Gaining Sustainable Competitive Advantage: Balanced Scorecard Approach

Gaining Sustainable Competitive Advantage: Balanced Scorecard Approach

Jorge Gomes (ISEG - Universidade de Lisboa, Lisboa, Portugal) and Mário Romão (ISEG - Universidade de Lisboa, Lisboa, Portugal)
Copyright: © 2018 |Pages: 14
DOI: 10.4018/IJCCP.2018010102

Abstract

Competitive advantage (CA) arises from a firm's attributes that allow one firm to create better customer value than others. Organizations of all sectors of the economy believe that sustainability is a way to achieve a differential advantage. CA is recognised as being the major cause for explaining top organizational performance and is a fundamental goal of academic management studies. There are two main views about obtaining a stable competitive position in the marketplace; The theory of industrial organization, re-introduced by Porter in the 1980s arguing that competitive advantage is caused by environmental opportunities. The resource-based view, which argues that every company creates its own competencies and capabilities can result in competitive advantages. The article shows how the balanced scorecard (BSC) can assist organizations in obtaining sustainable competitive advantage (SCA). The BSC development is a response to the criticism of traditional forms of accounting assessment. Academics and practitioners recognize the benefits of adopting the BSC concept.
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Introduction

According to the main theoretical views, value is generated through the processes that transform resources along the value chain (Barney, 1991; Bowman & Ambrosini, 2000; Porter, 1985) involving several actors along the process (Dyer & Singh, 1998). Value creation is a broad concept that can be seen in different perspectives, either by clients, employees, suppliers, shareholders or other stakeholders (Lepak, Smith, & Taylor, 2007).

The concept of CA was first defined in the literature by Ansoff (1965) who defined it as the advantage of proactively perceiving market tendencies before the competition and adjusting the supply in function of this anticipation. With the evolution of strategy as an academic discipline, the CA gained a more scientific and formal meaning, from being an occasional reference to becoming one of the key concepts of the discipline.

Competitive strategy is generally understood as the search for a favorable competitive position in a particular sector and aims to establish a profitable and sustainable position against the forces that determine competition in the sector (Porter, 1985). The company strategy is defined as the way to obtain CA (Barney & Hesterly, 2006). For companies with superior performance, the existence of a CA is reflected on the capacity to create value above the average of its competitors (Peteraf & Barney, 2003; Porter, 1985).

CA is seen as the main source for explaining the superior performance of firms, and thus represents the fundamental objective of strategic management (Powell, 2001; South, 1981). Cool, Costa and Dierickx (2002) argue that CA can be achieved both by a privileged position in industry, a position that cannot be replicated by others (Caves 1984), as by resources obtained in markets of imperfect factors (Barney, 1986), not completely mobile (Peteraf, 1993), protected from imitation (Rumelt, 1984, Dierickx and Cool, 1989, Reed & DeFillippi, 1990), and not replaced (Barney (1991).

The Resource Based View (RBV) provides a framework for the study of CA by emphasizing that the company's specific resources are determinant for generating economic profit (Barney, 1986, 1991; Dierickx & Cool, 1989; Peteraf, 1993). The theories of strategic positioning sustain that the CA can derive not only of specific resources, but also of privileged market positions (Porter, 1979, Caves, 1984). The concept of CA is built on the premise that firms can develop a differential advantage over their competitors (Barney 1991; Dierickx & Cool 1989; Hunt & Morgan 1995).

Recently, there has been an increasing amount of empirical research about CA (Ray et al., 2004; Newbert, 2008) and about distinguishing CA from organizational performance (Powell, 2001). The relevance of CA is not simply determined by external factors (Porter, 1985), but also by those internal sources (Barney, 1991) that have been considered critical for successful organizations. Obtaining a CA should be the goal of any organization's strategy, with results reflecting financial gains above average (Barney, 1991; Grant 1991; Porter, 1985).

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