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A firm is said to possess competitive advantage if it sustains profits that exceed those of its industry. The goal of many businesses is to attain sustained competitive advantage through products that are continually attractive to the customers or through an appealing service. Five forces that compel a company to seek competitive advantage, and include: rivalry among existing competitors, threat of new entrants, the threat of substitute products and services, the bargaining power of buyers and the bargaining power of suppliers. Competitive advantage can be realized through difference in price as well as the differentiating the product from those of the competitors. It enables firms to give its customers the same as its competitors at a lower cost, or to deliver superior value superior than the competition and realizing higher profit, thus distinguishing itself in the market. The realization of competitive advantage requires the utilization of strategies that will position the company.
Knowledge management is the formalized integrated approach of running an enterprise whether articulated or tacit knowledge assets such as policies and procedures, systems or documents. Knowledge management is considered the most fundamental strategic process and has been found to be the only sustainable competitive advantage for firms. According to Schwartz (2006), identifying the relevant knowledge and extracting value out of it is the key to understanding is key to understanding the success and failure of knowledge management efforts within organizations (p.37) Any firm that is interested in gaining competitive advantage must be in a position to create, develop, retain and transfer knowledge within the organization. This responsibility lies with the firm leadership. The firm should develop a methodology for identifying the form of knowledge that is relevant to the firm and can contribute in modifying the firm's behavior towards increased productivity.
Upon assessing the knowledge requirements of a firm, the leadership should develop or acquire knowledge that is effective and easy to learn. Of utmost importance is the use of the acquired knowledge to make the firm competitive, that is, to appeal to the customer due to lowered cost or greater value due to innovation. According to Schwartz (2006), the critical knowledge should entail the business mission, which gives in detail the reason for the business existence; the value proposition, which outlines the benefits the customer will gain by choosing the company's products, and how they are distinct fro those of the competitors (p.37). The management should pro actively seek and implement knowledge that will impact competitive advantage and how they can create value as well as show differential capabilities (p.34). The management ought to identify knowledge that unique to the firm strategy to ensure competitive advantage. Deployment of critical knowledge with consistency will definitely result in competitive advantage in an organization.
Innovation and creation of new products can also promote competitive advantage to the firm. New products, which can be products of innovation, have more value for the customer. The value in the product can be the result of gradual but cumulative improvements or a totally new product. According to Thomas (1993), a company defines itself by the products it offers to the market (p.7). The only way a company can ensure sustained profitability is if it the generation of value from invested products, and new products can help in achieving this goal. (p.7). New products are new or added value to the customers. Innovation refers to the creation of new knowledge and the utilization of the same to develop new goods, the opening of new markets, or the discovery of new input sources that ca n revolutionize the industry. An innovation may involve the following: developing new products or improvement of existing ones, making better the manufacturing processes while ensuring reduced cost and waste reduction, entrenching new organizational concepts such as constant improvement, devising marketing strategies to challenge new markets or challenging existing markets and finding ways such as internet to improve relations with the customers.
The firm ought to evaluate itself in terms contribution to creativity and innovation of its products, which may take the following eight types of creative contribution, which are; replication, redefinition, forward incrementation, advance forward incrementation, redirection, reconstruction, re-initiation and integration. Applying innovation in a firm may result in reduced cost due to the fact that much work can be done by a few people, creates the possibility of doing activities that were not possible before and as a consequence, the realization of surplus finances for re-investment into the firm. The firm is to choose the innovation that improves its ability to operate reflected by improved profits and efficiency. According to Thomas (1993), new and improved products increase market effectiveness by keeping customers from moving to the competitor or by attracting new potential customers. The new products can be as a result of incremental improvements, called extension products, or a totally new product, referred to as breakthrough products. New products can: enhance corporate image, leverage the firm's long term financial return and leads to the effective utilization of human resources.
The contribution of organizational structure in promoting competitive advantage in a firm is crucial. Organization structure refers to the system of task, reporting and the authority structure that govern the work of the organization. It entails the firm's culture, history and management style. It thus defines the form and function of the organization activities. A firm can attain superior performance and hence competitive advantage depending on its organizational structure. In reference to Lake and Ulrich (p.13), the firm cannot adequately depend on external factors alone to prosper, but should have the ability to manage changing strategies or else risk locking themselves into past success patterns as opposed to adapting to new situations. (p.38)
The firm's capability to manage people for competitive advantage is crucial. Hiring the best people is not enough. The ability of the firm should be in such a way that it can influence its members to create competencies that are specific to the organization, thus positioning the business to meet the changing customer and strategic needs. To realize this objective, the organization should appropriate its policies in such a manner as to bring about motivation, teamwork and accountability to ensure competitiveness. Organizational structure, as a means of achieving competitive advantage necessitates the creation of distinct competencies unique to the business and that cannot be replicated.
The aim of firms is to attain superior performance and the realization of a sustained competitive advantage. Strategic planning involves assessing business in order to determine whether it has the appropriate combination, with a view to developing the right mix of business units that are in line with the long term goals of the organization. The Strategic plan specifies the kind of competitive advantage the firm wants to attain and the pathway to attaining it. According to Porter (1998), every business unit ought to route to competitive advantage that will determine its performance (p.25). The strategies developed by the firm not only serve the present changes in customer needs, but look into the future to predict possible trends. According to Annacchino (2003), a strategic plan should be specific enough to define the product development and market development direction (p.5). The advantages of strategic planning that impact positively on competitive advantage are: improved return on investment, results in the higher growth rate of the company with it than without it. Strategic planning reduces time wasted, ensuring efficiency, thus competitiveness. It also provides a crucial focus on the market enabling the knowledge of customer needs.
The strategic plan lays down the pathway that the company will take to move from its current position to the desired position in future, and to sustain its competitiveness in the industry in which it competes. Annacchino (2003) further points out that strategic planning focuses the company on quality and sets it above the present and expected future competition, since it lays down the framework to understand competition in terms of competitive advantage, value addition workforce and market place challenges and how the company should respond in order to remain competitive (p.6). Innovative behavior is crucial for the company, especially regarding the development of new products that will give the company a distinguished position in the market. Innovativeness can add value to the existing products, or develop ground breaking products, totally new to the market.
In response to the quest competitive advantage, the company has to embrace appropriate knowledge management, strategic management, resolve to use the most competitive innovations to develop new products that can effectively compete in the market. The development of new products that can effectively compete in the market is dependent on the customer needs. The company can, using the suitable innovation, develop a product with a value that meets these needs. Internal affairs of the company can be well regulated by critical knowledge the company adopts. The above operations take place in the context of an elaborate strategic plan that ensures the company objectives are met while tabling a guideline into the future for the company.
Technologies and Knowledge Based Software
In the face of changing technological advances, businesses have to adopt innovative technologies in order to remain competitive in the market. The impact of technology on business is that it makes work efficient, while at the same time reducing the workforce required to do much work. The fact that most businesses spend more money on salaries will drastically reverse resulting in increased profits. To assist companies to manage their products, to develop new ones and do pricing, some marketing expert systems have been developed.
There are different technologies and knowledge based software that advance the ability of the firm to harness information related to product development and the management of related processes. Notably, these technologies and knowledge based software and mandated with different tasks that they need to accomplish in the managing new products. In other words, just as there are different stages of development of products in a market, so are the technologies and knowledge based software that harness important information regarding such products.
To begin with, project management software are important tools that are utilized by businesses and companies across the globe to manage the process of developing new products in the market. According to Webb (2000), the systems that have become specifically known as 'project management software' have centered on the management of tasks; they are designed for the purpose of planning, scheduling and monitoring the progress of tasks or activities. In this regard, project management software plays a critical role in gathering and analyzing information and data that is related to the overall process of developing new products. Additionally, these software technologies and knowledge assists managers to plan ahead of time in regard to the overall process of developing new products by laying down strategic plans on how these products would be launched into the market, and at what period of time. Remarkably, launching of new products into the market requires serious planning that is both internal and external.
On the other hand, apart from assisting in planning of different projects that are carried out in regard to new products, there is also the issue of assessing the costs of developing such products and the expected returns. It is important to understand that a quality product cannot be developed well unless one is able to manage the costs that arise during its development process. Webb (2000) argues that project costing is the ability to store cost rates against defined resources and calculate project costs where resources and demands are specified against each activity (p.111). This information is important to calculate and assist managers to plan their budget.
There are also new technologies that have been developed over time to manage and gather information in regard to the quality of the product that is launched into the market. In this respect, whereas the company has to carry out research and develop quality control measures to assess the quality of new products that are being developed at each step of development, there is also need to understand the quality of new products already in market and how they are perceived by customers. In this regard, collecting data and information from such customers play an important role in enabling a product to capture the market and compete effectively with the already existing products. Some of the technologies that are utilized in this case are online filling forms and statistical packages that are used to compute important data and information that is needed in this case. For example, the use of statistical packages can be utilized in understanding how skewed a new product is in the market. In reference to Us Dept of Labor and Bureau of Labor Statistics (2004), specialists in these technologies and software such as statisticians are actively involved in deciding which products to manufacture, how much to charge for them, and to whom the products should be marketed.
Following this argument, it can be concluded that technologies and knowledge based software play a critical role in the manufacture and marketing of new products. In line with this, the data that is obtained from the market can be analyzed and conclusions made on the kind of market that one can sell his or her products. For instance, SPSS program goes through a step-by-step procedure with a number of predictors to discover the best combination of predictors (Burns & Richard, 2008, p.396). In this regard, this program is useful in analyzing and tabulating the data and information that has been collected. SPSS is not the only program that is used in executing important tasks in regard to the formation and launching of new products in the market. There are numerous technological-based products that utilized in different ways to acquire important information regarding these products.
The use of technologies and knowledge based software is an important milestone in the development and marketing of new products. Notably, whereas these technological developments assists in managing funds or rather the budget during the overall process of developing a new product, they also assists in controlling the quality of products that are launched into the market. On the other hand, technologies and knowledge based software assist in gathering important information and data that is appropriate for the implementation of this product in the market. Of importance is the fact that the computational needs that arises as a result of development and management of new product phase are met with ease and urgency that is required.
Acquisition of information using technologies and knowledge based software provide a comparative advantage to businesses and organizations that are launching new products in the market. According to Nemati and Barko (2004), firms create competitive advantage by assembling resources that work together to create organizational capabilities (p.914). Therefore, utilizing technological devices in gathering important information and data enable businesses and organizations to have a comparative advantage over similar businesses in that particular kind of industry.