Businesses Are Changing Rapidly in essay
- Length: 10 pages
- Sources: 12
- Subject: Business
- Type: essay
- Paper: #65377790
Excerpt from essay :
There is an advantage in this strategic view to become the biggest and best, and to do it quickly in order to secure one's position in the market place.
The greatest strength of the competitive positioning strategy is the ability to describe market conditions in a perfect market. However, its reliance of a single factor for its analysis, the size of the company in comparison to other companies in the market is a key weakness. The following will summarize the comparison and contrasts between the resource-based view and the competitive positioning view of strategic planning.
Similarities of the Two Views
The resource-based view and the competitive positions view have several similarities. Many of these similarities stem from the fact that they both depend on factors that are external to the company. For instance, the activities of consumers and overall conditions in the economy can affect their market position. A major glut in a different sector of the economy may affect their competitive advantage, as consumers adjust their spending habits to accommodate the necessary changes.
One example of resource shifting by consumers occurs when fuel or food prices rise. Significant rises in basic commodities may mean that consumers cut back on entertainment spending. These affects can be localized or they can be wide spread. Changes in consumer spending due to factors in a different portion of the economy are beyond the control of the firm, or the categorical group.
Both the resource-based view and the competitive positions view are affected by governmental actions. These actions may affect the firm either directly or indirectly. One example of a direct action would be environmental clean up legislation that shifts the burden of preventing or cleaning up environmental damage to the firm. Another example would be raising taxes. Indirect governmental affects would include actions that affect a firm's suppliers. If supplies are affected by higher taxes or specific legislation they may need to raise their prices, creating rising costs for the firm. These types of changes would affect the company regardless of whether one used the resource-based or competitive positioning view of the company.
Competitor actions represents another factor that impacts both the resource-based view and the competitive positions view in a similar faction. Regardless of the analysis technique, the company must take actions to respond to the these external factors. Several internal factors also affect the resource-based view and the competitive positioning view in a similar fashion. For instance, innovation, the possession of trade secrets, skills and knowledge have an impact on the competitive advantage of the company. Neither the resource-based view nor the competitive positioning view have a mechanism to adequately account for these factors.
Differences in the Two Strategies
Although these views are similar in many ways, there are also many differences. Resource-based view can account for changes in the marketplace and can help to analyze in a dynamic market place. The competitive positioning view works best in a perfect market, with relatively stable conditions. It tends to treat market position as relatively static and not capable of considerable change. For example, it would be difficult to foresee that a small firm could gain a competitive advantage that would place it in a higher market position than a corporate giant. Using the resourced-based view, this type of movement is a possibility if the small firm can gain an advantage that would allow it to do so. The resource-based view is much more readily adapted to the changing face of the business world today. It is much more suited to explaining the dynamic nature of business, rather than relying on a static model as its basis.
The resource-based view has the flexibility to look at individual firms within a certain cluster, or it can compare the clusters themselves. In doing so it can provide a better picture of overall market conditions. The competitive positioning view is better suited for comparative analysis of individual firms. However, it is difficult to get an idea of overall market trends and shifts between categorical groups.
The resource-based view focuses on intra-firm resources and the individual capabilities of the firm. The competitive positioning view relies more on outside influences in the ability of the firm to gain a competitive advantage. The competitive positioning view does not account for the complex factors that can affect the ability of the business to gain an advantage in an imperfect market system.
The competitive positioning view is an excellent tool if one only wishes to consider a single company. It is useful as a tool for making investment decisions on a single company. However, it does not provide an excellent analysis of the company in relation to its potential for expansion. The availability of resources may limit the company's potential for expansion. The company's position today may not be reflective of limitations that may hinder its potential for expansion in the future.
A prime example of the ability of small companies to create a competitive advantage based on local resource management can be seen in the food processing industry. Small-scale food processors in Finland were able to build and sustain a competitive advantage in the local market by using their available resources to survive and compete against larger companies in the same industry (Forsman 2000). Using the competitive positioning view, the ability of the smaller company to compete against the large corporation, even on a local scale would seem like an anomaly.
This example demonstrates that in some cases, careful resource management and strategy can allow a small company to not only survive, but to be competitive on a local level. The competitive positioning view would suggest that the small company would have a difficult time competing with the larger company and establishing an economy of scale. This is more than likely to be true and the small company may only be limited to competition at a local level. Therefore, the competitive positioning view still holds true for small local firms in their ability to establish a larger economy of scale.
Williams (2009) suggests that supply chain strategies can be either defensive or offensive in nature. Resource-based strategies are generally offensive. Whereas, competitive positioning strategies can be considered defensive. Attia and Hooley (2007) agree that competitive positioning is an essential component of marketing management. However, their research highlights the value of resources in underpinning their competitive position. Without attention to resource management, even if a company does gain a highly sought competitive position, they will not be able to sustain it. Resources are important, even for those that take the competitive position viewpoint.
Applying These Strategies in the Modern Business Setting
We have examined two differing views of the changing business world of today. The resource-based view is able to explore the changes that are taking place as smaller and smaller companies are able to take advantage of and compete on a global marketplace. It can explain differences in success in geographically separated places. The competitive positioning view would suggest that once a company has an economy of scale in one location, it can use it leverage its position in different locations. Now let us examine how these two strategies can be applied in the modern for-profit business setting.
As companies must learn to market in cultures other than their own, it is becoming more apparent that the geographic factors in the market play a much more important role in determining success than size alone. This tendency supports the use of the resource-based view as the more relevant strategic method for assessing the modern business climate.
This is not to say that the resource-based view is the best match for every situation that one will encounter in the business community. The key question that is suggested in this essay is which method is better for an examination of the modern business climate. The answer to this question is not as simple as it would at first appear.
Whether to choose the resource-based view or the competitive positioning approach depends on the goal of the analysis, the size of the firm in question, its competitive environment, available resources, the core competencies and the goals of the company. The competitive positioning view is more appropriate when examining large corporation that operates in a highly structured market. If the company is so large, that it has access to vast resourced, then resources become less important. However, when they expand into a different market, resources can become more important. When a company decides to operate in a different market setting, their core competencies, knowledge of the market and knowledge transfer within the organization become important resources that must be considered in the strategic analysis.
This examination of two differing strategic views found that the competitive positioning view is the most widely researched of the two. It is much older than the resource-based view and was highly effective in analyzing the competitive advantage in the hierarchical, single location, market that existed in the past. Size was a reliable predictor of company success…