Competitive Advantage

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Definition: Competitive Advantage means superior performance relative to other competitors in the same industry or superior performance relative to the industry average.

What is competitive advantage?

There is no one answer about what is competitive advantage or one way to measure it, and for the right reason. Nearly everything can be considered as competitive edge, e.g. higher profit margin, greater return on assets, valuable resource such as brand reputation or unique competence in producing jet engines. Every company must have at least one advantage to successfully compete in the market. If a company can’t identify one or just doesn’t possess it, competitors soon outperform it and force the business to leave the market.

There are many ways to achieve the advantage but only two basic types of it: cost or differentiation advantage. A company that is able to achieve superiority in cost or differentiation is able to offer consumers the products at lower costs or with higher degree of differentiation and most importantly, is able to compete with its rivals.

An organization that is capable of outperforming its competitors over a long period of time has sustainable competitive advantage.

The following diagram illustrates the basic competitive advantage model, which is explained below in the article:

How a company can achieve it?

An organization can achieve an edge over its competitors in the following two ways:

  • Through external changes. When PEST factors change, many opportunities can appear that, if seized upon, could provide many benefits for an organization. A company can also gain an upper hand over its competitors when its capable to respond to external changes faster than other organizations.
  • By developing them inside the company. A firm can achieve cost or differentiation advantage when it develops VRIO resources, unique competences or through innovative processes and products.

Real World Examples of Organizational Behavior

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Findings from organizational behavior research are used by executives and human relations professionals to better understand a business’s culture, how that culture helps or hinders productivity and employee retention, and how to evaluate candidates’ skills and personality during the hiring process.

Organizational behavior theories inform real-world evaluation and management of groups of people. There are a number of components:

  • Personality plays a large role in the way a person interacts with groups and produces work. Understanding a candidate’s personality, either through tests or through conversation, helps determine whether they are a good fit for an organization.
  • Leadership, what it looks like and where it comes from, is a rich topic of debate and study within the field of organizational behavior. Leadership can be broad, focused, centralized or de-centralized, decision-oriented, intrinsic in a person’s personality, or simply a result of a position of authority.
  • Power, authority, and politics all operate inter-dependently in a workplace. Understanding the appropriate ways these elements are exhibited and used, as agreed upon by workplace rules and ethical guidelines, are key components to running a cohesive business.

Three Levels of Influence

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If you have ever held a job, taken a class, or participated in an organized activity, you have seen levels of influence. The three levels of influence are the individual, the group, and the organization. The three levels are interconnected so it is critical to understand each one.

The Individual

The individual level includes each individual person within an organization. Each individual acts differently which affects group dynamics and the organization as a whole. If there are a lot of happy and efficient individuals, the work environment will be an efficient and productive one. However, if there are a lot of negative and disgruntled individuals, it can create a toxic environment.

It is impossible for a company to study each individual employee’s behavior, however, it is important for a company to create guidelines and expectations that will attract employees with desirable behaviors. For example, a company may hire employees based on their personality or how they answer behavioral based interview questions. At the same time, companies can help influence individual behavior. They do this by creating a code of conduct, establishing policy and procedure guidelines, and by developing incentives and consequences.

The Group

The group level includes any groups within an organization. Groups can range in size from a couple people working together, to a large group with dozens or hundreds of members. As we just discussed, individuals can affect a group and a group can affect an organization. And at the same time, a group can affect individuals and an organization can affect a group. Imagine organizational behavior as a large spider web over each organization. The spider web connects each level of influence with the two others, creating a pathway between each one.

The Organization

Finally, the organization level incorporates the organization as a whole. In case you haven’t picked up on the trend, it’s important to point out that the organization impacts the individual and group behavior and that individual and group behavior impacts an organization.

Source: http://www.courses.lumenlearning.com

Principled leader behaviors: An integrative framework and extension of why leaders are fair, ethical, and non-abusive

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Research to date on leader behaviors such as justice rule adherence, abusive supervision, and ethical leadership has found a clear linkage between such behaviors and employees’ work attitudes and performance. Historically and surprisingly, an understanding of what initiates these impactful leader behaviors is much more limited and only recently have scholars begun to examine their antecedents. Thus, the goal of our integrative review is to advance cumulative knowledge of why leaders are fair, ethical, or non-abusive—which we refer to collectively as principled leader behaviors. Our review is structured around a framework of four theoretical lenses that elucidate what initiates and perpetuates such behaviors: interpersonal motives, focused on relational explanations; instrumental motives, centered on these behaviors as a means to some end goal; moral motives, which characterize these leader behaviors as an end in themselves; and self-regulation and disposition, focused on leaders’ automatic inclinations and capacity to enact these behaviors. We not only synthesize previously fragmented findings of what shapes principled leader behaviors, but also highlight areas of overlap and distinction across them. Extending our framework, we highlight the interplay of lenses and critical research avenues to better understand why leaders treat followers in beneficial and not harmful ways.

Source: http://www.aom.org