SCA has its roots from dynamic capabilities theory and resource-based theory. The underpinning notion of SCA and dynamic capabilities theory suggests that organisations can create competitive advantage based on its distinctive or core capability (Kearns & Lederer, 2003; Weerawardena & O'Cass, 2004). It is believed that every organisation is capable of acquiring and cultivating resources that is difficult to replicate (Kearns & Lederer, 2003). Hence, each organisation has the potential to build SCA.
SCA is important as it enables organisations to develop distinctive capabilities to deliver products or services to its customers that are unique to their competitors (Leskovar-Spacapan & Bastic, 2007). The researchers go on to illustrate that maintaining SCA is a continuous effort. In an effort to build core or distinctive capabilities, organisations can utilise its technology, complementary assets, resources or organisational work processes that is fundamental to the organisations core business or delivery to customers.
SCA can be regarded as the mechanism that fully maximises the organisations resources in exploiting the current business opportunities while exploring other resources in ensuring sustainability of its competitive position for the future based on durability, mobility and replicability (Chaharbaghi & Lynch, 1999). Hence, sustainability is considered to be a dynamic process rather than static and requires organisations to embrace change positively.
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SCA allows organisations to reach out or secure a better market share. In another words, capabilities done extremely well, to the extend, better than competitors are consciously developed and improved such that it creates a competitive advantage that is valuable, rare, difficult for competitors to duplicate or substitute with another capability. These capabilities could be in the form of people, processes, systems or even strategy formulation. Organisations that have successfully gained SCA tend to adopt specific strategies such as innovation, improved processes, superior quality or lower cost (Rijamampianina et al., 2003). However, what is even more difficult is sustaining the competitive advantage that has been created. This requires constant test of fit and reconfiguration to key work activities to beat the rivals. When competitive advantage is created, organisations can strive to move for sustainable competitive advantage and after that organisations can enjoy greater or improved business performance.
In the past, physical assets were closely linked to SCA, however in todays’ level of market liberalisation, it is knowledge assets that are linked to SCA. The very nature of knowledge assets is that it cannot be procured rather is something that has to be developed within the organisation and prevails within the structure and processes (Teece, 2000). With that realisation comes the concern of effective knowledge transfer to ensure that organisations can increase effectiveness and core competence. Knowledge that is trapped in employees or systems and not made available at the right time to the right people is of minimal value. This has cost implications which organisations have yet to be able to fully quantify. This is where the importance of correctly applying IT capability and making the appropriate investments to ensure knowledge is readily available when required.
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Barney (1991) believes that firm resources are a source for achieving sustainable competitive advantage and suggests four attributes to be acquired by any organisation intending on gaining sustainable competitive advantage. The first attribute is value with the capacity to exploit opportunities and neutralise threats. The second attribute is the element of rareness amongst current and potential competitors. The third attribute is inimitability whereby it poses extreme difficulty for current and future competition to duplicate their strategy either due to high cost or complexity. The last attribute is nonsubstitutability which illustrates that even if the competition manages to imitate a strategy, it will not be possible to substitute the resources with similar resources. Barney explains firm resources as rare and valuable resources that potentially deliver competitive advantage. After a decade had passed, a revisit of the article published in 1991 still proved relevant and worthy in measuring sustainable competitive advantage (J. B. Barney, 2001). These attributes forms the dimensions that will be used in this study to measure SCA.
SCA in Practice
The outcome of a study on Australian organisations revealed that firm resources play an important role in increasing organisational performance while industry structure failed to indicate any influencing factor over organisations competitiveness (Galbreath & Galvin, 2008). Based on the study, the importance of firm resources is fortified in explaining the strategic management focus of internal or external forces for competitive advantage.
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Practitioners have capitalised on information technology in sustaining their competitive advantage by practising the “create-capture-keep” paradigm that has received equal support from academicians (Mata et al., 1995). The key to creating SCA is when organisations can create a competitive advantage such that it is difficult and pose disadvantages for competitors to duplicate or replicate. The importance of information technology in accelerating competitive advantage is believed to be more effective when driven strategically whereby technology can be applied to product or process enhancements (Porter, 1985).
Weerawardena & O’Cass (2004) reported that SCA is very closely linked with innovation capabilities of an organisation. The innovation capabilities can be classified as both technical and non-technical capabilities in order to gain competitive advantage. This brings awareness that SCA requires organisations leaders and implementers to be able to think innovatively of sharpening their core capabilities to become SCA. The outcome of the study supports the notion that SCA can be developed using decision- making based on superior entrepreneurial skills, nurturing market-focused learning capabilities and innovation.
For an organisations unique proposition to make an effective contribution to the organisational performance and create SCA, Johannessen & Olsen (2003) suggests that the unique proposition first needs to be moulded to become a competency and later a distinctive competency such that it is something their competitors do not possess. Apart from owning assets, organisations’ knowledge can also be transformed into a distinctive competency to contribute to SCA (Johannessen & Olsen, 2003). In order for knowledge assets to be effectively applied in the context of building distinctive competency, they proposed the application of effective training on employees. Their study is based on
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efficiency-based approach rooted in Penrose’s (1959) theory. The researchers argue that training is important as it ensures the future state of a current distinctive competence, since this is fundamental to SCA – such that even future competition cannot duplicate one’s competency. However, their findings uncover that although the impact of training is recognised by organisations, nevertheless the application of training is still very conventional and highlights the importance of dynamic contextual training and the need to incorporate elements of knowledge-based theory on knowledge integration.
According to Peppard & Ward (2004), another aspect that is closely linked with creating and sustaining competitive advantage is the application of technology which includes IT capability and IT investments. The researchers explain that IT capability and investments can only deliver results when aligned with strategy. They found that among the common causes for ineffective IT investment were due to misalignment with strategy. It is noted that organisations may gain “first mover advantage” through IT investment and IT capability. However, if the competency can be quickly duplicated by rivals then it is not an SCA. Hence, the researchers advocate the IT capability and investments alone are unlikely to create SCA, however can create business value when linked with products, services, processes and business models.
A relatively recent study by Wu (2010) examined SCA based on resource-based view and dynamic capability theory in order to determine the relationship between dynamic capabilities and competitive advantages along with the moderating effect of environmental volatility. Based on Taiwanese organisations, the study revealed that dynamic capabilities influences competitive advantage and that higher environmental volatility reduces competitive advantage of organisations (L.-Y. Wu, 2010).
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