Why are certain organizations more successful than others?

What makes some organizations more successful than others? Why do certain organizations have a consistent and continual growth of income? Why are some organizations frequently ranked as the most profitable ones on lists? Is every organization capable of providing and effectively using their resources and their abilities for running a business?

Strategic managing implies defining and applying strategies which enable an organization to develop and maintain its competitive advantage. As a key concept in strategic management, competitive advantage is necessary for long-term success and for the survival of the organization. The essential part of strategic management is gaining and maintaining a competitive advantage.

Today, competition on the market is fierce, therefore, the modern business environment is described as the hypercompetitive environment. Competition is everywhere. Every organization struggles to secure its place on the market, whether it’s a fight for buyers, resources or another goal.

Competition is created when organizations compete to achieve a goal. For certain organizations, it is about reaching consumers, participating in the market, the marketing of goods or services.

From an industry point of view, the competition which exists among organizations today is quite strong. The reason for that is a large number of competitors or organizations manufacturing and selling the same or similar kind of merchandise and services as well as the organizations who fulfill the needs of consumers.

Speaking of competition among organizations, we must emphasize that within one branch of industry, there are firms that compete with each other by using similar strategies, resources, and catering to the same group of consumers. Within a single branch of industry, there may be several or more strategic groups, depending on how important those strategic factors are for different groups of consumers. For instance, the same strategic group would be represented by competitors who apply different strategies when it comes to price-quality. The intensity of the competition will depend on how effectively each competitor developed their competitive advantage as well as on the competition strategies each of them applies. The approach based on the concept of the strategic group is applied in order to define competitors within one branch of industry and to separate specific strategic groups with recognizable characteristics, as well as to explain the components of organization performance.

Regardless of which approach is applied to establish who the competitors are, each competitor possesses certain resources and capacities they intend to use to maintain the competitive advantage.

In order for an organization to effectively use the resources it lacks, it develops competitive strategies with the goal to secure the competitive advantage. The primary concern of competitive advantage is to secure an advantage for the organization.

Strategic management is necessary for gaining competitive advantage. One of the main questions strategic decision-makers face is the competitive positioning of the company within the industry. Trying to maintain competitive advantage, an organization strives to find a way to distinguish itself from others. The basis of competitive advantage that an organization managed to develop is upgraded with a competitive strategy that will secure potential profitability of the company. For instance, a good strategy enables the company to rank itself high within the industry which means its profitability will be above average.

For a sustainable competitive advantage, an organization develops competitive strategies using its existing resources. To gain competitive advantage and achieve its goal, an organization constantly finds new ways to secure the resources it needs.

When it comes to competitive advantage, it is necessary to emphasize the resources of a company and the role they have which is relevant for strategic decision-makers. An organization is represented as a group of means and capacities which are mutually different. According to research, success is guaranteed for companies which have the best and most adequate resources for their business. That implies developing and using unique organizational resources and capacities with the goal of increasing the income as well as preventing the organization’s influx of income. For organizational resources that means that each resource that can contribute to that as well as to gaining competitive advantage, can be used or developed.

To maintain competitive advantage, an organization must have a certain formal structure, systems, business politics and processes that will enable it to fully use its resources whether it involves financial, human, physical, immaterial or structural-cultural assets. A company’s resources are the most relevant condition for gaining and maintaining a competitive advantage.

Each organization has its specific assets and capacities which make it different from other organizations. Differences don’t just refer to human resources, financial or intangible assets Organizations differ by their distinct experiences, for building a different organizational culture, for having different capacities at their disposal etc. The key to an organization’s success will be guaranteed if the organization has the best and most adequate resources for their business, that is if the organization uses and develops unique organizational resources and capacities.

Strategic management implies developing and using unique organizational resources in the best and most adequate way of achieving the desired business results. Resources unique to every organization and which are necessary for achieving competitive advantage are primarily physical and financial means, human resources, immaterial and structural-cultural assets.

Financial assets represent financial assets of an organization such as monetary funds and investments, real and disposable debts. Stock capital an organization uses and any other retained profit, also represent financial means or an organization’s assets. Those are financial resources an organization uses for purchasing operating means, subject matter, payments, services, as well as well as funds in the bank accounts.

Physical assets are of great value for the competitive advantage of an organization. These are things used in an organization’s business. They include equipment, business space, manufacturing and retail facilities, raw materials or any other material means an organization has at its disposal.

Human resources of an organization include all the employees, their experiences, qualities, judgment, knowledge, wisdom, skills, abilities, and potential. Human resources find the employee to be precious for an organization, and since his value increases over time, organizational units of human potential focus on the growth and development of individual potentials and employees’ skills. Today, employees are perceived as a means we should invest in, therefore, human resources are perceived as a source for gaining competitive advantage. Many think that organizations which do not invest in human potentials of its company will not be competitive on the market.

Intangible assets lack physical substance (are not tangible) and can be defined. Identifying intangible assets involves an evaluation of the possibility to sell, transfer, license, rent or exchange separately. Having control of assets means a possibility for economic gain which is a result of using the assets. Common examples of intangible assets include brands, patents, reputation, license, trademarks, concessions, copyright, databases, goodwill, know-how, franchises, marketing rights, permits, design etc. Intangible assets can be developed within a society but one must differentiate the research phase from the development phase. Research costs cannot be capitalized, therefore, the accounting treatment for all research expenditure is to write it off as profit and loss account as incurred. In order for the development costs to be written off as profit, it is necessary to prove technical feasibility of completing the intangible asset so that it is disposable for use or sale, the intention to complete and use or sell the asset, availability of technical, financial or other resources to complete the asset, ability to use or sell the asset,  the possibility to measure the cost of the asset reliably.

Structural-cultural means represent the historical development of an organization, culture, work systems, organization’s politics, mutual relations between employees, employees’ trust, and an established formal structure.

When it comes to sustainable competitive advantage, it should be emphasized that the resources are to be unique and as such contribute to competitive advantage.