Chapter 2 Sustained Competitive Advantage PDF

 Chapter 2: Human resources, dynamic capabilities, and sustained competitive advantage “© Oxford University Press South Africa Used with permission.  Learning outcomes After reading this chapter, you should be able to: Explain what sustained competitive...

 Chapter 2: Human resources, dynamic capabilities, and sustained competitive advantage “© Oxford University Press South Africa Used with permission.  Learning outcomes After reading this chapter, you should be able to: Explain what sustained competitive advantage is. Discuss exploitation and exploration strategies, including their link to a sustained competitive advantage. Explain the role of human resources in achieving sustained competitive advantage. Distinguish between the various sources of sustained competitive advantage. Discuss the different paradigms covering the contribution of human resources to organisational performance.  Activity Sustained competitive advantage: From the competitors listed around the room, discuss and list the following: Strengths (SWOT Analysis) Customer needs (Top wants and needs you can solve) Overlap: (Find the overlap between strengths you possess as an organisation that provide value or solve customer needs) AXE competitors' strengths and the companies' unique strengths  Sustained competitive advantage A sustained competitive advantage (SCA) is the range of factors that set an organisation apart from its competitors in a way that allows: ○ The maintenance of market share. ○ An increase in profit. Factors that create SCA can be organisation-specific advantages. HR practitioners can unlock employee potential. Effective organisational design can also boost profits. HR shapes the culture and responsiveness of the organisation. To help with strategic management, HR must have that opportunity.  HRM and organisational performance Research has asked how HRM can influence organisational outcomes. Some early researchers believed there were best practices that would drive superior performance in almost all organisations. But contingency theory argues that every organisation operates in a unique environment and there is no best way to manage employees. According to this theory, HRM practices should be aligned with the identity and strategy of the organisation.  The ability-motivation-opportunity framework The term vertical fit is the degree to which an organisation’s strategy aligns with its business strategy. The term horizontal fit refers to extent that the organisation’s HRM practices are aligned with each other. Expectancy theory says humans are only motivated when they believe their efforts will result in valuable rewards. The ability-motivation-opportunity (AMO) framework helps to achieve horizontal fit through HRM bundles. In this framework, ability, motivation and opportunity are combined to achieve high performance, and to avoid deadly combinations.  Competitive advantage and SCA The term competitive advantage refers to value-creating strategies that are not being used by competitors. The term sustained competitive advantage refers to rare sources of CA that will be extremely hard to imitate. SCAs often come from organisations exploiting internal strengths to respond to external opportunities. A SWOT analysis (of strengths, weakness, S W opportunities, and threats) includes an analysis O T of internal strengths, and so can be used to help identify sources of CA and SCA.  The resource-based view of SCA The resource-based view of SCA uses four lenses with which to view resources: ○ Value ○ Rarity ○ Imitability ○ Organisation. Together these make up the VRIO framework. Resources are internal strengths allowing organisations to: ○ Exploit external opportunities ○ Neutralise external threats. The resource-based view highlights how important human resources are to an organisation’s competitiveness.  Organisational strategy SCA can be achieved through organisational strategies, such as exploitation or exploration strategies. The business functions need to be aligned to support these. Tensions may exist between a short-term and long-term perspective.  Organisational resources There are four main groups of organisational resources: ○ Financial capital resources ○ Physical capital resources ○ Human capital resources ○ Organisational capital resources. To contribute to SCA a resource must be valuable, rare, and imperfectly imitable (not able to be copied) and non-substitutable. An organisation must also possess the organisational ability to fully exploit the resource. The term strategic fit refers to an organisation’s alignment to its environment. The term strategic flexibility refers to its ability to adjust to change. Capabilities versus dynamic capabilities An organisation’s An organisation’s dynamic capabilities capabilities are the ways it can are the business use its processes and functions and how managerial skills to they operate. respond to and shape its business environment.  Diversity in the workplace For diversity to be a SCA, HR managers must prioritise: ○ Employees ○ The context in which they thrive ○ Removal of barriers to organisational functioning. Transformation needs to: ○ Be deliberate ○ Be inclusive ○ Give a voice to marginalised groups. Criteria for HRM practices and human capital to contribute to SCA Questions to ask about the resource: Is it valuable? Is it rare? Is it inimitable (unique)? Is it substitutable? The role of HRM and human capital in SCA An organisation’s HRM practices form the system it uses to attract, develop, motivate, and retain employees. They ensure the organisation’s human capital contributes to its objectives. SCA stems from the combination of effective HRM practices and exceptional human capital. Organisations may achieve a SCA by giving special treatment to employees who have core competencies or strategic strengths. The impact can be so exceptional that it results in better products, better service, more innovation, and better problem-solving. Deliberate efforts to create internal dynamic capabilities will contribute to a SCA.  Learning outcomes After reading this chapter, you should be able to: Explain what sustained competitive advantage is. Discuss exploitation and exploration strategies, including their link to a sustained competitive advantage. Explain the role of human resources in achieving sustained competitive advantage. Distinguish between the various sources of sustained competitive advantage. Discuss the different paradigms covering the contribution of human resources to organisational performance.