Sustainable Competitive Advantage With the Balanced Scorecard Approach

Sustainable Competitive Advantage With the Balanced Scorecard Approach

Jorge Gomes (ISEG, Universidade de Lisboa, Portugal) and Mário José Batista Romão (ISEG, Universidade de Lisboa, Portugal)
Copyright: © 2018 |Pages: 12
DOI: 10.4018/978-1-5225-2255-3.ch496
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Abstract

Why are some firms more successful than others? This question has been intensely debated by strategic management researchers over the last thirty years. Competitive advantage is recognised as being the major cause for explaining top organizational performance and is a fundamental goal of academic strategic management studies. Recently, there has been an increasing amount of empirical research on the subject of competitive advantage (Ray et al., 2004; Newbert, 2008) and about distinguishing competitive advantage from organisational performance (Powell, 2001). The relevance of competitive advantage is not simply determined by external factors, but also by those internal sources that have been considered critical for successful organisations.
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Introduction

Why are some firms more successful than others? This question has been intensely debated by strategic management researchers over the last thirty years. Competitive advantage is recognised as being the major cause for explaining top organizational performance and is a fundamental goal of academic strategic management studies. Recently, there has been an increasing amount of empirical research on the subject of competitive advantage (Ray et al., 2004; Newbert, 2008) and about distinguishing competitive advantage from organisational performance (Powell, 2001). The relevance of competitive advantage is not simply determined by external factors, but also by those internal sources that have been considered critical for successful organisations. Porter (1985) says that competitive advantage is at the heart of organisational performance in the competitive business environment, and that the core of this view is that in order to achieve competitive advantage, firms should systematically provide added value to customers relative to the competition. Peteraf (1993) defined competitive advantage as being sustained performance above normal returns, and Barney (2002) claims that superior performance is obtained through the value generation of internal resources usage. The research of Wernerfelt (1984), Rumelt (1984), Barney (1986), Dierickx and Cool (1989), Amit and Schoemaker (1993) and Peteraf (1993) have all been recognised as a reference for the study of sustainable competitive advantage (SCA), based on the resource-based view of the firm approach (RBV). According to this view, a firm´s endowment of resources is that which gives it a sustainable competitive advantage. RBV highlighted the relevance of intangible resources as a crucial factor for SCA. Intangible assets, such as intellectual property, knowledge and skills of employees or relationships with our customers, are all sources of competitive advantages and long-term financial success, which are both increasingly important for organisations today (Kaplan & Norton, 1992, 1996, 2000). The competitive market environment and dealing with intangible assets have both become the main reason for SCA today for organisations, and they are needed to support organisations’ strategy in reliable frameworks that measure strategy implementation, align business challenges with different internal activities, and include the management of IS/IT strategy, as well as other initiatives. The most globally-recognised management support system for fulfilling these organisational performance challenges is the Balanced Scorecard (BSC).

Key Terms in this Chapter

Competitive advantage: An advantage that a firm has over its competitors, allowing it to generate greater margins and/or retain more customers than its competitors.

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

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

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

Porter’s View: An approach that focusses on the positioning of the organisation’s business or brand in the marketplace to the best advantage.

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