Importance of Knowledge Management in the Era of Knowledge
Question:
Discuss About The Strategic Marketing Competitive Advantage?
In the knowledge era business have different outlooks which entail a new business compass. Quickness is instrumental to the success of firms in the era of knowledge. The process of knowledge management is increasingly being adopted in business firms (Dalkir, 2017). Businesses have recognized the need for seeking a competitive edge over the other business firms through the process of knowledge management. Sources of sustainable advantage of business firms include stakeholder relationships, reputation of the organization and brand recognition.
Business organizations have realized the need to attach significant value of the intangible assets of the business. The businesses providing financial and professional services are important examples of such business types. Processing knowledge is of utmost importance in the organizations, which are knowledge intensive in nature, for the success of such organizations (Liebowitz & Frank, 2016). It is agreed by many that Knowledge management accounts for the most important element of competitive advantage of organizations. In globally interconnected economy of the modern world sustainable advantage of business organizations are no longer attached to the capital or the physical assets of the company, rather sustainable advantage has been found to be deeply rooted in the ability of effectively channeling of intellectual capital of the organization.. In this report the creation of competitive advantage by business organizations by creation sharing and utilizing knowledge will be discussed elaborately. This report will take into consideration relevant literature on competitive advantage, resources that can be utilized for achieving competitive advantage; review how knowledge creation and utilization are useful in creating competitive advantage.
Competitive advantage can be defined as the advantage created by a firm with a view to provide its customers with something the other firms in the business field fail to provide. Competitive advantage is created by those who are in charge of the management and involves proper planning, controlling and organizing activities that aim to create such competitive advantage (Wagner, & Hollenbeck, 2014). In the planning stage the management of organizations are required to formulate policies and assess the areas of business where competitive advantage can be sought (Donate & Pablo, 2015). Competitive advantage can be said to be achieved by business organization by being ahead of the other firms in the field of businesses in the best way possible for the attaining more profitability than the competitors of the business. Thus it can be said that for corporations to be successful in achieving competitive advantage over the other business organizations proper planning is important to decide the short as well as long terms goals of such organization. The concept of competitive of advantage had been coined by Michael Porter in 1970.
According to Porter it can be stated that one of the main requirements for gaining success in the competitive business environment is the ability of the business organization to achieve competitive advantage over the other business structures (Porter & Heppelmann, 2014). According to Porter it can be stated that competitive advantage can be defined as the ability of organizations to earn more investment on returns than the other business organizations. According to the resource based view it can be said that a business organization is said to gain competitive advantage over its rivals companies when such business organization formulates and implements strategies which aim to create value for the company and which are not followed by rival companies. Competitive advantage has also been defined as analysis of industry and organizational governance and the effects of the same on the firm in the form of resource advantages and strategies (Geisler & Wickramasinghe, 2015). The resource based view of competitive advantage had been developed for the purpose of explaining how business organizations achieve competitive advantage over its rivals but the use of substantial resources (Peteraf, Gamble & Thompson, 2014).
Sources of Sustainable Advantage in Business Organizations
Proponents of resource based theory are of the opinion that enterprises are to be treated as creators of value added capabilities of organizations. The organizational competencies include assessing the resources and assets of the organization from the knowledge-based view. The resources of the organization include all the tangible as well as the non tangible assets and human and non-human assets. The assets and resources owed by the organizations are to be used by the same o formulate strategies which aim to enhance the value of the company (Madsen & Walker, 2015). There are some unique resources and competencies which are possessed by business organizations However, such resources and competencies are known by different names such as: core competencies, distinctive competencies, core capabilities, invisible assets, knowledge embedded within the organizational structure, corporate cultures and internal cultures.
The core competencies of a firm can be defined as the those which are valuable to the firm, cannot be imitated by rival companies, non-substitutable by other companies and uncommon (West, Ford & Ibrahim, 2015). Such core competencies present great advantage to the company over its rival firms and are more likely to generate a lasting competitive advantage (Todorovi? et al.,2015). It can be said that intangible assets of a firm are more likely to generate competitive advantage of the firm over the other rival companies as intangible assets cannot be substituted easily by other companies. Such intangible assets of organizations are acquired over a long period of time and therefore cannot be imitated by other organizations (Herrera, 2015). The VRIO framework as devised by Barney can be used to assess which resources would be of substantial competitive advantage to the organizations (Chatzoglou et al., 2017). The VIRO framework constitutes of value created for customers, rarity of resources as compared to the competition in the business sector, inimitability and organization. Another important framework that has helped companies assess the position of the company and the knowledge to achieve competitive advantage in the market. The framework has described above is referred to as “Configuration for Knowledge” and is comprised of four independent factors in a closed loop system (Andersén & Samuelsson, 2016). The factors aim to maintain balance between the fluid and institutional domains which will yield operational efficiency and strategic flexibility. The elements as described above are enumerated below.:
- Identification of strategic business driver
- Establishment of core knowledge and inter-relationship of the different units of business. The core knowledge includes both tangible and intangible assets. Such intangible assets include cultures and values of people, technology and capabilities of business. Construction of value chain which aims to trace patterns of usage of knowledge and the movement of knowledge through formal and informal sides of the firm is important for the purpose of determining what and where critical knowledge of business exists
- Applying enough discipline with a centralized focus on the consideration and culture of some variable such as precision, speed and the channel through which knowledge is dispersed
- Motoring the knowledge and rebalancing the same.
The same concept has been used by numerous companies since then in order to gain advantage over the business organizations. It has been identified by Porter that competitiveness can be used a key strategy by companies to gain advantage over its rivals. It had been also stated by porter that aim of competitive advantage is to transform the barriers faced by other companies into the company’s advantage. Porter has illustrated a model in which five forces contribute to control the ability of the firm earn more profitability over the businesses and return on investment. The model as illustrated by Porter takes into account five forces which include:
- Opposition faced by other firms
- Entry of new competitors in the field of business in which the organizations operate
- Suppliers’ negotiating interest
- Customers’ negotiating powers
- Expansion of substitute produces by the organizations.
In context of analyzing competitive strategies, it can be said that the companies which do not monitor closely the external forces and the market demands end up losing the opportunities and implementing strategies which later turn to be detrimental to the company. Companies are required to adapt and implement strategies competitive in nature for the purpose of surviving in the market.
How to Achieve Competitive Advantage through Knowledge Creation and Utilization
For the purpose of analyzing competitive advantage and analyzing competitive strategies from the resource based perspective it can be said that business are to be viewed as a package of resources and abilities (Lin and Lei 2014). The abilities and the resources of the business merge to foster the competencies of the business organization . Technical know-how and resources form the main components for developing economic lead of the business organizations. Resources are comprised of human and Non Human resources which include capital, finance, equipment of the business, human capital and human resources. Human capital resources will be comprised of skill, intellect, judgment of the individuals.
The resource based view of competitive advantage states that a company’s inner means, combination of all the resources are to be measured by developing approaches. Stress has been also been laid on the necessity of utilization of the resources of the company for its own competitiveness (Bromiley & Rau, 2016). According to the resource based theory it can be stated that the valuable resources of a business organization must not be easily accessible by the other rival firms in the business field. Utilization of these valuable resources by the firm is very important to boost the competitiveness of the firm. Competitiveness is the main important factor which is focused upon by the resource based view. Competitiveness gives rise to innovation which is also instrumental to the success of the business organization. Innovation in the business sector can be brought by analytical and critical thinking and adoption and application of new ways of operations (West, Ford & Ibrahim, 2015). The resource based view is continuously evolving in the modern business world in order to create to have a better assessment of the relationship shared between the resources of the company and the sustainable advantage.
As stated by stated by Dasgupta and Gupta(2009), knowledge can be considered to be the most tactically substantial resource of a company. It can be stated according to Dasgupta and Gupta(2009), creation, sharing and utilization of knowledge is of utmost importance for achieving competitive advantage of a firm therefore creation, sharing and utilization of knowledge lies at the core of the resource based theory. For business organizations to overcome financial and communal challenges within the realm of the business atmosphere it is essential for business organizations to possess the competence required for spearheading the attainment of knowledge. It can be state that Knowledge management is a form of discipline which aims to endorse the incorporation of methods for capture, classify and record information related to the function of the organization (Davis & Simpson, 2017).
Examples of such information related to the organization can include record of the skill-set of the employees, brochures, strategies and other measures. For the purpose of obtaining competitive advantage sustainable in nature an organization is required to assess the way knowledge is formed, allocated and applied and how the attribution of such knowledge is to be done to the administrative process. Knowledge creation and utilization is essential for promoting the competitiveness of the organization. As mentioned by Pinto, (2015), intellectual capital can be considered to be an instrumental factor for knowledge formation and that knowledge is more likely to be possessed in large groups rather than separately by individuals. As opined by Dasgupta and Gupta, it can be stated that knowledge invention in the operations of the business leads to creation of competitive advantage. It can also be said that operative and complete administration is based on knowledge and learning.
For knowledge to nurture in the organization it is essential that such knowledge has a good flow throughout the organization. To ensure that knowledge has a good flow there must be efficient systems in place which will manage the flow of knowledge. Competitiveness governs how the creation and utilization of knowledge is transferred from one section of the organization to the other( Campbell & Park, 2017). To ensure that competitiveness is maintained in the organization there has to be good understanding, collaboration and coordination between the different units of the organization. According to Dasgupta and Gupta it can be said that an organization’s ability to distinguish itself from other organizations is dependent on its efficiency to integrate and implement the innovative management practices . Such integration and implementation of the innovative management practices in an organization must be done with the practices of knowledge management as possessed by the organization.
It has been stated by Mackintosh that the reason why knowledge management practices should be taken into consideration by all business organizations is the rivalry between the companies in the same field of business. Marketplaces of business have been getting increasingly competitive and therefore knowledge based management should be considered on a daily basis. Focusing on the needs of the consumers has been noted to be the main goal of every business organizations therefore the focus has shifted from paying attention to the fact that early retirement of employees leads to loss of knowledge. The process of globalization has made organizations take overseas contractors and clients however not much attention has been paid to the retention of knowledge. Thus it can be said that organizations are required to build systems which will of great benefit to the organizations in maintaining knowledge for the purpose of gaining an edge over the organizations in the field of business.
To ensure that all the departments of an organization is well equipped with the tools of competitiveness creation, sharing and utilization of resources and knowledge has to be done all across the organization (Lonial & Carter, 2015). Strategic management can be considered to be a collaborative development which aims to harmonize the operations of advertisement, administration, finance, book keeping, research and development, manufacturing. As opined by Laszlo & Zhexembayeva (2017), it can be sated that an organization’s failure to identify and establish a connection between the functionality of the different units of the organization can be disadvantageous to an organization particularly to its strategic management. Thus sharing of knowledge among the different departments and functional areas of businesses can be held to be important for creating competitive advantage. Sharing of information binds together the different department of a business and aims to improve the decision making process of the business organization. Information sharing can be attributed to knowledge sharing which is a resource of management competitive in nature.
Every business organizations must have an internal system of auditing information in order to identify the gaps existing in the flow and communication of knowledge and information in the organization (Bromiley & Rau, 2016). Every business organization has different business structures therefore basic differences lie in the establishments, industries and corporations, which make their internal process of auditing different. Such process of making internal assessment must be therefore related to the business structure of the organization. In order to ensure that the right strategies of collecting, sharing and utilization of knowledge are implemented management of organizations are required to employ the right personnel in the right positions who can perform such task. As competition among the different business organizations has witnessed a drastic increase, competitive intelligent programs have been implemented by various organizations to acquire an advantage over the rival companies of such business organization.
Competitive intelligent programs as defined by competitive intelligence professionals as those principled and methodical procedures to collect and examine information related to the economic achievements and the other corporate developments of rival firms so as to pursue the own goal of the business (Campbell & Park, 2017). Intelligence about rival firms can be gathered by a business organization in many ways such as hiring of top professionals of such rival corporations. The process of hiring top personnel of rival and competitive corporations can be illustrated in technological firms in the United States. Intelligence programs which are competitive in nature are a part of the management system in order to provide substantial information about the operations of rival companies so as to gain an advantage over the other companies (Kozlenkova, Samaha, & Palmatier, 2014). Thus to summarize it can be said that competitive intelligence can be described as an essential tool for the formulation and implementation of strategies which aim to enhance the competitiveness of the business organization in question. It has been assessed that management information systems aim to collect relevant information and raw materials from both the outside and inner estimate of the organization. The rational information systems are those in which relevant information is inputted and such information is converted into productivity. The importance of information systems has been realized now more than ever before due to the increase in competitiveness of the businesses and due to the complexity of the business structures. The intelligence information systems have been developing rapidly due to the aforementioned reasons.
Conclusion
Thus to conclude, it can be said that competitiveness of business organizations is critical for its success. Such competitiveness helps the business implement innovative policies which in turn result in creating a competitive advantage over its rival firms. The competitive advantage of companies can be assessed from the resource based perspective. However, it is not possible to discuss the resource based theory without focusing on the creation, sharing and utilization of knowledge within the business structure as well as outside the business structure. Resource base theory helps to assess and evaluate how organizations have been able to achieve sustainable advantage which is competitive in nature. Knowledge of business firms is the most important and significant asset which is possessed by the concerned organization.
However, whether Knowledge management has been effective in creating competitive advantage for firms which are sustainable in nature has been clearly developed and substantiated theoretically and empirically. The term knowledge management has been broadly defined to include activities which intend to manage, create, and exchange assets which are intellectual in nature with the business organization It can be mentioned that business organizations are required to setup systems and employ people having the required skill for maintaining and promoting a good flow of knowledge throughout the business. To gain competitive advantage over other rival companies it is important to setup intelligence management systems in the business management. Such intelligence management helps a business develop an idea about the competitive advantages of the rival companies. Intelligence management policies generally tend to hire top employee who are working at rival companies to gain significant and relevant information about the operations of the other companies.
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