In today’s fast-paced economy competition is an issue of services and products. Much attention has been directed to a better service and the best product and how this can be achieved through utilising the human resources. This research paper identifies the competitive advantage concepts and models, competitive strategies and the main human resource practices that have a significant impact on the employee’s performance.Understanding sources of competitive advantage has become a major area of research in the field of strategic management. Therefore this research paper also develops an analytical framework for strategic management in order to initiate/formulate and implements the strategic plans successfully. Three questions regarding identifying,defending and achieving competitive advantage through the employees have been raised and answered. Finally a summary of practical criteria of best practice for competitive advantage is presented and a general discussion and recommendations have been drawn. Organizations are increasingly looking at human resources as a unique asset that can provide sustained competitive advantage. The changes in the business environment with increasing globalization, changing demographics of the workforce, increased focus on profitability through growth, technological changes, intellectual capital and the never ending changes that organizations are undergoing have led to increased importance of managing human resources . A human resource (HR) department that is highly administrative and lacks strategic integration fails to provide the competitive advantage needed for survival, thus losing its relevance. Huselid and Becker (1997) found that there were noticeable financial returns for organizations whose human resource management (HRM) systems have achieved operational excellence and are aligned with strategic business goals. According to Ulrich(1998), a major role of HR personnel is to become a strategic business partner. Youndt and Scott (1996) find that firms employing HR practices according to the stated strategy are regarded as having better perceptual performance. The firm is regarded as a cohesive organism, which learns to adopt or find better ways of doing things essentially in response to its environment (Child 1997: 67). The question then is what really the firm should do to maintain or to optimise its situation in its environment? Should it focus on its financial situation, it’s technology, or it’s human resources?. To answer this question we should at first see what other researchers have concluded. Barney 1991 suggests that, in order for a resource to qualify as a source of sustained competitive advantage, the resource must add value to the firm, it must be rare, it must be inimitable and it must be non-substitutable. Wright, et al 1994 have shown that human resources meet Barney’s criteria for being a source of 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. 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 team’s aspiration; its ability to build and maintain alliances; and the integration of the business into a global network. What does that mean to us?. Its means that sources of competitive advantage have shifted from financial resources to technology resources and now to human capital. In other words,success does not depend primarily on the size of the budget or the products supporting technologies. It really depends on employee’s attitudes, competencies and skills; their ability to generate commitment and trust, communicate...
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