Competitive Advantages trhough the People

Claudia Huajardo Gonzales School of Management, Wuhan University of Technology, Wuhan, P.R.China, 430070 (E-mail:chuajardo@gmail.com) Abstract It is time to consider in some detail the barriers, internal and external, that make the right thing with respect to managing the workforce. If we are, either as individual organizations or as a society, to move more effective ways of managing the work force and to implementing what we know with a shorter time lag, it is imperative that we fully understand the factors that stand in our way. Most managers today understand the strategic implications of the information-based, knowledge-driven, service-intensive economy. They know what the new game requires: speed, flexibility and continuous self-renewal. They even are recognizing that skilled and motivated people are central to the operations of any company that wishes to flourish in the new age. And yet, a decade of organizational delaying, restructuring and reengineering has produced employees who are more exhausted than empowered, more cynical than self-renewing. Worse still, in many companies only marginal managerial attention if that is focused on the problems of employee capability and motivation. Somewhere between theory and practice, precious human capital is being misused, wasted or lost. Keywords Competitive Advantages, strategy, employment, Human Resources

1 Introduction
A company has competitive advantage when it has a better position than its rivals to reassure customers and defend against competitive forces. There are many sources of competitive advantage: product development with the highest quality, provide superior service to customers, achieve lower cost rivals, have a better location, design a product that has a better performance than competing brands. The competitive strategy is what a company is doing to try to disarm the rival companies and gain a competitive advantage. The strategy of a company can basically be offensive or defensive, shifting from one position to another depending on market conditions. Companies in the world have tried to follow all the conceivable approaches to overcome their rivals and gain a market advantage. Barney 1991 suggest that, in order for a resource to qualify as a source of sustained competitive advantage, the resource must add value to the firm, it must be rare, it must be inimitable and it must be non-substitutable. Wright, et al 1994 has shown that human resources meet Barneys criteria or being a source of sustainable competitive advantage. Coff 1994 argues that human assets are a key source of sustainable advantage because of causal ambiguity and systematic information making them inimitable. Guest 1990 says that if management trust their workers and give them challenging assignments, workers in return will respond with high motivation, high commitment performance. Gratton 1997 identified six factors for success: 1. 2. The commitment and high performance The motivation and aspirations of recruits,

3. 4. 5. 6.

The core capabilities of the management team, The teams aspiration Ability to build and maintain alliances Integration of the business into a global network.

This factors means that sources of competitive advantage have shifted from financial resources to technology resources and now to human capital. In other words, success does not depend primarily on the size of the budget of the products supporting technologies. It really depends on employees attitudes, competencies and skills, their ability to generate commitment and trust, communicate aspirations and work in complex relationships. Now we know one of the sources of competitive advantage which is the employee.

2 Concepts
2.1 Competitive Advantages When a firm is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors, then we can say the firm has a competitive advantage. And when a firm is implementing a value crating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy, then we can say the fir has a sustained competitive advantage. 2.2 What is a Strategy? Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations. In other words, strategy is about: Where is the business trying to get to in the long-term (direction) Which markets should a business compete in and what kinds of activities are involved in such How can the business perform better than the competition in those markets? (Advantage)? What resources (skills, assets, finance, relationships, technical competence, and facilities) are What external, environmental factors affect the businesses' ability to compete? (Environment)? What are the values and expectations of those who have power in and around the business?

markets? (Markets; scope)

required in order to be able to compete? (Resources)?

(Stakeholders) 2.3 Competitive Strategies Following on from his work analyzing the competitive forces in an industry, Michael Porter suggested four "generic" business strategies that could be adopted in order to gain competitive advantage. The four strategies relate to the extent to which the scope of a business' activities are narrow versus broad and the extent to which a business seeks to differentiate its products.

The four strategies are summarized in the figure below:

The differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry segments. By contrast, the differentiation focus and cost focus strategies are adopted in a narrow market or industry.

3. Implementing strategies in the HR

3.1 What is a strategy in the HR? Conventionally, strategy is assumed to involve the planning and directing of the organization towards some goals and objectives. In any business, there a certain, market-related issues, which are strategic and there are also certain, market-related decisions, which are strategic. Strategy choice perspective involves defining strategy. Such choices are critical because they play a decisive role in determining the ultimate success or failure of the business. Firms that combine high levels of competence in multiple modes of strategy making appear to be the highest performers. Clearly, certain market-oriented choices, such as the desired competitive position of a particular business unit, are strategy. But such concerns do not define the universe of strategy. 3.2 How this strategic plan is formulated in order to be successful? If the Human Resource (HR) is integrate into strategic plans, if the HR policies are coherent, if line managers have aspirations and motivations are considered, if top management are committed, if the business is integrated into a global network and if employees identify with their firm, then the firms strategic plan can be implemented successfully. 3.3 What are the firm resources? Firm resources include all assets, capabilities, organizational processes, firm attributes, information, knowledge, etc. controlled by a firm that enable the firm to conceive of an implement strategies that improve its efficiency (doing things right) and effectiveness (doing the right things). In the language of traditional strategic analysis, firm resources are strengths that firms can use to conceive of and implement their strategies. Firm resources can be conveniently classified into three categories: 1. Physical capital resources, 2. Human capital resources

3. Organizational capital resources.

1. Physical capital resources include the physical technology used in a firm, a firms plant and equipment, its geographic location, and access to raw material. 2. Human capital resources include the training, experience, judgment, intelligence, relationships and insight of individual managers and workers in a firm. 3. The organizational capital resources include a firms formal reporting structure, its formal and informal planning, controlling, and coordinating systems, as well as relations among groups within a firm and between a firms and those in its environment.
HR resources add value to the firm, are rare, cannot be imitated and are not sustainable. Also they have characterized human resources by unique historical conditions, causal ambiguity and social complexity, which mean that not all firms can successfully develop human resources as a sustain competitive advantage through imitating the HR practices of firms that have successfully develop human resources.

3.4 Strategic Human Resources Management (HRM) and Competitive Advantage The struggle to gain competitive advantage in markets that grow more fiercely contested day to day has radically altered the complexion of many businesses. The HRM theorists arguing that HRM should be recognized as a source of competitive advantage. The field of strategic human resource management has grow up alongside the field of strategic management in recent years. It represents attempts by HRM researchers to relate the worlds of HRM and strategic management to each other.
The models for strategic human management 3.4.1 The Matching Model of behavioral perspective The essential idea of this model is that HR practices should be matched to the firms desired competitive position. This is seen to make the organization more effective. In other words, management should work out what behavior is required by the choice of a particular business position and adopt those HR practices, which reinforce them. Some authors argues that the firms should choose whether they want to be cost leaders, or differentiators on the basis of some superior non-prices feature such as superior quality, delivery or service. If for example, management choose a business strategy of differentiation from competitors on the basis of higher levels of product innovation, this would call for creative, risk oriented and co-operate behavior. The HR practice would therefore include: Selecting high skilled individuals, Giving employees more discretion, using minimal controls, Making a greater investment in human resources Providing more resources for experimentation Allowing and even rewarding occasional failure, and appraising performance for its long-run implications. On other hand, if management wants to pursue cost leadership, this entails designing jobs which are repetitive, minimal training, cutting staff numbers to the minimum and rewarding high output and predictable behavior.

The attraction of the matching model clearly lies in its simplicity and the way if offers a basis for integrating HR practices. The disparate functions of HRM are brought together around a common theme, behavioral consistency with preselected competitive position. If we think in terms of our conceptual framework, this is the outcome desired by management. 3.4.2 The Capabilities Model The matching model of strategic HRM is linked to the product market oriented views of strategy advocated by Michael Porter 1985. A second model is linked to the resource-based view of the firm. The resource-based perspective offers a way of theorizing the contribution of HR strategy that does not rest solely on the reactive notions of the positioning model. Human resources can be defined as the pool of human capital under firms controlling a direct employment relationship. In resource based thinking, HRM can be valued not only for its role implementing a given competitive scenario but for its role in generating strategic capability for its potential to create firms which are more intelligent and flexible than their competitors over the long haul firms which exhibit superior levels of co-operation and operation. By hiring and developing talented staff and synergizing their contribution within the resource bundle of the firm, HRM may lay the basis for sustained competitive advantage. In order to get more complete model of strategic HRM, it should be linked to the employment relationship. The resource-based view of the firm, quite clearly, provides a basis for asserting that key human resources are sources of competitive advantage. Applying learning in a company involves people with skills who want to act together, who co-operate in powerful ways.

4. Competitive Advantage through Employment Relationships

Employment relationship has been recognized as a socio-economic exchange process which involves the mediation of different interests- the interest of employer to minimize the labor cost and the interest of the employee to maximize the labor price. Hence, employment relations engender bargaining which can either individual or collective and mobilization the power in order to protect or advance such interest. But how it can happened? First we must begin by analyzing the employees relationships drive, (conflict or co-operation) conflict should occurs in the employment relationship by the following reasons: Sharing the economic returns in other words the fair wage, lay-offs (job security) The authority (power).

The contemporary fashion of employment relationship tends to increase the participation and involvement as a mediate and control such conflict. Management knew that in order to control the conflict have to cope with the paradox of what might be called the motivation control equation. One side is the need to ensure the active and positive participation of the workforce in the pursuit of business objectives-something which may be critical where the quality of the product or service is directly depended on employee performance. This implies treating employees with respect, rewarding them fairly or even generously and, perhaps, seeking to elicit responsibility and trust. On the other side is the needed to control worker-behavior in the light of the economic realities of competition and the profitmotive. These imply treating the employee as an economic resource to be made as economically efficient as possible: in the practice this may require extracting additional productivity for no additional cost, minimizing wages and rewards and declaring redundancies.

5. Talent as a Competitive Advantage

Who does it take to create an effective HC-centric organization? The first answer many give is the right people. It is hard to argue with this, as talent is certainly critical to innovation, change, and high performance. Talent that brings needed expertise and ideas to corporations is fundamental to innovation, as is talent that accepts change and is capable of learning and executing new processes. The right talent is the fundamental building block when it comes to creating an organization capable of innovation and changing and using this as a source of competitive advantage. Whats more, acquiring the right talent is becoming an increasingly complex and challenging activity. The workforce itself has become more global, virtual, and diverse than it ever has been. Increasingly, a surplus of investment capital is changing a scarcity of talented people. The future is sure to hold more of the same; thus, organizations that excel at talent management will continue to enjoy a competitive advantage. There is also a good reason to believe that, in the United States at least, the educational system is not keeping up with the expected need for talented, well-educated employees. For example, the share of the U.S. workforce that has a post-high school education is not expected to rise significantly in the next twenty years, despite the fact that more and more of the work in the United States is expected to require at least a high school education. Meanwhile, the supply of educated workers outside the United States is expected to continue to grow. Increasingly, customer service representatives, radiologists, engineers, software developers, and editors can be sourced many places in the world. The challenge for organizations, therefore, is to create an infrastructure that will allow them to find the talent they need, develop it, motivate it to perform, and retain it. The ability to do this and to do it well is a critical part of creating a competitive advantage that is difficult if not impossible to duplicate.

6. How can the organization gain a competitive advantage through its employees?
To answer this question the organization must make the distinction between resource stock and process capabilities. It may be helpful to make an analytical distinction between human capital advantage and human process advantage. The organization can have the possibility of generating human capital advantage through recruiting and retaining outstanding employees, through capturing a stock of exceptional human talent, with productive possibilities. Human process advantage may be understood as a function of causally ambiguous, socially complex historical evolved process such as learning, cooperation and innovation, which are very difficult to imitate. Some firms may have highly intelligent managers but may fail to maximize the interplay of their talents as a result of excessive infighting between departments. Human resource advantage, then the superiority of one firm labor management over others might be conceived as the product of its human capital advantage and human resource advantage. Advantage, as it were, can be traced to better employee employed in organization with better processes. Also the organization must distinguish between the competitive advantage and sustained competitive advantage. Competitive advantage can occur only in situations of organization resource heterogeneity and organization resource immobility, whereas sustained competitive advantage exists only when other organizations are incapable of duplicating the benefits of a competitive advantage.

7 Conclusion

The arrival of the information-based, knowledge-intensive, service-driven economy has forced massive change on companies worldwide, most dramatically in the way they must redefine their relationship with their employees. The shift in strategic imperatives over the past 25 years has necessitated new battle plans. The competition remains intense for strategic market positions and for scare organization resources and capabilities, but the war for talent has shifted the focus of the battle front. Today managers must compete not just for product markets or technical expertise, but for the hearts and minds of talented and capable people. And after persuading them to join the enterprise, management also must ensure that those valuable individuals become engaged in the organizations ongoing learning processes and stay committed to the companys aspirations.

References
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