Strategic Management: Value Creation and Competitive Advantage of Introduction Every market situation is characterized by stiff competition between two or more business organizations. Also, having an advantage over other competitors do not guarantee a constant high performance. Hoskisson et al (2007), therefore, claims that continual analytical survey of market conditions is necessary for survival of a business. The survey enables an organization to have competitive advantage over its rivals. Competitive advantage is a set of strategies and methods applied in a business to not only position the business in the market, but also to make it unique (Hoskisson et al., 2007). The methods and strategies aim at making a business dominate its market space. Competitive advantage management is, therefore, an integral part of a business plan. This paper explores value creation and competitive advantage. In particular, the paper discusses key steps in creating value and importance of competitive advantage. In addition, the paper highlights how a multinational company maintains competitive advantage over its competitor.
Key Steps in Value Creation
According to Bamford amp. West (2009), creating value and competitive advantage in a business calls for, as the first step, an understanding of competitive advantage type an organization wishes to employ in. Based on Michael Porter’s analysis, competitive advantage, as a firm’s strength, is categorized as either differentiation or cost advantage (Bamford amp. West, 2009). Cost advantage occurs when a company delivers similar products like its competitors but at low costs, while differentiation entails delivering high quality products than those of a rivaling business. The second step involves assessing available resources in a business. Available resources determine whether a business applies one type of competitive advantage or both. Third step involves evaluating strengths or abilities of a business (Bamford amp. West, 2009). Strengths of a company are vital in planning for steady progress of an organization. From abilities and resources, a business realizes its distinctive competencies. Identified skills facilitate efficiency, innovativeness, and quality customer-business relation. The final step involves deciding on when and how to apply formulated strategies.
Competitive Advantage in a Multinational Company
Wal-Mart is an example of a multinational company that has successfully applied the concept of value creation and competitive advantage to win its competitors. Wal-Mart Stores, Inc. runs numerous chains of warehouse stores and large discount retail shops worldwide. According to Fishman (2006), the company is considered as among largest grocery retailers in United States. The company has two close competitors, which are Kmart and Target. Wal-Mart has, nevertheless, maintained a steady growth because of diversification of its products and competent leadership it has. Several strategies have, thus, been implemented to sustain its high market position. Wal-Mart, for instance, has initiated online business where specific items are offered and ordered in the company’s website. Through Wal-Mart To Go initiative and video-streaming services, customers easily acquire domestic products. Improving quality of products by eliminating trans-fat and reducing sugar and salt is a move that drastically increased demand for Wal-Mart’s products in January 2011 (Stolberg, 2011). Other strategies include strong advertisement of new products and continual opening of divisions and branches.
Importance of Competitive Advantage
As had been mentioned, competitive advantage and business plans are two inseparable items. Success of a business is pegged on how unique its products are. According to Bamford amp. West (2009), there are four importance of competitive advantage. Competitive advantage promotes services and/or products of a business. Through proper management of competitive advantages, effective market strategies, which are instrumental to a business, are implemented. As an element of competitive advantage, continual assessments, which are essential to a business, ensure that a business maintains a high edge over its competitors (Hoskisson et al., 2007). Quality evaluations enable businesspersons to determine market value of their products and overall market image of their organizations. Therefore, as a third significance, competitive advantage enables business to enhance or improve their market images. As the fourth merit, competitive advantage eliminates cost leadership, as a way of creating value. Being a focal part of a business plan, competitive advantage enables businesses to create unique selling propositions that are not based on cost leadership. A practical example is the market position of Wal-Mart and Target and Kmart. Through the four significances of competitive advantage, Wal-Mart has outdone the latter two companies (Stolberg, 2011).
Competitive Advantage in the Wounded Warrior Project and my Organization
The Wounded Warrior Project (WWP) is an example of an organization that is famous for its continual effort in rehabilitating injured individuals. WWP is renowned for its mission to not only honor wounded warriors, but to also empower war victims. Specifically, WWP raises awareness and enlist public’s aids which are meant for assisting severely injured warriors of United States Armed forces. WWP also campaign for programs that indirectly meet needs of wounded victims. The organization has created value by raising awareness and assisting wounded warriors rehabilitate and get back to civilian life (WWP, 2010). The mission of WWP has made citizens of United States to have positive attitude towards being employed in the United States Armed forces. The Wounded Warrior Project has created competitive advantage by creating partnerships with organizations who are interested in assisting war victims. Well-known partnerships, for instance, include GMAC Bank, now Ally Bank. Veterans of Foreign Wars and Southwest Airlines among others.
WWP, which is a nonprofit organization, is similar to my organization. Similarity is evident in the fact that my organization participates in rehabilitation of marine servicepersons. My organization focuses on maintaining readiness of marines in performing their daily tasks and their family members in providing moral support. The objective is achieved by providing programs aimed at preventing stress-related injuries. In addition, implementing programs that maintain and improve morale of our marines and their family members is an objective of our organization. Moreover, we seek sponsorship from other organizations to facilitate our mission. Nonetheless, difference between WWP and our organization is that the former emphasizes on already wounded individuals, whereas my organization serves all marines, wounded or not. According to Barney (2007), a competitive advantage is either temporary or sustained. Competitive advantages of WWP will, thus, be only temporary because few service members are injured in war. Consequently, rehabilitation service meant for injured warriors will fade off.
In sum, value creation involves making products or services of a business outstanding. Value creation is a sure way of obtaining a competitive advantage. Outdoing all potential rivals in a market is a process which begins with identifying available resources and possible strengths. Proper integration of available resources and capabilities in a business results to either cost advantage or differentiation or both cost advantage and differentiation. Competitive advantage enables a business to promote its service, improve its market image, and adopt effective ways of maintaining high market position. Also, competitive advantage eliminates cost leadership.
Barney, J. A. (2007). Gaining and sustaining competitive advantage. (3rd ed.). New Jersey: Pearson PrenticeHall.
Bamford, C. E., amp. West, G. P. (2009). Strategic Management: Value Creation, Sustainability, and Performance. South-Western College Publication.
Hoskisson, R. E., Hitt, M. A., Ireland, D., amp. Harrison, J. S. (2007). Competing for Advantage. 2nd Edition. South-Western College Publication.
Stolberg, S. G. (2011). Wal-Mart Shifts Strategy to Promote Healthy Foods. The New York Times. Accessed October 22, 2011 from http://www.nytimes.com/2011/01/20/business/20walmart.html.
Fishman, C. (2006). The Wal-Mart Effect: How the Worlds Most Powerful Company Really Works–and HowIts Transforming the American Economy. Penguin (Non-Classics).
Wounded Warrior Project (WWP). (2010). Accessed October 22, 2011 from www.woundedwarriorproject.org.