute to how a firm orients to its industry, market and consumers. By manipulating generic strategies for achievement within such externalities, a firm may gain or falter in its attempted competitive advantage bid.
Organizational Size and Competitive Advantage
Big companies are known to rely on several resources at their disposal to obtain say economies of scale over smaller companies in the same industry, it is apparent that smaller companies may also implement competitive strategies similar to those adopted in larger companies to improve performance. It is safe to assume, however, that smaller companies are more innovative and inventive especially in the introduction of new products and services to the market. Outsourcing is another advantage enjoyed by smaller companies especially in marketing their products overseas.
According to Fiegenbaum and Howard (2006), firm size has no much significance in overall performance or competitive forces in any particular industry. However, generic strategy calls for a low cost production for a given level of quality shared between small and large companies.
Organizational Type and Competitive Advantage
Regarding the type of organization, the generic strategy applicable in gaining competitive advantage is differentiation that calls for developing products or services with unique attributes valued by customers as better or different from the products in competition (Porter, 1995). The value addition that results from the product or service is advantageous in setting a premium price for the same thus giving the firm an edge over its competitors. Depending on the type of the organization, internal strengths include access to high quality of scientific research, skilled and creative team that develops products, strong sales team that communicates successfully perceived strengths of the product and a corporate reputation for innovation and quality (Bharadwaj, Varadarajan & Fahy, 1993). In all these internal capacities, organizations specializing in product manufacturing are placed far advantageously than their service counterparts who may take far too much time to prove their inventive and innovative capacities (Remenyi, 1991). Similarly, service industry, because of limitations in patents and geography are prone to imitation and quick changes in customer tastes that make them more vulnerable to customer loss.
The reason why there is an issue (both business and IS)
According to the focus strategy of Porter, concentration on a narrow segment of production to achieve cost advantages or differentiation is a step towards better services or production. This promotes customer loyalty while discouraging other firms from direct competition. This is the basis of focusing on IS/IT to achieve competitive advantage in contemporary production/ service delivery.
The use of IS/IT in gaining a competitive advantage lies in making it a religion; creating a culture of innovation and emphasis on opportunities (Moe et al, 2007). IT should be used to create a culture change that transforms operations of the firm and establishes it as a market leader. Strategic information systems work better to impact the firm’s business operations and products. Most successful IT/IS ventures are supportive of businesses and are used to mechanize operations so that efficiency, effectiveness and control are attained. They thus become an integral part of the business when they start to influence market share and marketplace profitability. New products, new market, and new method of doing business are introduced into the market so that the competitive stance of the organization is advanced against its competitors.
The Centrality of IS/ IT as a factor in Competitive Advantage of Organizations
According to the focus strategy of Porter, concentration on a narrow segment of production to achieve cost advantages or differentiation is a step towards better services or production. This promotes customer loyalty while discouraging other firms from direct competition. This is the basis of focusing on IS/IT to achieve competitive advantage in contemporary production/ service delivery. Firms pursuing focused strategy boast of lower volumes and thus less bargaining power from their suppliers. The use of IS/IT in gaining a competitive advantage lies in making it a religion; creating a culture of innovation and emphasis on opportunities (Moe et al, 2007). IT should be used to create a culture change that transforms operations of the firm and establishes it as a market leader. General types of IS in use are financial systems, strategic systems and operational systems but can overlap depending on the operations of a firm. Strategic information systems work better to impact the firm’s business operations and products. Most successful IT/IS ventures are supportive of businesses and are used to mechanize operations so that efficiency, effectiveness and control are attained. They provide the basis for better management and dependable information for the smooth running of the businesses and for analysis helpful in planning new directions. They thus become an integral part of the business when they start to influence market share and marketplace profitability. New products, new market, and new method of doing business are introduced into the market so that the competitive stance of the organization is advanced against its competitors.
Sustaining a gained competitive advantages
An organization by using strategic information systems or technologies perennially competes with its rival firms. In such competitions, sustainable competitive advantage becomes the focal point of the firm’s corporate strategy since it allows the firm to maintain and improve its competitive position in the market (Ward & Peppard, 2002). This advantage allows the firm to survive longer and profitably against its competition. However, many forms of competitive advantage may not be indefinitely sustained for as long as is wished by a firm. This is because the promise of economic rents as exhibited by the firm invites competitors to replicate the competitive advantage of the successful firm (Kehoe, Little & Lyons, 1993). Nevertheless, through strategic IS/IT use, such competitive advantage can be sustained.
Sustainable competitive advantage is never a destination but a journey. Through IT/IS, the company must venture into a value-creating process that cannot be duplicated by other firms. According to Porter (1998), cost leadership, differentiation and focus economics are practiced. The use of IS/IT to create cost leadership relies on the firm’s internal ability to manipulate available market information to lower its costs for unit productions. Differentiations from IS conforms to strategies that arise from informational coordination to deliver greater services for the same price as that afforded by competitors. Such positional advantages come with skills in manipulating commonly available IT frameworks for productivity. “Focus economics” may be helpful if by specialization, a firm produces within an exclusive market niche to capture obtain a competitive advantage (Porter, 1998).
Examples of the use of IS/ IT for gaining or enhancing competitive advantages
Several firms have used IS/IT to gain competitive advantages over very stiff industries and niches. The Microsoft’s 7-Part Competitive Strategy elevated it into a market leader in provision of operating, office and internet based systems among other information decoding systems for the third generation computers. The model employed innovation of strategy, innovative corporate growth, venture strategies, new management models, new approaches to information, knowledge and idea management, strategic partnerships, new forms of marketing, organizational innovations and an inspiring culture among other factors in its operations.
Success factors in IT/IS use in attaining a competitive advantage
Although Bill Gates built his firm on technological products, his business mastery contributed much to his success. This success was based on a competitive urge that concentrated the firm’s efforts on a market with huge potential but with few competitors. He got in early and in a big way, strove to become the industry leader, made Microsoft’s products the best, most useful but the cheapest, and established for himself a proprietary position through which he owned whatever he sold and protected his position in the market. Through offers to customers and strategic alliances that they could not refuse and continual innovations and inventions, Microsoft became an undisputable leader in the IT market. The lesson learned in this fete is that all attempts to possess the market eventually lead to possession of its profits. Equally, to become the leader in an industry, one must set the standards of the industry through strategic IS/IT use to create cost leadership, product differentiation or focus that is unmatched.
List of References
Bharadwaj, S, Varadarajan, P, & Fahy, J 1993, Sustainable competitive advantage in service industries: A conceptual model and research propositions. Journal of Marketing, 57: 83-99.
Fiegenbaum, A, & Howard, T 2006, Strategic groups and performance: The U.S. insurance industry, 1970-84. Strategic Management Journal, 11 (3): 197 – 215
Kehoe, D, Little, D, & Lyons, A 1993, Strategic Planning for Information Systems enhancement. Integrated Manufacturing Systems. 4 (2): 29 – 36.
Porter, ME 1985, Competitive Advantage: Creating and Sustaining Superior Performance. Free Press, New York
Remenyi, D 1991, An Introduction to Strategic Planning. NCC Blackwell, London.
Robson, W 1997, Strategic Management and Information Systems: An Integrated Approach. Prentice Hall, New Jersey.
Ward J, & Peppard, J 2002. Strategic Planning for Information Systems. John Wiley & Sons, Inc, New York.