THE EXTENT TO THE CREATION, SHARING UTILIZATION OFKNOWLEDGE IS

CENTRAL TO THE RESOURCE BASED VIEW OF COMPETITIVE ADVANTAGE

Isaac Manyozo
Student Number: R1811D6916424
MBA – Master’s in Business Administration – Code UU-MBA712
Tutor: Annette Christinal
Date: 14th April, 2019
THE EXTENT TO THE CREATION, SHARING UTILIZATION OFKNOWLEDGE IS
CENTRAL TO THE RESOURCE BASED VIEW OF COMPETITIVE ADVANTAGE
Experience, observation and information have shown that factors or elements and situations
surrounding business operations in the modern days are changing and getting aggressive at a high
speed and hence, progressively becoming less and less conducive to successes of businesses. In
confirmation, Wajungu and Oloko (2016) declared that the operating environment for businesses
these days is changing at a faster rate as it responds to the influence of a variety of prevailing
factors such as globalization, changing customer and investor demands, continuously rising
competition for products on the market and changing legal and economic policies within the
different economies. This prevailing situation is more or less of a crisis to ownership and
management of different organizations. This has put pressure on businesses as it has made it very
difficult for organizations to thrive and achieve set goals and objectives that are meant to ensure
that they continue to be profitable, successful and to continue to exist. This situation challenges
businesses to ensure that there management and leadership is more efficient and effective. In order
for organizations to sail through the rough waters being faced these days, the main solution must
be to employ strategic management in connection with transformational leadership. According to
UU-MBA712 (2019) strategic management is defined as “the process of formulating and
implementing strategies to accomplish long-term goals and sustain competitive advantage”.
Transformational leadership transmits to the group a perfect foresight for the control of the
situation and also shows great commitment to duty is able to recharge and energize a team. Cherry
(2018). Strategic management and Transformational leadership alone are not enough for
organizations to survive. These concepts can only work successfully these days if they are
complimented by knowledge. “Knowledge has emerged as the most strategically significant
resource for the firm” (Dasgupta and Gupta, 2009). Knowledge is a set of ideas that is contained
within an organization. It is generally categorized into two types namely the explicit knowledge
and implicit or tacit knowledge. Explicit knowledge is the type of knowledge that is stored in data
bases or documents while implicit knowledge is the kind of knowledge that is stored in people’s
brains. Explicit knowledge is emphatically the type that can be recorded, transferred, and shared.
It is definable and can be protected by the legal system. Implicit or Tacit knowledge on the other
hand is basically the know-how, and is by nature difficult to describe. It can be demonstrated but
rarely codified, and resides with its holder. It gets transferred through demonstration and on-the-
job training. Most organizations face major challenges when it comes to how to manage the
implicit knowledge (Dasgupta and Gupta, 2009). Most organizations face a very big challenge in
management of implicit knowledge. Management of implicit knowledge can happen indirectly
however by managing different factors that contribute to an organization’s culture, structure,
technology and leadership. The knowledge possessed by an organization coupled with how it
rapidly learns are becoming as important as the organization’s products and services. As Raguz,
Zekan, and Peronja (n.d.) put it, noticeable resources have ceased to be the only reliable assets for
organizations in modern times as businesses in today’s global economy continue to depend on
their immaterial assets like information and knowledge.
In terms of management and to an organization, knowledge is referred to as the ideas that people
have or know about an organization’s customers, suppliers, products, processes, mistakes and
successes. All organizations learn or possess knowledge. Garvin, (2000) opined that an
organization cannot improve without getting fresh ideas and when learning is not available
repetition of old practices occurs and businesses experience fake and temporary transformation.
User knowledge is a tremendous source of innovation that happens in a firm. “Sustainable
development cannot happen without innovation. Every organization is facing a test to create
innovation strategies that take into account stakeholders requirements in addition to changes in
the environment (Dasgupta & Gupta (2009). The external environment of businesses is
progressively getting rough as such organizations have become reliant on their resources and
capabilities as the major sources of competitive advantage.
This essay discusses how far the creation, sharing and utilization of knowledge has become an
important factor to resource based view of competitive advantage. “Efficient knowledge use
enhances competitive advantage and improves organizational success. Knowledge management
has become increasingly important as organizations realize that effective use of their vast and
varied knowledge assets and resources provides them with the ability to innovate and respond to
fast changing customer expectations (Singh and Ditcher, 2011).”
Competitive advantage refers to the potential, characteristic or something that is unique to an
organization that make that organization to perform in a more superior way than its competitors.
UU-MBA712 defines competitive advantage as “the ability to use resources so well that the
organization performs better than the competition.” According to Halawi, Alanson & McCarthy
(2005) “The resource based view (RBV) of a firm defines a strategic asset as one that is rare,
valuable, imperfectly imitable and non-substitutable. Knowledge is seen as a strategic asset with
the potential to be a source of competitive advantage for an organization.” Knowledge is the main
resource that enables organizations to improve and gain competitive advantage as such most
organization do nurture it. This is evident in most organization as they tend to invest in continuing
education, provide upgrading through short courses and trainings. The main concept employed to
achieve this is known as knowledge management which is the concept concerned with finding,
gathering, assessing, organizing, and sharing information or knowledge. Halawi et al (2005) put
it that there is progressive and steady increase in the development and practice of knowledge
management (KM). Knowledge management offers conducive and supportive environment for
collection and dissemination of already available knowledge. Knowledge management is largely
used as a strategic tool in an organization to achieve long term objectives generally through
development of skills to achieve a competitive advantage, storage and dissemination on knowledge
and through improvements in decision making and organizational performance. Firms need
knowledge to develop products; they need knowledge about customers and competitors in order
to identify niche markets and serve them effectively. For instance, due to the turbulent business
environment, organizations these days develop strategies to study and think about the other
companies in the same industry or business. It has become imperative in modern days to get
intelligence on what the competitors do better than everybody else like particular technology
possessed, routines of the organization processes and the culture within the competing
organization. This has been necessitated by the need to get more innovative and improve.
“Companies do not respond to the competitive environment simply, but they try to create
knowledge-based competitive advantage to combat with their competitors evermore (Rahil,
2012).” According to Chuang (2004), quoting Clemens (1991), “resource based has surfaced as a
key competitive priority in many organization activities including corporate strategy.” In defining
resource based Chuang (2014) quoted Barney, et al (1991) who defined resource based as the
resources and capabilities that long differing organizations which are apparently in competition
do contain.
Today’s turbulent business environment has made organizations to face increased demand for both
radical and incremental change. The ever increasing pressures exerted on organizations by their
external environments coupled with unending appearance of counterfeit products in the markets
has brought about a great need for businesses to strengthen their core competences, efficiencies
and effectiveness. “Organizations need a lasting and sustainable competitive advantage that can
endure the constant encroachments of competitors which lies in talent management and knowledge
management, given that both of those two sources can hardly be copied (Bailey, 2018).”
Organizations have become aware that to survive in the external environment and to continue to
be competitive, the businesses must factor in knowledge in their management activities. It is of
great benefit that organizations must have special knowledge that is hard to copy, the know-how.
This is in line with Rahil (2012) who citing (Johannsen & Olsen, 2003) said that the capabilities
brought about by the knowledge management based assets cannot easily be copied. Companies
make great investments in knowledge continuously so that they can have better personnel and be
able to pick out things in the environment and be able to note all the areas needing improvement.
Investment these days is also made externally to end users and customers so that they provide
feedback wherever there is an insight to help businesses. This only explains how knowledge
management is necessary or central as it brings value development which brings competitive
advantage there by generating more sales or attract more customers. In service industry, investment
in knowledge management is also made through research on how lead organizations the more
knowledge they have the better able people become at absorbing in the environment. People .In
contrast to Strength, sustainable competitive advantage cannot be achieved by availability of
tangible resources. It can be achieved by intangible capabilities such as creativity, talent and
innovation. (Bailey, 2018). The modern era is generally a knowledge era apart from being a new
era where knowledge which is defined as a set of ideas that are contained within an organization,
has become an important asset for organizational performance in that it is a tremendous source of
innovation that happens in a firm. Thus the strengths of an organization are grounded in its
resources, capabilities and competencies that help a company attain a competitive advantage based
on superior efficiency, innovation, and quality and customer responsiveness. (Kibet et al 2010).
Knowledge management is used as a strategic tool in an organization to achieve long term
objectives. This is accomplished by development of skills that enable achievement of competitive
advantage by firms, the storage and dissemination of knowledge and by improvement of decision
making and organizational performance. In modern day’s businesses, a primary source of profit
and competitive advantage is the knowledge of how to make products and provide services
efficiently and effectively in ways that other competing organizations cannot imitate. “Competitive
advantage then is the ability of the firm to occupy a superior position in an industry and outperform
its rivals on the primary performance goal- profitability (Kibet, Samuel, Magutu, and Yoga,
2010).” This assertion is agreed by Halawi, Aronson & McCarthy (2019) who opined that in
relation to resource based view of a firm, knowledge is considered as strategic resource that has
the capability to create competitive advantage for an organization. “The resource-based view
(RBV) of the firm defines a strategic asset as one that is rare, valuable, imperfectly imitable and
non-substitutable (Halawi et al, 2019)”. The ever increasing competition and reduction of product
life cycle calls for a systematic and effective management approach based on creation, sharing and
utilization of knowledge for sustainable innovations that lead to competitive advantage. Thus there
is need to absorb and integrate new and existing knowledge to create knew knowledge which is
necessary for improvement and innovation in terms of products and processes. “Critical to growth
in most sectors is the combination of launching new products and services, entering lucrative
markets, creating new competitive advantages and deploying new business models (Dasgupta and
Gupta, 2009).”
This means that resources capabilities and proficiencies are the determining factors for the
strengths of firms that are necessary for it to achieve competitive advantage based on superior
efficiency, innovation, and quality and customer responsiveness. (Kibet et al 2010)
It is evident that to overcome the increasing turbulence in the external environment it needs
creation, sharing and utilization of knowledge, known as knowledge management which is
essential for creation of sustainable competitive advantage, i.e. continuously offering customers
with goods and services that are superior to all of their other alternatives. This notion is based on
Micheal Porter’s work of 1985, Competitive Advantage, in which he opined that “companies can
attain a sustainable competitive advantage only through three primary ways. First is cost
leadership which means companies provide reasonable value at a lower price, and second is
differentiation which means companies deliver better benefits than anyone else and finally is
focus which means the company's leaders understand and service their target market better than
anyone else (Amadeo, 2019)”. Porter said that; in cost leadership, it entails that businesses attract
customers by low cost. Although it is difficult when competing on price, low cost is a good way
to positioning a business and finding sustainable competitive advantage. In terms of
Differentiation, this should take place when low prices cannot be offered but instead some
attribute about the product or service that is really different from competitors gets introduced and
that attributes is the one convincing customers to pay more. Of much importance is the
performance and quality of product that what an impact on the consumer’s functional and
emotional benefit of the product. Lastly Focus, the business selects either cost leadership or
differentiation to take advantage of and target a very specific market, usually called a niche that
larger companies do not serve.
Knowledge creation, sharing and utilization has distinctly become central to the resource based
view of competitive advantage in that it is a secure source of innovation that brings about
competitive advantage. Dasgupta and Gupta, 2009 that “innovation is typically understood as
the successful introduction of something new and useful, for example introducing new methods,
techniques, practices or new or altered products and services.”
Knowledge is a tremendous source of innovation that happens within a firm. The concept of
knowledge based competitive advantage entails that firms make innovations based on
information collected from both internal sources like people, culture, routines etc and also from
external sources that are important to the organization like vendors, suppliers, thus these sources
often provide a lot of tips and tricks on how to improve and maintain the consistency of products
and give clue on what better products are out there to improve. Knowledge can also be obtained
from customers who have a really good feedback. The majority of innovations comes from
insights given back by users and customers as feedback (Bailey, 2018). The creation, sharing and
utilization of energy has also influenced quality strategy in that businesses do prioritize the
service or the quality of product as differentiator from their competitors.
Looking at a bigger picture, mergers and acquisitions are also sources of competitive advantage.
In this activity, creation, sharing and utilization is also central in a firm. Knowledge about
businesses concerned is necessary tool for a successful merger and acquisition. Merger means a
strategic alliance. It is a combination of two previously separate businesses achieved by forming
another completely new business into which the two original businesses are integrated.
Knowledge management is a necessary tool so that concerned parties can become aware of what
type of businesses they are dealing with. Mergers mean more market share, more products or
technologies. Companies would do well to obtain the data and the information they need based
on the requirements to achieve business objectives. Those objectives can be market share,
competency, new technology, new market entry, adoption rate, operating synergy as well as
financial synergy (Bailey, 2018)” From another angle, the notion of mergers and acquisitions are
a dreadful cause for panic in some industries like the tobacco industry where companies sell
semi-processed products to same customers due to the fact that the business environment is
becoming increasingly turbulent owing to the fact that the mergers and acquisitions are reducing
the number of customers i.e. potential buyers. This situation has made creation, sharing and
utilization of knowledge a necessary tool for survival. The need for competitive innovativeness
and hence competitive advantage cannot be overemphasized as the shrinking market is posing a
great threat to, and increasing rivalry among the organizations. This goes along with one of
Porter’s generic strategies framework as presented by UU-MBA712 (2019) in explaining about
“the extent of rivalry between companies where competitive rivals are defined as organizations
with similar products and services aimed at the same customer group and are direct competitors
in the same industry/market. In this scenario, Porter’s cost leadership strategy is employed.
Organization try as much as possible to offer products to customers that are as low priced as
possible to achieve a competitive advantage. Quoting (Porter 1979, 1987, and 1996; Bauer and
Colgan, 2001; Hyatt, 2001) Richard S.A. & Marilyn M.H. (2006) Richard S.A. & Marilyn
M.H. (2006) cited that “The cost leadership strategy focuses on gaining competitive advantage
by having the lowest cost in the industry. Richard S.A. & Marilyn M.H. (2006) also quoted
(Malburg, 2000) emphasizing that an organization needs to apply low-cost leadership strategy so
as to be able to attain a low-cost advantage, low-cost manufacturing, and a staff fully dedicated
to low-cost leadership strategy. Low cost competitive advantage is generally attained when
organizations engage in vigorous pursuit of low cost reductions, tight control of overhead cost,
and minimizing distribution costs (Malburg, 2000). In addition improvements of production
efficiencies are another contributing factor to low cost leadership strategy. It is no surprise
therefore that All undertakings not having a cost advantage in the organization need to be
willingly ceased and other jobs get outsourced to other organizations with a low-cost advantage
(Malburg, 2000). All these happen these days in organizations in the name of cost cutting
strategies.
It can therefore be summed up that creation, sharing and utilization of knowledge which is simply
called knowledge management has in modern days become a panacea to relieve the harsh impact
of the turbulent external environment of organization. For businesses to survive, knowledge
management has become a key factor because it brings about innovations and hence competitive
advantage for businesses from the resource based view of the firms.
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