Competitive ability control – internal environment factors

By all means business external environment is the most important base for searching for competitive advantag­es. Yet, regardless of all the possibilities of a firm concerning analysis and taking up timely measures while changing the external environment, in some instanc­es all these efforts will be just ineffec­tive. First of all it concerns the situation when substitute goods and services ap­pear. Thus type-writers vanished when personal computers appeared, business correspondence overnight delivery com­panies showed up on the verge of bank­ruptcy when faxes and e-mail appeared, film cameras were replaced by digital ones, nowadays smartphones success­fully push out classic mobile phones. In all cases as listed one market leaders were replaced by others and the first had to play the secondary roles or leave the market at all as they were not familiar with new technologies. Now we can see Nokia loses its position and iPad Apple cones to the front. It is not a surprise for everybody that during the last two years Apple in particular became the most ex­pensive brand ($ 100,24 bln. in 2012), though just three years ago, in 2009, Ap­ple was in the second ten and Nokia took the 5th place.

Scientists-economists have start­ed talking about instability of the exter­nal environment and necessity for con­structing business competitive ability on the ground of internal resources and competence in the middle 90s of the 20th century. At the heart of this approach lies the fact that a firm – is a special combina­tion of resources and competences, and these resources and competences are the primary determinants of its strategy.

Really, what should producers of type writers do when nobody wants to by their product? To put in vast facilities in absorption of computer technologies so that not to lose their clients and mar­ket? If taking such a decision a company preserves the external environment, re­sponding to its demands. But collapse of this decision is evident. It would be far more efficient to give up producing type writers and try, on changing the market and external environment, to produce another product where similar technolo­gies are in demand. For example it could be electric shavers or small domestic electric appliances. In such a situation the risk of collapse will be lower; and it will be far more easier to save business, though in other environment. Unfortu­nately, Kodak did not use this logic and started producing digital cameras standing far behind; and eventually it led to bankruptcy in 2012.

Therefore a company should never neglect the significance of inter­nal environment in securing competitive ability and not just work out its quality on behalf of the current business, but to look for the possibilities for use of the resources it has in other, best of all in­novative spheres.

There are no universal formulae of control as for internal environment. The first action for the company to take – is, like in the case of eternal environment is to classify factors of internal environ­ment so that to be able to fetch out narrow spaces or strengthen the strong points from then on. Traditionally the inner en­vironment of a company is divided into resources and competences or business-processes. In their course interaction of resources takes place. The recourses can be divided into material, non-ma­terial and human. Business-processes, according to the approach suggested by an American scientist M. Porter, where he calls them types of activities, can be nominally divided into two categories: primary activity and secondary (support­ing) one.

The most important modern char­acteristics of quality of the inner envi­ronment of a company – is availability of knowledge. Knowledge, created all alone or obtained by a firm, which allow to predict changes, create innovations and take correct strategic decisions give the very same competitive advantage a firm is holding out for. Therefore in the 21st century, the ability to create, exchange and improve knowledge will be replaced by possession and / or control over ac­tives as a supreme source of competitive advantage. At the present time it is safe to say that neither resources, whatever valuable they are, nor business-process­es wherein interaction of resources takes place the value is created, that is special, beyond the reach of copying by compet­itors, ability to create knowledge is the source of competitive ability.

Knowledge is created by people and if we want the process to be effective and involved all human resources of an organization, according to the scientists M. A. Hitt and R. D. Aerland, we need to reconsider the treatment of corporate governance. Corporate governance should be realized not in an authoritar­ian way, but through the agency of stra­tegic leadership realized by a group of top-managers. Strategic leadership is the ability of a man to anticipate, foresee, support flexibility, think strategically and work with others for initiation of changes which will create economically viable future for an organization.

The processes of strategic leader­ship assume that all the employees of a company are considered not as salaried workers but as citizens of society inter­ested in its prosperity. Due to the fact that information and knowledge, necessary for creation of competitive advantage can be taken at any time and place, managers should keep away from giving answers but should ask their employees right questions. The most effective strategic leaders should have the ability to work with all citizens of organization in order to find the ways of combination of resources, abilities, and key competences with the corresponding opportunities for growth.

Conclusion

Securing business competitive abilities in the 21st century, in the age of globalization, innovations, knowledge and technologies becomes more and more troublesome problem for compa­nies. Ability to foresee changes, initiate them and quickly make effective strate­gic decisions becomes the supreme fac­tor as a security of leading positions on the market. Such changes can take place in internal or external environment of a company and be both the sources of competitive ability and threats for it.

At the present time the most ef­fective tools of business reaction to the dynamics of external environment fac­tors or its forced change are cooperation of firms and merge. These two strategies of external growth are widely used in business and give a range of advantages necessary for consolidation and leader­ship on the market.

In recent times factors of internal environment of a company play the de­cisive role among external and internal sources of competitive ability. Quality and diversity of recourses and business processes, a company's ability to create knowledge and innovations determine the quickness and effectiveness of reaction as for changes in external environment. Strategic leadership, as a new organiza­tion management style in the 21st century wherein management direct all human recourses of a company to creation of knowledge and innovations, has the most important meaning in management of in­ternal environment. And it results in busi­ness cost increase, market share and level of profitability as the basic indexes of a company's competitive ability.

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