Strategic Advantage Competitive Advantage Within the Global Essay

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Strategic Advantage

Competitive advantage within the global retail sector

The resource based theory

Conceptual framework- Resource-Based Theory

The e-retail strategy

In this paper, we explore the concept of resource-based view in gaining of strategic advantage within the global retail industry. Our focus will be in the use of information technology as a resource in drawing an e-strategy for the purpose of gaining a strategic advantage with a focus on the global retail sector. The organizations in our focus being global leading retailers; Wal-Mart, Metro AG, Carrefour and Tesco.

The high level of competition within the global retail industry has seen several players resort to the use of certain resources and competencies in order to maintain a lead over their competitors. These resources are strategically harnessed and applied in order for the affected firms to maintain a strategic advantage. In this paper, we explore the concept of resource-based view in gaining of strategic advantage within the global retail industry. Our focus will be in the use of information technology as a resource in drawing an e-strategy for the purpose of gaining a strategic advantage with a focus on the global retail sector. The organizations in our focus being global leading retailers; Wal-Mart, Metro AG, Carrefour and Tesco.

Definition of strategic advantage

Competitive advantage refers to the strategic advantage that a given business entity enjoys over its rival entities within a given competitive industry. The achievement of a competitive advantage positions and strengthens a business entity within a given business environment.

The concept of competitive advantage is noted by Porter (1980) to be at the heart of an organization's performance within the competitive marketplace .Every firm therefore strives create as well as sustain competitive advantage within the industry in which it operates. Barney (2002,p.9) noted that an organization experiences a competitive advantage whenever its actions in a particular industry creates an economic value at a time when very few competing organizations are engaging themselves in similar actions. Competitive advantage is therefore tied to organizational performance.

Competitive advantage within the global retail sector

Existing evidence indicates that the appetite of consumers toward purchasing of groceries online is ever growing. For instance Tesco Plc (2006) noted that over the 2005 Christmas period, close to one million clients shopped via its Tesco.co portal a fact which saw its annual sales jump to close to £1 billion with a generated profit of close to £56.2 Million. Waitrose and Sainsbury also experienced a surge in sales via their online stores. This made them to respond by appropriately expanding their capacity for online shopping operations. Forsythe and Shi (2003) noted that online shopping is the fastest growing area of web/internet usage. It has been noticed that it is not the clients who are enthusiastic about online transactions, top retailers are also noted to be increasingly noticing the potential of e-retailing. In particular, they are realizing the internet's ability to present as well as store information while also facilitating a two-way communication with clients. The internet can also be used in the collection of market research data, promotion of goods and services as well as the online ordering of products and services. All these are valuable attributes of e-retailing that are important within the increasingly competitive retail marketplace. Retailers are therefore very keen to exploit these attributes.

The internet is noted to currently provide a very rich and yet flexible retail channel that almost all of the major grocery retailers are keen to exploit appropriately (Doherty et al., 2003). As a result of the internet's ability to radically re-organize the underlying processes that govern retailing as well as the highly dynamic and yet innovative nature of e-commerce, there has been an exponential growth of academic inquiry into its application in e-retail.The internet has been seen as a tool or rather channel for marketing (Rowley.1996),segmentation as well as sales of product and services. The internet has been noted to lead to increased efficiency as well as cost reduction (Amit & Zott,2001).E-commerce can therefore be used as a value creation tool.

The work of Cazier et al. (2006) supports the view of Porter (2001) that competitive advantage can be achieved through differentiation in a sense that is greater than t cost leadership.

The resource based theory

The work of Zhuang and Lederer (2006) highlighted a significant gap in the extant strategic e-commerce literature. This gap is the application of resource-based view theory (RBT) of the concept of strategic advantage as noted by Wernerfelt (1984). The Resource Based Theory posits that organizations compete on the basis of various heterogenosly distributed resources that are rare, valuable non-substitutable and imitable. Several authors have commented that as a consequence of the versatility of information technology when uniquely and innovatively applied, it is more suitable than any other existing resources in the delivery of a sustainable competitive advantage (Porter,1985).

However, it has also been noted that there is difficulty of firms gaining a sustainable competitive advantage directly via the application of IT.This is attributed to the readily available nature of IT as well as the ease of copying these IT strategies (Carr,2003).Another school of thought suggest that even though it might be difficult to gain a sustainable competitive advantage using IT, there exists very few direct means of using IT in levering a sustainable advantage. In particular, it has been argued that a sustainable advantage may be gained via the application of certain unique information system (IS) capabilities (Wade and Hulland,2004) or through the use of other complementary organizational resources/capabilities to leverage information technology strategy in question as noted by Clemons and Row (1991).

The work of Zhuang and Lederer (2006) highlighted a significant gap in the extant strategic e-commerce literature. This gap is the application of resource-based view theory (RBT) of the concept of strategic advantage as noted by Wernerfelt (1984). The Resource Based Theory posits that organizations compete on the basis of various heterogenosly distributed resources that are rare, valuable non-substitutable and imitable. Several authors have commented that as a consequence of the versatility of information technology when uniquely and innovatively applied, it is more suitable than any other existing resources in the delivery of a sustainable competitive advantage (Porter,1985).

In this paper, we employ a methodology that depends on the analysis of how grocery retailers use information technology and in particular internet-based sales channels in gaining a sustainable competitive advantage directly via the functionality that is offered on their websites or indirectly via its interactions with the complimentary organizational capabilities and resources.This paper first of all provides a review of major contributions to the existing resource-based literature in order to decide on its applicability to strategic management of retailer organizations. The evidence used is derived from the world's leading retailers namely; Wal-Mart, Metro AG, Carrefour and Tesco.

Conceptual framework- Resource-Based Theory

Extant literature has been dedicated to the analysis of resource-based theory. Most of these literatures are written within the concept of strategic management (Barney,

1991; Pfeffer and Sutton, 2004; Teece et al., 1997). In this section, we explore the meanings of resources and capabilities prior to exploring how they are applied by the world's top retailers in the attainment of strategic advantage from the competitive positioning of their brand and products on an IT resource like a retail website. The last couple of years has seen a significant level of interest in the processes through which organizations can employ a portfolio of resources aimed at propelling them towards the attainment of unparalleled level of competitive advantage. A resource-based view of a given firm suggest that an organization should invest in the resources and capabilities that would best suit them in their quest for a successful and sustainable competitive advantage.

Resources: resources are defined by Wernerfelt (1984) as anything that can be regarded as a strength or a weakness of a given firm. Barney (1991) on the other hand defined resources as all assets, organizational processes, capabilities, attributes, information and knowledge that are controlled by the organization in order to conceive as well as implement strategies that improves its effectiveness and efficiency.

Capabilities:. Capabilities on the other hand are developed from the coordinated and combined behavior as well as activities of a given form's employees. It is therefore embedded within the firms' processes and activities (Makadok,2001) .The role of capabilities in the leveraging of value can only be realized from the available resources. Capabilities are defined by Helfat and Peteraf (2003) as the ability of a given organization to perform a set of tasks which are coordinated while using organizational resources for the sole purpose of realizing a particular result.

How the world's top grocery firms strive to achieve an improved level of competitive positioning using IT-oriented resources

On the basis of the definitions above, IT-oriented resources a can be regarded as the physical computing assets. In this case, it includes the software and IT applications that the organizations use as well as the hardware and any other physical computing infrastructure that the organizations' e-retailing strategy rides on. The ability of…[continue]

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