Describe how promoting synergies and core competencies enhances competitive advantage

ACHIEVING COMPETITIVE ADVANTAGE WITH INFORMATION SYSTEMS5the marginal gain is much larger.The larger the number of participants in a network,the greater the value to all participants because each user can interact with morepeople.The availability of Internet and networking technology has inspired strategies thattake advantage of the abilities of the firm to create networks or network with eachother.In a network economy, information systems facilitate business models based onlarge networks of users or subscribers that take advantage of network economies.Internet sites can be used by firms to build communities of users that can result inbuilding customer loyalty and enjoyment and build unique ties to customers,suppliers, and business partners.Define and describe a virtual company and the benefits of pursuing a virtualcompany strategy.

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- Explain how information systems promote synergies and core competencies.

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- Describe how promoting synergies and core competencies enhancescompetitive advantage.

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The relationship between Information Technology (IT) resources and competitive advantage has been the academic focus of attention and debate issues. Although many researchers found that IT investments contribute to help firms gain competitive advantage, there are still those who doubt like Solow (the Solow Computer Paradox), and Carr (IT doesn’t matter). The aim of this study is to research the relationship between IT resources, which are divided into four categories: IT infrastructure, IT technical skills, IT managerial skills, and IT-business partnership, and the competitive advantage of firms. Using data from 30 Algerian firms and the Pearson Coefficient, the results indicate a significant positive relationship between IT resources and the competitive advantage. Furthermore, the results show also a significant positive relationship between all categories of IT resources from one side, and competitive advantage of firm from the other side. Finally, the results show no significant relationship between firm’s age, type of industry, and the competitive of firms.

There are many avenues for companies to pursue to gain an edge against other businesses in their industry. In order to stand out, companies look to promote unique aspects of their business that make them better than the competition and more attractive to consumers. These differentiating characteristics of a company are referred to as core competencies. Core competencies are proficiencies or resources that give businesses a competitive advantage. If companies are able to develop their core competencies, they have a greater shot at beating out the competition and reaping the benefits.

Criteria for Determining Core Competencies

There are three main criteria that organizations can follow to determine the strategic strengths that will give them a competitive advantage. First, a core competency must bring with it the potential for accessing a wide variety of markets. This ensures that the product or service has an initial value with the added potential for even greater value. The second trait requires that the core competency adds to the customer benefit of the end product or service, which means that it is essential to the company’s final output and is not substitutable. The third criterion requires that the competency be difficult and costly to imitate. If a company’s core competency is unique and rare enough that competitors are unable to reproduce it, competing businesses will be unable to match their success.

Most successful companies have strong core competencies that they exploit to maximize business and profits. For instance, Amazon’s goal of being the “most customer-centric company on earth” embodies the core competency that gives them competitive advantage over numerous other retailers. Companies should be aware that just because their core competency has brought them success once, they may not always have the advantage when markets and consumers change. They must be able to change and adapt by developing new, updated core competencies that can help them retain their edge.

Competitive Advantage Strategies

Companies can achieve a competitive advantage a number of ways. Three common and effective strategies which companies have used to find success are cost leadership, differentiation, and market segmentation. Cost leadership refers to bringing consumers goods at a lower price. Companies can achieve cost leadership by improving efficiency in their operations. If they can lower overhead costs in manufacturing, labor, resources, and every other aspect that goes into the production of their goods or services, they can give consumers the greatest value, which can lead to increased sales and customer loyalty.

Differentiation refers to providing better or unique products. Companies can do this by making the highest-quality products, delivering services faster than competitors or reaching more customers quickly and conveniently. Companies achieve differentiation by using creativity and innovation to fill a need or solve a problem that no other company has been able to solve. Since these companies are able to make a higher-quality product, they are able to charge more, which increases their profit margins.

Market segmentation, which is also referred to as focus, is another strategy for achieving competitive advantage. It requires that companies understand the specific needs of their target market better than their competitors. This often involves focusing on a particular niche market that larger corporations overlook. This strategy can be combined with the cost leadership or differentiation strategies. For example, some companies differentiate themselves by providing a unique, personalized service to a select group who they know will be willing to pay more for the ease of the one-on-one service.

How Core Competencies Benefit Companies

Developing core competencies enables organizations to gain a competitive advantage with the express benefit of increasing sales and profits. Companies achieve this through innovation in developing products and services. While seeking ways to fill niche target markets, deliver services quickly and efficiently, and increase product quality, companies are bringing consumers better products and better values. This is something that customers recognize and payback with loyalty. Another benefit of developing core competencies is that it helps organizations establish the essence of their brand. If a company’s core competency lies in its outstanding customer service, then that is also an excellent attribute that can be used for marketing its brand.

Whether launching a new business idea or rebranding a product to fit the current market, developing core competencies can lead to a competitive advantage. Companies need to exploit the special strengths that make their product or service stand out among others in the industry. Understanding these concepts will set resourceful and strategic companies apart from the rest.

How Ohio University Can Help

At Ohio University, we understand how important an MBA can be to advancing your career. We also know that your MBA should be affordable, engaging, and academically-rigorous. That’s why we have designed an online MBA that is comprehensive and challenging, yet flexible to fit your lifestyle. When you earn your MBA online from Ohio University you are making a conscious decision to improve your professional value and position yourself for current and future business opportunities.

Recommended Reading

Four Ways Predictive Analytics is Changing the Course of the Future

Sources

Economist.com, Core competence
The Balance.com, What Is Competitive Advantage?
Strategic CFO, Core Competencies Definition

How do information systems promote synergies and core competencies How does this enhance competitive advantage?

How do core competencies lead to a competitive advantage?

What are core competencies and why are they important?

What strategies can companies use to gain competitive advantage?