Gaining Competitive Advantage through the Balanced Scorecard

Gaining Competitive Advantage through the Balanced Scorecard

Jorge Gomes (ISEG Lisbon University, Portugal) and Mário Romão (ISEG Lisbon University, Portugal)
Copyright: © 2015 |Pages: 10
DOI: 10.4018/978-1-4666-5888-2.ch498
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Background

Competitive Advantage

Why firms differ? How they behave? How they choose the strategies and how they are managed? Those are organizational issues of firm performance that has been central in strategy research and for decades the academy and practitioners have tried to obtain answers. The competitive advantage is the result of the firm's ability to efficiently perform the set of activities necessary to obtain a lower cost than competitors and organize these activities in a unique way, able to generate a differentiated value to buyers (Porter, 1985). Ma (1999) argues that competitive advantage arises from the differential among firms along any dimension of firm attributes and characteristics that allows one firm to better create customers value than do others. For managers, the challenge is to identify, develop, protect and allocate resources and capabilities in order to provide the company with a sustainable competitive advantage and thus a higher return on capital (Amit & Shoemaker, 1993).

The RBV explores the idea of competitive advantage requires that the resource endowments of the firms are heterogeneous and explains the importance of developing valuable and scarce resources and capabilities (Collis & Montgomery, 1995; Hamel, 1994; Prahalad & Hamel, 1990), which are said to be the source of sustainable competitive advantage (Barney, 1991; Barney & Wright, 1998; Wright, McMahan, & McWilliams, 1994). Teece et al., (1994, 1997) develops the RBV in the sense of the dynamic changes and the organizational capabilities. Organizations should focus on their capacity of renewing competences in order to adjust to the changing business environment (Teece et al., 1994, 1997). The Knowledge Based View of the firm (KBV) is closely related to the RBV and focuses on knowledge as the most strategic resource a firm has. The KBV is a natural consequence of the RBV which argues that knowledge is the main productive resource of the firm (Kogut & Zander, 1992; Grant & Baden-Fuller, 1995). A key limitation of all the above strategies is that it seems to ignore the dynamics of competition in the marketplace. The present context for strategic management has been described as hypercompetitive (D’Aveni, 1994) which ensures that sustainable advantage is transitory. According to D’Aveni (1994) instead of long-range plans and long-term competitive advantage, a succession of small and duplicated strategic attacks is more typically used in rapidly changing hypercompetition environments. The firm can effectively create a lasting sustainable advantage by connecting a series of those short-term advantages.

Key Terms in this Chapter

Dynamic Capabilities: Higher order strategic processes that integrate recombine and generate new technological and marketing capabilities which in turn increase firm performance.

Knowledge-Based View: Considers knowledge as the most strategically significant resource of the firm.

Hypercompetition View: In a quickly changing environment the organizations are under a very strong competition and it is difficult for one company to keep a competitive advantage for a long time.

Resource-based view: Supports that resources possessed by organizations allow obtaining competitive advantage and lead to superior long-term performance.

Porter's Five Forces Model: Approach that focus in positioning of the organizations business or brand in the marketplace to the best advantage.

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