The sources of competitive advantage in two industries Essay
The sources of competitive advantage in two industries I.
IntroductionIn modern rapidly developing industries the level of competition is very high. The main problem companies face is unexpectedness of market situation change that results in unforeseeable consequence for many of them. A lot of new opportunities, new companies and new products appear every day and sometimes the appearance of just one new company in the sector can change the situation completely and not for benefit of already existing firms. And this is only one example of what can bring critical alterations to the firm activity in very short terms.
The right reaction of the firm depends on its competitive ability thus every industry the competitive ability is the most important showing of the firm activity. This showing must be learned, worked over and constantly improved and maintained in order to make the company work for benefit. There are common economic strategies that can be followed by every industry; however alteration should be made due to the different situations on different markets (Dess, Gregory G.
, et al.
2007). The alterations depend on the current industry development situation, the issues it faces today and its initial peculiarities (Bennett 1992). The given paper will research the sources of competitive advantage of two industries: banking and manufacturing in order to provide the necessary recommendations which will be drown from the researched material. II.
Banking Industry1. OverviewBanks can reach competitive advantage even in condition made tumultuous by absorptions and acquiring, activity area decreasing, and declining profitableness (Dess, Gregory G., et al. 2007).
According to Grover, sustained competitive advantage (SCA) includes setting a bank for prolonged economic development through establishing the goal to improve clientele service (Grover, Varun and William J. Kettinger. 2008). The task of reaching and maintaining competitive advantage has the significant elements: evolving and choosing scheme, applying alterations and discovery, motivating workers, and setting schemes like infrastructure, estimation and awards.
Sustaining competitive advantage in modern unlooked-for economic environment appears to be not an easy assignment. For any bank to sustain a competitive advantage, it is necessary to work out the advantage that is exceptional, expensive to copy, not replaceable, and non-convertible. The banking industry is in stream, mess and possibly even disorder (Dess, Gregory G., et al.
2007). The apparently everlasting amount of absorptions and attainments, “right measuring,” and falling or even contradictory profitableness make the prospect of some banks rather doubtful (Fred 2006). Thus the questions are if it is likely for a bank not just to endure, but to succeed? The response is an expressive yes however, if a bank realizes the notion of competitive advantage and how to get and maintain it (Grover, Varun and William J. Kettinger.
2008).It is the arrangement of the bank that wants to reach long lasting profitableness despite the inappropriate market conditions (Barney 2007). This arrangement engages some of the customary arrangement connected with trading and goods/service arrangement, however it is furthermore much more penetrating and all-embracing (Dess, Gregory G., et al.
2007). It engages the complete concentration and certain purpose of the bank to possess outstanding customer service and reactivity. It involves distinction, originality and the proficiency and enthusiasm to provide the service that not only satisfies but surpasses the clients’ needs (Hill, Charles., and Gareth Jones 2007).
;2. The four critical componentsAs a competitive advantage is the most important to better presentation, the issue is how to get it and what are the main sources. The four essential components are:· choosing and working out the scheme· permanent novelty/ruthless alteration,· empowerment of people/leadership and· schemes — infrastructure, estimation and award (Hill, Charles., and Gareth Jones 2007)3.
Strategy DevelopmentSpeaking about banking industry and its sources of competitive advantage it is essential and enough to apply to the accepted and widely used theory of Michael Porter who stated that it is impossible to reach sustainable competitive advantage just through functional efficiency. According to him, a competitive advantage is present if the company can provide the same advantages as other companies in the industry but at a more reasonable price (cost advantage), or provide advantages that go beyond those other companies can offer (differentiation advantage). Therefore, a competitive advantage gives the companies opportunities to make better quality for its clients and better earnings for itself (Hill, Charles., and Gareth Jones 2007).
Thus, there are two strategic focuses that can help reach SCA and are essential to be discussed below, the first is low cost leadership (Hill, Charles., and Gareth Jones 2007). a. A low cost leadershipA low cost leadership implies that a bank is concentrated on operation expenses increasing by means of more effective procedures and/or data schemes, expanded administration and workers output, improved teaching and presentation, good conditions or other methods while sustaining satisfying or just somewhat satisfying competitive ability (Hersey et al.
2007). Certainly a low cost strategy does not imply worse quality of service or price decreasing. Banks with too low prices are not successful usually (Hersey et al. 2007).
. It implies competitive ability with a lower cost; however a cost is not reduced too much to counteract the decreased price benefit. The competitive advantage for the clients is normal quality of service for reasonable prices, and for the bank it lies in expanded market share and increased earnings (Hill, Charles., and Gareth Jones 2007).
b. differentiation strategyThe second strategic approach that is reasonable to be applied is differentiation strategy. It is intrinsically at variance with a low cost strategy (Dess, Gregory G., et al.
2007). Offering better characteristics, advantages, outstanding reactivity, better service or other increased sizes generally results in higher expenses (Mcmenamin 1999). A bank must use this scheme only if it is possible for it to define the characteristics/services/sizes which are significant for clients and which the clients will agree to pay much for.Offering outstanding service, presentation and characteristics influence a bank’s profitableness badly if the clients do not agree to pay more or this outstanding service.
This high cost should more than counteract the increased charges if the bank is going to get competitive ability (Dess, Gregory G., et al. 2007). The benefit for a client is better meeting of his requirements, and the benefit for the bank is distinguished services and increased earnings.
Besides competitive ability, a bank should conclude on its competitive boards. The main issue is if the bank intends to work with a great number of clients with great number of requirements, or of the bank intends to aim on limited, more characterized market sectors with exact, uniform requirements (Brigham, Eugene F., and Michael C. Ehrhardt.
2007).The blend of competitive ability and competitive goal results in the creations of several competitive advantage schemes:· reduced cost/ extensive markets,· reduced cost/focused market(s),· differentiation/extensive markets· differentiation/focused market(s).Cost and differentiation strategies are also called positional advantages because they explain the company’s situation in the business in terms of price or differentiation. 4.
Other critical factorsAccording to Dess (2007), even if a bank recognizes and selects a proper scheme, it should still apply and sustain it. As bank characteristics/services will not generally be maintained as exceptional, the only way to sustain competitive advantage is to advance much quicker than other banks (Kay 1996). Therefore, the requirement for ruthless discovery and alteration is very essential (Dess, Gregory G., et al.
2007). Reaching differentiation and better presentation needs very wide and pledged activity from both administration and workers; therefore, the staff motivation is essential. And eventually, no one of this may occur without a proper system to maintain services and to assess and award client-oriented strategy. 5.
Function of marketing in competitive advantage achievementAccording to Robbins (2007), marketing must implement a key function in assisting a bank to accomplish a SCA (Robbins, Stephen P., and Tim Judge 2007). Determining attractive and befitting market sectors and the service/good/presentation measurements, that are significant to these sectors, creating goods and services presentation measures to satisfy and surpass the expectations, providing novelties and alterations are marketing tasks (Robbins, Stephen P., and Tim Judge 2007).
Marketing is usually concentrated on the clients and how to meet their expectations, and it is the main issue of competitive advantage that should be carefully preserved while developing the proper strategy for any company working in manufacturing industry in order for the latter to work for benefit and gain the competitive advantage. III. Manufacturing industry1. OverviewThe presence of correctly worked out and definite strategy is absolutely crucial to provide the growth and achievement of business.
In developed manufacturing businesses correct manufacturing strategy is very essential in achieving competitive advantage. The business situation is far from knowable, therefore restraining out opportunities for examination. Further, decisions in an organisation are seldom based on optimal rationality alone, given the political processes that occur in all organisations. The detailed plan must be created considering all the aspects of business.
Mello (2005) wrote:Strategic planning is one of the most important and vital aspects of a business. Strategic planning is tedious and complex, and usually has long terms affects on organizations. One major constraint of strategic management is that planned projects must have the support of the entire organization or the project is doomed to fail. Strategic plans must be clearly implanted into all roles within the organization so that projects can be afforded the best opportunity for success (Mello 2005).
Every business is in an exclusive and flexible position proposing goods and services with distinct order result standard (Mello 2005). This is natural for such diverse industry as manufacturing industry. Manufacturing strategy connects production and business strategically the analysis shows that the abilities of manufacturing are usually not taking into account when creating or applying strategy. Manufacturing, trading, Research and Development, financial, and Human Resource departments should all build schemes which in coordination include the general scheme for business conducting.
2. Strategy developinga. Several important features of manufacturing strategyDuring the manufacturing strategy development, there are several important features that must be preserved:· it should support business scheme by concentrating on a little number of goals determined by clients’ expectations;· it should recount share of assets inside the manufacturing characteristics so that to reach production purposes;· it will be traced in the model of decision taken by the production function. If the conclusions made by the company are not compatible with the asserted scheme, then the asserted scheme is shown by the adopted scheme.
b. Other critical componentsThe manufacturing strategy should also involve:· determining manufacturing purposes· defining strategic resolution segmentsIn order to create a proper a strategy it is necessary:· to define the markets, present showing and competitors ;· to determine the possibilities and dangers;· to evaluate of present scheme;· to create of a new scheme to satisfy needs. c. The necessary measurementsAccording to Dess (2007), the main target of manufacturing strategy is to develop important activity principles in which the competiveness measurements include price, value, reliability and elasticity (Dess, Gregory G.
, et al. 2007). Schemes require to be assessed for completeness, persistency, the degree to which they were connected and the assistance they provide to competitive advantage achievement. Future expansion in this area can aim at the usage of a resource-founded viewpoint inside manufacturing strategy and on advancement of the usage or method of strategy creation.
The strategy depends on a company’s distinctive focus on the measurement of:· Price· Quality· Output· Durability· Elasticity 3. Flexible Manufacturing SystemsFlexible Manufacturing Systems are automatized universal schemes of gear and data course, organized for the financial output of little batches of complex details (Haberberg & A Rieple 2008). Such schemes include workstations and move schemes in which the command of procedures is presented by a main machine (Aaker 2004). The integration of these characteristics provides the Flexible Manufacturing System with the next strengths:· decreased lead-time and higher output;· reducing of living labour application;· machine application;· positive correlation of output and elasticity.
IV. Summary and conclusionThe given research shows that for every industry it is essential to work out a correct strategy in order to gain competitive advantage. It is very important in order to maintain the firm’s activity in the modern market conditions that undergo rapid changes every day. The presence of correctly worked out and definite strategy is absolutely crucial to provide the growth and achievement of business.
However for every industry the sources of competitive advantage vary depending of its peculiarities. For banking industry which is in stream, mess and possibly even disorder, it is essential to reach sustained completive advantage. Sustained competitive advantage (SCA) includes setting a bank for prolonged economic development through establishing the goal to improve clientele service (Johnson, K Scholes and R. Whittington 2008).
It is essential to create proper strategy according to the abovementioned scheme:The blend of competitive ability and competitive goal results in the creations of several competitive advantage schemes:· reduced cost/ extensive markets,· reduced cost/focused market(s),· differentiation/extensive markets· differentiation/focused market(s).The manufacturing industry is more flexible and diverse; product manufacturing is its core activity, so the correct manufacturing strategy is essential to gain competitive advantage. In developed manufacturing businesses correct manufacturing strategy is very essential in achieving competitive advantage. Every business is in an exclusive and flexible position proposing goods and services with distinct order result standard (Dess, Gregory G.
, et al. 2007). Manufacturing strategy connects production and business strategically the analysis shows that the abilities of manufacturing are usually not taking into account when creating or applying strategy. The main target of manufacturing strategy is to develop important activity principles in which the competiveness measurements include price, value, reliability and elasticity.
The strategy depends on a company’s distinctive focus on the measurement of these four components.So we see that the strategies that should be used for two different industries are completely different. This can be explained by the different industry peculiarities. The banks have the main goal to offer multifarious services with affordable cost.
The focus of the manufacturing companies is to offer high quality product and make the good proportion of the price and value.List of ReferencesAaker, David A. (2004). Strategic Market Management.
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