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Lecture 2 - Managing strategically and competitive advantage

Managing strategically implies formulating and implementing strategies that allow an organization to develop and maintain a competitive advantage. When a company has a competitive advantage it has something that other competitor’s don’t, that differentiates them from competitors or does something that others don’t. Getting and maintaining competitive advantage –is what managing strategically is all about. An organization will either succeed or fail, failure is not the choice of a company, and instead failure usually can be traced to not recognizing the impact of important external factors or to not capitalizing on organizational resources and capabilities.

There are three views important to understanding Competitive Environment

First a company has to tool at the impact of external factors – called I/O Industrial Organization View The second view is called Resource-Based View – empathizes exploiting organizational resources in order to develop and maintain competitive advantage. Another modern approach is called Guerilla View of competitive advantage - it proposes that an organization’s competitive advantage is temporary and can be gained only by peppering the competitive marketplace with rapid radical surprises.

The Industrial Organizational View (I/O)

I/O view focuses on the structural forces within an industry, the competitive environment of a firm and how these influence competitive environment. Most factors about I/o are coming from M. Porter’s Five Forces. According to Porter five forces determine the average profitability of an industry, which in turn influences the profitability of a firm within the industry.

It involved understanding:
• What makes an industry attractive,
• Choosing an attractive industry in which to compete
• Choosing an appropriate competitive position within that industry. (I/O views that competitive advantage relates to the competitive positioning in the industry and underlying industry characteristics determine its potential profitability)

Resource based View

RBV says that a firm’s resources and capabilities are the most important in getting and keeping the competitive advantage. It sees organizations as a collection of different assets and capabilities. There are some key assets that give a firm a competitive advantage, therefore a company will be positioned to succeed in case it has the best and the most appropriate resources for its business.

Resources include; financial, physical, human, tangible and intangible, structural/cultural assets used by an organization to develop, produce and deliver products or services.

To be unique resources must add value, be rare , be hard to imitate and be exploitable To add value means – that resource can be used to exploit external circumstances that are likely to bring revenue or to neutralize the external negative situation that hinders the generation of revenue

Hard to imitate – e,g reputation, employee trust, organizational culture.

Guerilla View

The main premise of the guerilla view is that an organization’s competitive advantage is temporary. This is due to a constant changing environment characterized by market instability, technological changes, and other unexpected developments

It is difficult to develop and maintain permanent competitive advantage. According to guerilla View successful organization must be adept at rapidly and repeatedly disrupting the current situation and radically surprising competitors with strategic actions designed to keep them off balance – in other words acting like guerilla unit.

| |I/O Industrial Organization |RBV |Guerilla View | |Competitive advantage |Positioning in Industry |Possessing unique organizational assets|Temporary...
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