Donna O.

OConnor Carrietta Brown Pauletta Welsh McDonald

GROUP 1

QUESTION
Competitive

advantage based on heavy investment in human assets is more sustainable than investments in other types of assets. Discuss.

SUSTAINABLE COMPETITIVE ADVANTAGE

Surfaced in 1984 by George S. Day

different types of strategies that may help an organization to sustain the competitive advantage.

Actual term sustainable competitive advantage emerged 1985 - Michael Porter

the basic strategies firms can have in order to achieve sustainable competitive advantage. 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 (Barney, p. 102).

Defined in1991 Jay Barney

WHAT IS SUSTAINABLE COMPETITIVE ADVANTAGE?

A long-term competitive advantage that is not easily duplicable or surpassable by the competitors. BusinessDictionary.com (2011)
A

protracted or extended benefit or gain Implementing some inimitable and matchless value creating strategy No current or potential competitors are implementing or able to copy the benefits of this strategy.

ACHIEVING SUSTAINABLE COMPETITIVE ADVANTAGE

An organization is a cohesive organism that learns to adopt or find better ways of doing things in response to its environment. In order to maintain or optimize its situation in its environment, the organization must focus on various types of assets. J. Child (1972) Where should it focus its attention?

Its financial situations? Its Technology? Or its human resources?

ACHIEVING SUSTAINABLE COMPETITIVE ADVANTAGE

Coff 1994 argues that human assets are a key source of sustainable advantage because of causal ambiguity and systematic information making them inimitable. Guest 1990 says that if management trust their workers and give them challenging assignments, workers in return will respond with high motivation, high commitment and high performance.

ACHIEVING SUSTAINABLE COMPETITIVE ADVANTAGE

Gratton 1997 identified six factors for success:

the

commitment of top management; the motivation and aspirations of recruits; the core capabilities of the management team; the teams aspiration; its ability to build and maintain alliances; and the integration of the business into a global network.

ACHIEVING SUSTAINABLE COMPETITIVE ADVANTAGE

Innovation

Productivity

Outstanding Service

Human Resource

Special Skills

Unsual Quality

ACHIEVING SUSTAINABLE COMPETITIVE ADVANTAGE

Sources of competitive advantage have shifted from financial resources to technology resources and now to human capital. Success does not depend primarily on the size of the budget or the products supporting technologies. Success depends on employees attitudes, competencies and skills; their ability to generate commitment and trust, communicate aspirations and work in complex relationships.

ACHIEVING SUSTAINABLE COMPETITIVE ADVANTAGE

If a resource is to meet the criteria to be a source of sustained competitive advantage, the resource must add value to the organization. The resource must not only be rare, but it must also be inimitable (unique, matchless, incomparable) and non-substitutable. Human resource has that quality that makes it a source of sustainable competitive advantage.

WHY HUMAN RESOURCES?

Achieving competitive success through people involves fundamentally altering how we think about the workforce and the employment relationship. It means achieving success by working with people, not by replacing them or limiting the scope of their activities. It entails seeing the workforce as a source of strategic advantage, not just as a cost to be minimized or avoided. Firms that take this different perspective are often able to successfully outmaneuver and outperform their rivals. Jeffrey Pfeffer

WHY HUMAN RESOURCES

What successful firms tend to have in common is that for their sustained advantage, they rely not on technology, patents, or strategic position, but on how they manage their workforce.

THE IMPORTANCE OF THE WORKFORCE

As other sources of competitive success have become less important, what remains as a crucial, differentiating factor is the organization, its employees, and how they work. Consider, for instance, the example of Nordstrom.

THE IMPORTANCE OF THE WORKFORCE

The example of Nordstrom,

the department store chain, has enjoyed substantial success both in customer service and in sales and profitability growth over the years. Nordstrom compensates its employees in part with commissions. many of its competitors, after finally acknowledging Nordstroms success, and the fact that it was attributable to the behaviour of its employees, instituted commission systems. By itself, changing the compensation system did not fully capture what Nordstrom had done, nor did it provide many benefits to the competition. Indeed, in some cases, changing the compensation system produced employee grievances and attempts to unionize when the new system was viewed as unfair or arbitrary.

THE IMPORTANCE OF THE WORKFORCE

Most managers today understand the strategic implications of the information-based, knowledge-driven, service-intensive economy. The new game requires: speed, flexibility and continuous selfrenewal. Skilled and motivated people are central to the operations of any company that wishes to flourish in the new age. HOWEVER, a decade of organizational delayering, destaffing, restructuring and reengineering has produced employees who are

more exhausted than empowered, more cynical than self-renewing. in many companies only marginal managerial attention is focused on the problems of employee capability and motivation.

Somewhere between theory and practice, precious human capital is being misused, wasted or lost.

THE IMPORTANCE OF THE WORKFORCE

At the heart of the problem is a failure to recognize that although the past three decades have brought dramatic changes in both external strategic imperatives and internal strategic resources, many companies continue to have outmoded strategic perspectives.

THE MODELS COMPETITIVE STRATEGY

Many of todays leaders were trained in this model

sophisticated strategic-planning systems were supposed to help senior managers decide which businesses to grow and which to harvest. all the planning and investment were unable to stop the competition from imitating or leapfrogging their carefully developed product-market positions. In the late 1980s, the search for more dynamic, adaptive and sustainable advantage led many to supplement their analysis of external competition with an internal-competency assessment. They recognized that development of resources and capabilities would be more difficult to imitate: The corecompetency

THE MODELS COMPETITIVE STRATEGY

focused attention on the importance of knowledge creation and building learning processes for competitive advantage. LIMITATIONS Companies recognized that their people were not equal to the new knowledge-intensive tasks. competency-based strategies are dependent on people: Scarce knowledge and expertise drive new-product development, and personal relationships with key clients are at the core of flexible market responsiveness. CONCLUSION people are the key strategic resource, and strategy must be built on a human-resource foundation.

THE MODELS RESOURCE-BASED MODEL

Presently being touted as an alternative theory of strategy to that developed by Porter 1985. Instead of focusing on positioning in the product market, firms achieve sustainable competitive advantage by developing resources, which add unique or rare value, which cant easily be copied by others. Thus the firm with superior access to physical resources, which others cannot buy, holds a superior advantage.

For example, a manufacturing firm, which invents a superior process technology, holds an advantage over its rivals.

THE MODELS RESOURCE-BASED MODEL

What are the firm resources?

Firm resources include all assets, capabilities, organizational processes, firm attributes, information, knowledge, etc. controlled by a firm that enable the firm to conceive of and implement strategies that improve its efficiency (doing things right) and effectiveness (doing the right things). Firm resources are strengths that firms can use to conceive of and implement their strategies. Firm resources can be conveniently classified into three categories:

physical capital resources, human capital resources and organizational capital resources.

Physical capital resources include the physical technology used in a firm, a firms plant and equipment, its geographic location, and access to raw materials. Human capital resources include the training, experience, judgment, intelligence, relationships and insight of individual managers and workers in a firm. The organizational capital resources include a firms formal reporting structure, its formal and informal planning, controlling, and coordinating systems, as well as relations among groups within a firm and between a firm and those in its environment (Barney 1991: 101).

THE MODELS RESOURCE-BASED MODEL

meet the criteria for being a source of sustainable competitive advantage.

Human

resources add value to the firm, are rare and cannot be imitated they are characterized by unique historical conditions, causal ambiguity and social complexity,
not

all firms can successfully develop human resources as a sustain competitive advantage through imitating the HR practices of firms that have successfully developed human resources.

PFEIFFER SIXTEEN PRACTICES OF COMPETITIVE ADVANTAGE THROUGH PEOPLE

Employment security Incentive pay Participation and empowerment Symbolic egalitarianism Long-term perspective Selectivity in recruiting Employee ownership Teams and job redesign Wage compression Measurement of practices Cross-utilization & cross-training High wage Information sharing Training and skill development Promotion from within Overarching philosophy

IN CONCLUSION

Sustainable competitive advantage can best be achieved by seeking improvement in the management of people,
through better utilization of human resources the resource-based view of the firm provides a framework for examining the role of human resources in competitive success and forces us to think more clearly about the quality of the workforce skills at various levels and the quality of the motivation climate created by strategic human resource management (Boxall 1996).

BIBLIOGRAPHY

Barney, J. 1991,Firm resources and sustained competitive advantage Journal of Management, Vol. 17, No 1 Boxall, P. 1996, The strategic Human Resource Management debate and the resource-based view of the firm Human Resource Management Journal Child, J. 1972 Organisation structure, environment and performance: the role of strategic choice, Sociology. Coff, R.W., 1994,Human Assets and organization control: implication of the resource- based view John M. Olin School of Business Washington University. Day, G. S. (1984). Strategic Market Planning: The Pursuit of Competitive Advantage. St. Paul, MN, USA: West Publishing Company. MITSloan Management Review, Winter 2002, Volume 43, No. 2 Porter, M. E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New York: The Free Press.