The relationship between human resources and competitive advantage is the fact that an efficiently implemented human resources management regime can be leveraged to the competitive advantage of a company. Competitive advantage refers to the various strategies a company can implement that will give it a competitive edge over rivals within that industry or other related industries. Human resources can be used in various ways to achieve this desirable competitive edge. Hiring the right employees to meet company goals, grooming the employees within a company, and providing the employees with attractive benefits are all examples of how human resources and competitive advantage are connected. Show
The human resource department is responsible for the identification of the manpower requirements in firms and the engagement of competent employees to fill those vacancies. During the establishment of companies goals and targets are visualized, and in order to realize these goals the company must hire the right mix of employees who can help the company in its quest. Successfully hiring employees with the desirable human capital is one of the links between human resources and competitive advantage. A company with the right staff will be able to tap into the wealth of knowledge and experience reposed in the human elements of the corporation to boost performance and gain a competitive edge over companies with less qualified workers.  Another way in which human resources and competitive edge are related is the fact that the human resources department can channel company resources toward grooming and developing the human capital base of the company in alignment with the particular requirements of the company. This practice includes features like trainings, courses, seminars, personal development programs and conferences, which will be sponsored by the company. The aim of this type of human capital development is to instill the vision of the company in employees with the hope that they will channel the company’s delineated strategies for competitive advantage. Most of the trully successful companies have a well-developed human resources department with an established strategy for attracting and, most importantly, retaining employees. Companies that do not have a really good employment practice will find themselves losing their most valued and skilled workers to competitors offering better employment packages. This connection between human resources and competitive advantage includes factors like attractive wages and other financial compensation, the reasonable guarantee of employment security, and the promise of further development of employees through company-sponsored training and personal development programs. Good welfare packages, health insurance and an inclusive organizational corporate culture also help a firm solidify its human capital base, which may be applied toward competitive advantage. Competitive advantage refers to factors that allow a company to produce goods or services better or more cheaply than its rivals. These factors allow the productive entity to generate more sales or superior margins compared to its market rivals. Competitive advantages are attributed to a variety of factors including cost structure, branding, the quality of product offerings, the distribution network, intellectual property, and customer service. Key Takeaways
1:32 Competitive AdvantageUnderstanding Competitive AdvantageCompetitive advantages generate greater value for a firm and its shareholders because of certain strengths or conditions. The more sustainable the competitive advantage, the more difficult it is for competitors to neutralize the advantage. The two main types of competitive advantages are comparative advantage and differential advantage. The term "competitive advantage" traditionally refers to the business world, but can also be applied to a country, organization, or even a person who is competing for something. Competitive Advantage vs. Comparative AdvantageA firm's ability to produce a good or service more efficiently than its competitors, which leads to greater profit margins, creates a comparative advantage. Rational consumers will choose the cheaper of any two perfect substitutes offered. For example, a car owner will buy gasoline from a gas station that is 5 cents cheaper than other stations in the area. For imperfect substitutes, like Pepsi versus Coke, higher margins for the lowest-cost producers can eventually bring superior returns. Economies of scale, efficient internal systems, and geographic location can also create a comparative advantage. Comparative advantage does not imply a better product or service, though. It only shows the firm can offer a product or service of the same value at a lower price. For example, a firm that manufactures a product in China may have lower labor costs than a company that manufactures in the U.S., so it can offer an equal product at a lower price. In the context of international trade economics, opportunity cost determines comparative advantages. Amazon (AMZN) is an example of a company focused on building and maintaining a comparative advantage. The e-commerce platform has a level of scale and efficiency that is difficult for retail competitors to replicate, allowing it to rise to prominence largely through price competition. Competitive Advantage vs. Differential AdvantageA differential advantage is when a firm's products or services differ from its competitors' offerings and are seen as superior. Advanced technology, patent-protected products or processes, superior personnel, and strong brand identity are all drivers of differential advantage. These factors support wide margins and large market shares. Apple is famous for creating innovative products, such as the iPhone, and supporting its market leadership with savvy marketing campaigns to build an elite brand. Major drug companies can also market branded drugs at high price points because they are protected by patents. How Do I Know If a Company Has a Competitive Advantage?If a business can increase its market share through increased efficiency or productivity, it would have a competitive advantage over its competitors. How Can a Company Increase Its Competitive Advantage?Lasting competitive advantages tend to be things competitors cannot easily replicate or imitate. Warren Buffet calls sustainable competitive advantages economic moats, which businesses can figuratively dig around themselves to entrench competitive advantages. This can include strengthening one's brand, raising barriers to new entrants (such as through regulations), and the defense of intellectual property. Why Do Larger Companies Often Have Competitive Advantages?Competitive advantages that accrue from economies of scale typically refer to supply-side advantages, such as the purchasing power of a large restaurant or retail chain. But advantages of scale also exist on the demand side—they are commonly referred to as network effects. This happens when a service becomes more valuable to all of its users as the service adds more users. The result can often be a winner-take-all dynamic in the industry. How Is Competitive Advantage Different From Comparative Advantage?Comparative advantage mostly refers to international trade. It posits that a country should focus on what it can produce and export relatively the cheapest—thus if one country has a competitive advantage in producing both products A & B, it should only produce product A if it can do it better than B and import B from some other country. What is the meaning of competitive advantage?What Is a Competitive Advantage? Competitive advantage refers to factors that allow a company to produce goods or services better or more cheaply than its rivals. These factors allow the productive entity to generate more sales or superior margins compared to its market rivals.
What is competitive advantage with example?For example, if a company advertises a product for a price that's lower than a similar product from a competitor, that company is likely to have a competitive advantage. The same is true if the advertised product costs more, but offers unique features that customers are willing to pay for.
What are the 4 competitive advantages?The four primary methods of gaining a competitive advantage are cost leadership, differentiation, defensive strategies and strategic alliances.
What is competitive advantage and why is it important?A competitive advantage is what sets a company apart from its competitors, in the eyes of its consumers. These advantages allow a company to achieve and maintain superior margins, a better growth profile, or greater loyalty among current customers. A competitive advantage is often referred to as a “protective moat.”
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