Is Creating Competitive Advantage For Firms Commerce Essay

Understanding the function of IS in making competitory advantage for houses has gained considerable involvement among IS research workers. Based on the resource-based position, a figure of surveies have attempted to explicate the function of IS as a resource, in bring forthing strategic benefits. Anyhow, there is small apprehension of how houses combine assorted resources that work in coordination with each other to bring forth competitory advantage in a given country. This research intends to place the set of supply concatenation resources that when augmented by IS could bring forth competitory advantage in supply concatenation. We farther place the consequence of this competitory advantage on house public presentation. Hence the intent of research is 1. Designation of cardinal complementary resources for IS to bring forth supply concatenation advantage, 2. In the presence of these resources, demoing the consequence of IS on competitory advantage and 3. Showing the impact of supply concatenation competitory advantage on house public presentation. The research will concentrate on houses in the dairy sector in Pakistan. Further research may demo if the same set of resources can take to provide concatenation advantage in other sectors and contexts.

Prior Research & A ; Problem Identification


One of import concern for research workers in strategic direction is to understand how houses create and sustain competitory advantage ( Porter, 1985 ; Rumelt, 1984 ) . A figure of theories in strategic direction literature have been proposed to explicate the being and size of houses, for illustration the Transaction Cost Economics ( Williamson, 1975 ) that is based on the premiss that houses exist to cut down market dealing costs. One of the most outstanding in this country, the positioning school has dominated scheme research for several decennaries. Harmonizing to this school house ‘s public presentation depend both on the industry in which the house operates and on house ‘s place in the industry. Following from the positioning school, the model that has been most widely used to understand and explicate scheme suggests that houses gain competitory advantage by capitalising on strengths and avoiding failings while working chances and neutralizing menaces in environment. Although both internal analyses of organisational strengths and failings and external analyses of chances and menaces have received some attending in literature, there has been primary focal point on analysing house ‘s chances and menaces in its competitory environment ( Barney, 1985 ) . For illustration, Porter ‘s ( 1980 ) five forces theoretical account emphasizes the actions a house can take to make defendable place against competitory forces.

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Resource-based position exists as another theory of the house stressing internal strengths of organisations derived from costly-to-copy resources ( Penrose 1959, Peteraf 1993 ) .

A figure of information systems ‘ ( IS ) research workers have used resource-based position to explicate the function of IT in bring forthing competitory advantage for houses ( Mata et al. , 1995, Powell and Dent-Micallef, 1997, Ray et al. , 2001 ) .

Resource-based position focuses on strategic resources. These resources, harmonizing to resource-based position, are the beginnings of economic rent and hence cardinal drivers of public presentation and competitory advantage ( Conner, 1991 ) . Resource-based position physiques on two cardinal premises i.e. resource heterogeneousness and stationariness. Resource heterogeneousness means that resources differ across houses. If all houses had same resources than no 1 house will be able to bring forth above normal returns because all houses would be able to utilize the resources in similar manner thereby restricting the advantage any one house may acquire by possessing these resources. Similarly if resources could be easy transferred from one organisation to another than any one house possessing resources with ability to bring forth excess returns would non be able to make so because other houses may get such resources. Harmonizing to Barney ( 1991 ) , steadfast resources to hold the possible to bring forth sustained competitory advantage should hold four properties. First, they must be valuable to work chances and/or neutralize menaces in a house ‘s environment. Valuable resources enable a house to gestate of or implement schemes that improve its efficiency or effectivity. The resources must besides be rare among house ‘s current and possible competition. If a peculiar valuable house resource is possessed by a big figure of houses, so any one house will non be able to derive a competitory advantage since all houses will be in a place to work the resources in the same manner. Third resources should be amiss immobile. If other organisations could get the resources that a house possesses than it would shortly free its advantage. Finally the resources should be non-substitutable. If replacements are available for a house ‘s resource, so other houses will be able to replace this resource hence striping the resource from its ability to bring forth above normal returns.

Adding to the resource-based position, some research workers have pointed out the importance of resource appropriability which relates to the rent gaining potency of a resource ( Wade and Hulland, 2004 ) . This means that unless a house is able to utilize a resource for a cost less than the value generated by the resource, the house will non bask the benefit of possessing the resource. If, for case, one organisation has a talented employee who adds value to it but asks for a wage higher than his value add-on so the house will non profit from the value add-on that the employee provides.

The resource-based position may farther be developed by doing some basic differentiations among the type of resources that can bring forth above normal returns ( Miller and Shamsie, 1996 ) . These resources may therefore be grouped based on their similarities and differences. For case, we may hold a group of resources falling into the sphere of supply concatenation and term them as supply concatenation resources. Similarly we may hold selling resources, knowledge-based resources and so on.

Furthermore, resources are industry specific i.e. resources in one industry may hold the possible to bring forth sustained competitory advantage for a house runing in one industry but non for houses in other industries. For illustration, merchandise R & A ; D resources may be beginning of competitory advantage for houses runing in microprocessors ‘ industry but may non be so for houses in trade goods ‘ concern. Similarly trade name name may be more valuable in experiential service industries than in industries where quality can be determined prior to buy ( Nayyar, 1990 )

Previous research work to understand the application of resource-based position in specific industries has been conducted in the bearings industry ( Collis D.J. , 1991 ) , movie industry ( Miller and Shamsie, 1996 ) and with logistic service suppliers ( Wong and Karia, 2009 ) . Anyhow, resource demands for sustained competitory advantage in the dairy industry are non good understood.

Equally far as IS research workers are concerned, a figure of them have used RBV in finding how information systems resources may bring forth competitory advantage for houses ( Powell and Dent-Micallef, 1997, Ray et al. , 2001 ) . Mata et Al. ( 2009 ) concluded that ‘managerial IT skills ‘ was the lone IT property ( out of the four considered in their analysis ) that could take to sustained competitory advantage ( SCA ) . Anyhow, resources and specifically IS resources, act in concurrence with other steadfast resources to bring forth strategic advantage ( Ravichandran and Lertwongsatien, 2002 ) . Though managerial IT skills carry through the standards for a resource to bring forth sustained competitory advantage ( Mata et al. , 2009 ) these accomplishments can non bring forth SCA in isolation. If a house has better managerial IT skills but improper distribution web, managerial accomplishments may assist acquire client information in a timely mode, but can non itself lead to timely bringing of order, for case. Managerial IT skills may therefore, be a beginning of competitory advantage merely when combined with other resources ( Wade & A ; Hulland, 2004 ) . Therefore any property of IT can merely take competitory advantage, if it can synchronise with other resources to bring forth this advantage.

Pavlou and El Sawy ( 2006 ) have studied the consequence of IT on competitory advantage in new merchandise development through sweetening of new merchandise development capablenesss. Anyhow, it is non clear which resources when combined with IT can take to competitory advantage in supply concatenation. Furthermore, since inward supply concatenation is different from outbound supply concatenation, both using different resources and capablenesss these need to be analyzed individually.

Concentrating on the dairy sector, we study the consequence of IS resources on inbound and outward supply concatenation capablenesss. We furthermore look into the consequence of these supply concatenation capablenesss on supply concatenation competitory advantage and house public presentation. We begin by explicating the concepts information systems resource, inbound and outward supply concatenation capablenesss, supply concatenation competitory advantage and public presentation.

Information Systems Resources

We, in this survey, use the typology of key IS resources and capablenesss developed by Wade and Hulland ( 2004 ) . They classify IS resources into inside-out, outside-in and crossing. Wrong-side-out capablenesss are deployed in response to market demands and are normally internally focussed. Outside-in capablenesss include expecting market demands, making lasting client relationships etc. which are all externally focused. Crossing capablenesss involve both internal and external analysis and are required to incorporate inside-out and outside-in capablenesss ( for inside informations see Wade and Hulland, 2004 ) .

Supply Chain Capabilities

Council of Logistics Management ( CLM ) defines supply concatenation capablenesss as the ability to consistently, strategically organize the traditional concern maps and tactics across concern maps within a peculiar organisation and across concerns within the supply concatenation for the intents of bettering long term public presentation of single organisations and the supply concatenation as a whole. Harmonizing to Collis ( 1994 ) , supply concatenation capablenesss refer to the ability of an organisation to place, use, and absorb both internal and external resources to ease the full supply concatenation activities. Supply concatenation capablenesss may be divided into inbound and outward supply concatenation capablenesss ( Chase et al. , 2001 ) . Inbound supply concatenation capablenesss, from buying and supply concatenation direction position, involves integrating of the supply base that evolved from the traditional buying and stuffs maps. Subjects such as provider choice, provider engagement, fabricating public presentation, supplier public presentation have been studied from supplier side ( Choi and Hartley, 1996 ) . Outbound supply concatenation capablenesss, from transit and logistics direction position, focal point on distribution and logistics direction with the end of cut downing stock list and transit cost.

We measure inward supply concatenation capableness as the ability of organisation to seamlessly incorporate both information and stuff flows to the house from the providers. Outbound supply concatenation capableness is measured as the ability of an organisation to present its merchandise to the terminal consumer at the right clip, in right measure and at right topographic point. If the organisation is non able to administer its merchandise to the consumers when they want it, in the measure they want it and at the topographic point they want it, clients will hold the chance to travel to rivals ‘ merchandise.

Supply Chain Competitive Advantage

Competitive Advantage comes from a house ‘s ability to distinguish itself from the rival or its ability to sell at a lower cost than rivals and still be able to keep above normal returns ( Conner, K.R. , 1991 ) . In other words, it is the extent to which an organisation is able to make a defendable place over its rivals ( Porter, 1985, McGinnis and Vallopra, 1999 ) . It hence comprises of capablenesss that enable a house to make such place. The empirical literature has systematically shown cost, quality, bringing and flexibleness to be of import competitory capablenesss ( Tracey et al. , 1999 ) .

Firms may hold competitory advantage in some concern activities and competitory disadvantage in others ( Ray et al. , 2004 ) . Supply concatenation can besides be a beginning of competitory advantage for houses. Globalization has made it possible for organisations to disaggregate the transmutation procedure to accomplish benefits of planetary competences. Many organisations are choosing their providers and traveling their procedures such that they could acquire that maximal value for minimal cost. Since reconfiguration of supply concatenation lends tremendous benefits for organisations ( Chase et al. , 2001 ) , companies that can run a superior supply concatenation as compared to rivals have the chance to harvest above-normal returns. Hence deriving competitory advantage in supply concatenation can be of import for organisations.

In supply concatenation the two most of import determiners of competitory advantage are cost and reactivity ( Fisher, M. L. , 1997 ) . Responsiveness is defined as the extent to which channel spouses respond hand in glove to environmental alterations. We hence mensurate our supply concatenation competitory advantage concept based on these two variables.

Firm Performance

Organizational public presentation refers to the ability of an organisation to accomplish its market-oriented and fiscal ends ( Yamin et al. , 1999 ) . Performance has been operationalized utilizing assorted standards, including return on investing, market portion and net income. We use market portion and operating net income to mensurate steadfast public presentation.

Theory, model & A ; hypothesis

The consequence of information systems ( IS ) on competitory advantage and its impact on fiscal public presentation has been an of import country of treatment for information systems ‘ ( IS ) research workers and practicians ( Devraj and Kohli, 2003 ) . Despite a figure of documents that have appeared in this country there are still debates about the strategic value of IS ( Carr, 2003 ) . Results relating IS investing to public presentation show fluctuation across houses. We hence need to understand what types of organisational factors and direction patterns contribute to a house ‘s ability to bring forth concern value from IS ( Aral and Weill, 2007 ) . More specifically we need to understand whether IS effects competitory advantage straight or indirectly ( Wade and Hulland, 2004 ) . Several research workers have argued that the value of IS needs to take into history complementary resources ( Ranganathan and Brown, 2006 ) . Though there is grounds of a general relationship between IS and organisational public presentation, we still need to understand the specific factors driving these general consequences ( Aral and Weill, 2007 ) .

The intent of this research is to reply what resources IS need to unite with to bring forth competitory advantage in supply concatenation. The research will besides demo the importance of IS resources in bring forthing this advantage. Looking at the dairy sector, we identify supply concatenation capablenesss that houses get with the aid of IS. We furthermore analyze the consequence of these capablenesss on supply concatenation advantage taking to steadfast public presentation.

We develop and test hypotheses sing function of information systems in concern public presentation through supply concatenation capablenesss and advantage.

IS Resources and provide concatenation capablenesss

Resource-based theory nowadayss steadfast assets and capablenesss as two beginnings of competitory advantage and house public presentation ( Day, 1994 ) . Harmonizing to Day ( 1994 ) house capablenesss are ‘complex packages of accomplishments and accumulated cognition, exercised through organisational procedures ‘ that enable houses to convey assets together and deploy them well. Examples include Wal-Mart ‘s logistics capablenesss and L.L.Bean ‘s superior order fulfilment processes.

Information systems resources augment supply concatenation capablenesss that lead to competitory advantage in supply concatenation. Since, IS has the possible to develop, add, incorporate, and let go of other cardinal resources over clip ( Wade & A ; Hulland, 2004 ) , specifically with regard to provide ironss where timely information processing is necessary to cut down costs, we highlight the particular function that IS plays in bring forthing supply concatenation advantage.

Equally far as inward supply concatenation is concerned, IS resources can assist better capablenesss in this country by timely sharing information sing demand of stuffs with the providers. Suppliers can therefore be better prepared to present the right measure at the right clip. Sharing of information may besides intend that organisations would develop trust and relationship with its providers that would be long term. This relationship would farther heighten inward supply concatenation capableness to work in coordination and therefore deliver consequences.

IS resources can play an of import function in the development of outward supply concatenation capablenesss as good. Integrating the outbound supply concatenation utilizing information systems would enable organisations to capture consumer information in existent clip and therefore do them more antiphonal to client demands and demands. The system would besides assist organisations to track the motion of their merchandises through systems like RFID ( Radio Frequency Identification Device ) and therefore be able to better command the bringing of goods to consumers. Hence we develop the undermentioned hypotheses.

H1A: Information systems enhance inward supply concatenation capablenesss for organisations in dairy sector.

H1B: Information systems enhance outbound supply concatenation capablenesss for organisations in dairy sector.

Supply concatenation capablenesss and supply concatenation competitory advantage

Supply concatenation capablenesss and resources are the edifice blocks for supply concatenation scheme and possible beginning of competitory advantage ( Morash and Lynch, 2002 ) . We develop hypotheses sing the consequence of inbound and outward supply concatenation capablenesss on supply concatenation competitory advantage.

Inbound supply concatenation or supply base in dairy industry is more normally known as the milk aggregation web. The intent of milk aggregation resources is to guarantee consistent supply of quality milk. Resources, in this class, include relationships with husbandmans, aggregation centres to guarantee proper aggregation of milk and avoid milk wastage etc. In developing states, provider development is an built-in portion of milk aggregation web. This is to guarantee that quality milk is available in coveted measures throughout the twelvemonth. The aggregation web is a immense investing of capital. Developing the web besides takes clip and brings important larning with it. Once the web is developed, it is hard for rivals to copy. Collection web hence becomes an idiosyncratic resource group that can bring forth competitory advantage for houses in dairy sector.

Outbound supply concatenation or distribution web though valuable is non a rare resource as it is easy for organisations to double any advantage that one house has in distribution. Although distribution of chilled milk remains a challenge, UHT treated packaged milk has a shelf life of about a month and does non present great trouble in distribution. Anyhow, distribution web resources remain of import and valuable since high costs are incurred in distribution. Nevertheless organisations with old ages in concern have learned the fast ones of the trade. Besides the handiness of experient 3rd party logistic service suppliers has made this resource class non-rare. Hence distribution web can non be a beginning of supply concatenation competitory advantage in dairy sector.

H2A: Inbound and outward supply concatenation capablenesss are non jointly required to derive supply concatenation competitory advantage in dairy sector.

H2B: Inbound supply concatenation capablenesss would take to competitory advantage for houses in dairy sector.

H2C: Outbound supply concatenation capablenesss will non take to competitory advantage for houses in dairy sector.

Supply concatenation competitory advantage and house public presentation

Competitive advantage can take to high degrees of economic public presentation, client satisfaction and relationship. For case, trade names with high client trueness would confront less exchanging in their mark sections thereby increasing gross revenues and profitableness. Similarly an organisation offering premium quality that rivals are non, can demand higher monetary values from consumers and hence addition its net income borders. Similarly, organisations that have antiphonal supply concatenation can rapidly react to client demands and therefore demand higher market portion. Given fixed monetary values, houses with low cost supply concatenation can heighten their net income borders as compared to rivals if they are confronting higher costs. Hence we have the undermentioned hypothesis.

H3: Supply concatenation competitory advantage will positively impact public presentation of houses in dairy sector.

Consequence of IS Resources on Firm Performance via supply concatenation competitory advantage



Inbound SC capablenesss




Outbound SC capablenesss


Firm public presentation

Competitive advantage in SC

IS Resources




Operating Net income



SC reactivity

Scandium cost

Fig. 1

Research Approach/ Methodology

We will roll up informations from organisations in the dairy sector in Pakistan. We will carry on field interviews of supply concatenation directors, logistics directors and procurance directors who are responsible for a house ‘s supply concatenation activities. Following Seidler ( 1974 ) we identify whether the respondent was in a place to generalise ‘about forms of ( relevant ) behaviour, after sum uping either observed or expected organisational dealingss ‘ . Since our respondents would be corporate directors managing supply concatenation activities, it would be sensible to anticipate that they can offer equal overview of supply concatenation activities. We will place the types of information systems that organisations are utilizing and sort them into the typology developed by Wade and Hulland ( 2004 ) . This will bespeak the figure of organisations that are utilizing inside-out, outside-in, crossing or a combination of these resources.

We so study the consequence of information systems ‘ deployment on inbound and outward supply concatenation capablenesss. We identify the figure of houses whose supply concatenation capablenesss enhanced after execution of IS. If the figure of houses whose supply concatenation capablenesss were enhanced after the execution of IS are significantly greater than the figure of houses whose capablenesss were non enhanced we conclude that IS has a positive consequence on supply concatenation capablenesss or frailty versa.

To analyse the consequence of supply concatenation capablenesss on supply concatenation competitory advantage we collect public presentation prosodies on cost and reactivity from our mark organisations before and after development of supply concatenation capablenesss. We so compare these prosodies with other organisations in the industry. If there is important betterment in a metric ( outweighing the consequence of competition ) after development of supply concatenation capablenesss so we conclude that supply concatenation capablenesss lead to competitory advantage in supply concatenation.

Similarly the consequence of supply concatenation competitory advantage on steadfast public presentation may be tested by roll uping figures on market portion and operating net income. If the value of these has significantly improved after development of supply concatenation competitory advantage so hypothesis sing the positive consequence of supply concatenation competitory advantage on public presentation would be supported.

As mentioned in Boudreau et Al. ( 2001 ) , we can run collateral factor analysis to look into the convergent and discriminant cogency of concept. Dependability may be tested utilizing internal consistence consequences. We can find the goodness of fit index and CFI to show theoretical account tantrum.

In our analysis, the control variables will be the industry and environment. In this instance we are aiming the dairy sector. Furthermore, environment in Pakistan can be termed as turbulent ( maintaining in position the uncertainness in state ‘s environment ) . So our research will post consequences for such environment.

Theoretical/ Practical Outcomes of Research

This research will place the set of resources that are required to derive sustained competitory advantage in dairy sector. It will besides foreground the of import function that IS resources drama in bring forthing this advantage. It will therefore be an of import add-on to literature as it will place the resource combination required for IS to really supply above-normal supply concatenation public presentation in disruptive environment. It will besides be an interesting penetration for directors as it will assist them place the set of resources that a house has been able to get to bring forth competitory advantage. The research will place the complimentary supply concatenation capablenesss developed by IS resources that lead to provide concatenation competitory advantage. Since the consequence of IS on public presentation is non good understood, this will be good in understanding how IS can take to organisational public presentation through betterment of supply concatenation capablenesss. Further research is possible to happen out resources possessed by houses that do n’t hold supply concatenation competitory advantage and hence identify the difference between resource set of a house that has competitory advantage in supply concatenation vs. those that do n’t. Research may besides be conducted to demo if the consequences are valid across industries.


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