CC BY
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Section 15. Economics and management
Lavrova Natalia Sergeevna, Northern Arctic Federal University named after M. V. Lomonosov, Master student, Institute of economy and management E-mail: lavvvvric@rambler.ru
Relation between competence and competitive advantages of the firm
Abstract: Research paper was considered an aspect of competence as source of uniqueness organization and its competition advantages. It emphasizes the importance internal factors for get success of business. The article is divided into two parts: theoretical framework and case study, which suggests as the competence of the influence on the competitive advantages of firms in theory and practice.
Key words: competence; competitive advantages, resource-based approach, system “plant — technical university”.
Theoretical framework
1. Competences as basis of uniqueness of the company
To describe the sources of uniqueness of a company in the scientific literature historically used the following terms: “strengths”, “skills”, “competence”, “ability”, “organizational knowledge”, “invisible assets”. Kenneth Andrews [1] in his article “The Concept of Corporate Strategy” used the term “distinctive competence” for definition the type of activity in which the organization manifests itself in the best way. Prahalad and Hamel [2, 79-91], whose studies largely determine the development of strategic management, lead the term “core competence”. It means a set of skills and technologies, mass haphazardly accumulated organization knowledge and experience, which becomes the basis for successful competition. In the same studies with the aim to emphasize the importance of “collective learning company” uses the term «capacity» or «key capability» to refer to a particular dynamic learning processes. All these terms are similar in that they represent a unique abilities, knowledge, mature behavioral model of organization, which are a potential source of its competitive advantage.
One of the first authors, who indicated the importance of internal factors in determining the likelihood of success in the implementation of the selected strategy, became P. Selznick. He wrote the book “Leadership in administration” in 1957 [3], where argued that in business the past determines the present. In the course of his development organization produces a certain “character”, which he called “a distinctive competence”, which is manifested through a number of “special abilities and limitations” contained in the emerging over time, the institutional framework affecting the competence of the organization to form and maintain certain strategies. Besides, such a distinctive competence, which can be used in single activity, may play a deterrent
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role in another. According P. Selznick, the art of management consists in ability to compose correct opinion concerning the conformity of the organization of its mission and strategy. Follow him, I. Ansoff [4] in his book “Corporate strategy” offers template-list of skills and resources, the so-called “grid competencies”. It should regularly be compiled for both the company itself and for competitors with the goal of benchmarking and identification of the relative strength of competitors.
The concept of “competence” can have two meanings: 1) the authority provided by law, the charter or other act of a specific agency or official, and 2) knowledge and experience in the particular area. [5] On the basis of the second basic values give the definition of that competence is the special properties of an information resource, containing experience, knowledge and skills on the method of organization and management of resources and business processes (abilities of the organization) to achieve these goals, the bearer of which, individually or collectively, are employees. As noted by I. Nonaka and H. Takeuchi [6], companies do not create knowledge and not gain competitive advantages. They get them from the interaction of staff on all levels and environment.
2. Key employees and their definition
Every company needs competent, highly professional personnel involved in the affairs of the organization. They should have a broad range of interests and able to open new horizons of development. At the same time on a labor market obvious deficiency of this category of the personnel is felt. In addition, people with high human capital (high level of education, qualification, vertical and horizontal mobility) and employed, as a rule, intellectual work, aspire after independence, self-employment. They identify themselves not so much with the organization, but with the professional community. And this creates serious difficulties for their involvement in the affairs of the company.
There is a set of approaches to definition of key employees in the organization. So, Lepak and Snell [7, 517-543] allocate two criteria: value and uniqueness. In their opinion, those workers who possess valuable and unique knowledge and skills, become key for the company. The Spanish scientists A. Lopez-Cabrales, the River of Valais and I. Herrero [8, 81-109] develop Lepak and Snella’s ideas. In their opinion, the key employee is the one who possesses valuable and unique knowledge, skills and abilities, that is the unique human capital. Besides, its activity is connected with rod business of the company [9, 52-62].
Key employees are not simply owners of valuable and unique knowledge and skills, they are capable to turn this knowledge into core organizational competences. The Spanish researchers allocate three groups of organizational competences on which direct influence is rendered by key employees, are administrative, technical abilities and customer focus.
In literature administrative abilities are understood as strong organizational culture, strategic vision, realization of potential of workers, flexibility [10, 260-272];
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[11, 699-727]; [12, 241-264]. Technical competences are understood as the abilities connected with technological aspects of creation and improvement of a product or service [12, 241-264]. Technical competences of the organization associate with qualification, competence and experience of employees. Customer focus is an ability to create additional value for consumers thanks to the adjusted interaction with them, and also thanks to knowledge and understanding of their inquiries, interests. Customer focus means orientation of the organization to quality, loyalty of consumers and mutual trust.
Results of the research conducted by the Spanish scientists, testify to positive dependence between activity of key employees and existence of administrative abilities, between activity of key employees and innovation of the company, between activity of key employees and customer focus of the company [8, 81-109]. Thus, A. Lopez-Cabrales’s research, the River ofValais and I. Herrero proves communication between organizational abilities and knowledge and skills of key employees.
3. Knowledge spiral
Formation of skills and competences of employees is put during training, experience and interaction finding with other people. These processes promote creation of new knowledge on the basis of which the company creates innovations and gets competitive advantage in the market. At the heart of creation of knowledge lies interaction process between tacit and explicit knowledge. According to I. Nonaka and H. Takeuchi, authors ofthe book “The knowledge-creating company ...” [6], four various modes of knowledge conversion:
- Socialization is process of sharing experiences and thereby creating tacit knowledge such as mental models and technical skills;
- Externalization is a process of articulating tacit knowledge into explicit concepts, taking the shapes of metaphors, analogies, concepts, hypotheses, or models;
- Combination is a process of systemizing concepts into a knowledge system. This mode ofknowledge conversion involves combining different bodies ofexplicit knowledge;
- Internalization is a process of embodying explicit knowledge into tacit knowledge. It’s closely related to “learning by doing.”
Knowledge creation is continuous process of interaction of tacit and explicit knowledge, by means of transition just seeing knowledge to another. Originally, socialization starts building a “field” of interaction which promotes the sharing of experience and mental models. Then the externalization promotes creation of “dialogue or a collective reflection” in which metaphors, analogies and other methods of an articulation of knowledge are used. The following stage of process of creation of knowledge is the combination. Here incorporate explicit knowledge into a single network for the formation of a new product, service or management system. And the final stage performs with the “learning by doing”, which provides the internalization of knowledge. After passing all stages of the process, the creation of knowledge is entering a new stage,
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and the process repeats again. This phenomenon in scientific literature received the name “a knowledge spiral”.
Case study
1. Background
Shipbuilding is the branch of the heavy industry which is carrying out construction of the ships and vessels of a various class and appointments. Accumulating in the production of achievement of a large number of allied industries (metallurgy, mechanical engineering, electronics, etc.), the shipbuilding simultaneously stimulates their development, achievement of high scientific and technical level by them. It is possible to tell that, on the one hand, the shipbuilding is the indicator of a level of development of economy of the state, on the other hand, stimulating link of economic development. Creation of one workplace in shipbuilding involves emergence of 4-5 workplaces in allied industries [13]. But characteristics of branch are also high science intensity of the ships and vessels, duration ofcycles ofdevelopment and construction, a high capital intensity of production of branch, need of purchase of a considerable share of the accessory equipment abroad.
As experience shows, in Russia, the main brake of orders and the development of industry is the personnel problem of builders to directors. Not the unimportant role in it was played by a demographic hole which was formed in the early nineties the 20th centuries. Shortage of the highly skilled personnel is sharply expressed. Not demand and low wage led to irreplaceable loss of personnel potential. Thus reduction of number happened, generally at the expense of leaving of young and perspective workers aged till 30-40 years. Lack of young shots breaks continuity of generations — this chain on overwhelming number of the enterprises is broken already off. According to “United Shipbuilding Corporation” data [13], only its general need for shots till 2020 is estimated at more than 17 thousand workers and experts, taking into account natural leaving of the personnel and development prospects.
Today the ship-building branch of economy of Russia endures a reforming stage. The state took the serious measures aimed at the development of domestic shipbuilding. Were developed and approved: the federal target program “Development of civil sea equipment for 2009-2016”, strategy of development of the ship-building industry for the period till 2020. The various events directed on integration of scientific and production and technological potential of the Russian shipbuilding are besides held. On the basis of the existing large enterprises regional innovative clusters are created.
One of such clusters is the ship-building innovative territorial cluster of the Arkhangelsk region. Today in the territory of area 6 large enterprises located in the center of nuclear shipbuilding — Severodvinsk. The municipality possesses advantageous geopolitical position, and also the debugged cooperation between the enterprises of branch for all country. Each element of a cluster has the developed network of branches, representations, suppliers and contractors.
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For achievement of goals of the enterprise of the region strengthened existing relations with educational institutions of the higher and professional education led by Northern Arctic Federal University. Autonomous establishment has in the arsenal 51 contracts on the international cooperation in science and education sphere with the international organizations, scientific educational institutions and business structures from 14 countries of the world. Besides educational institutions, strengthening of interaction happened to the scientific and research organizations, the design offices, capable to make large-scale researches, development, preparation, training and retraining of personnel on the job.
Thus, further development of a cluster directly depends on effective interaction of the enterprises, scientific institutions and authorities for expansion of access to innovations, technologies, “know-how”, specialized services and highly qualified personnel.
2. Solutions of problems
For achievement of goals before a cluster in the conditions described above, the enterprises of area use the integrated system of training under the name “plant — technical university”. This system of preparation of engineering shots represents a combination of theoretical training to production work of students at the basic enterprises according to a specialty profile, the preparation direction. Today “plants — technical university” [14] solve problems of reduction of terms of adaptation of experts to conditions of the concrete enterprise, provide the accelerated growth of professional skill of experts and their inclusion in the solution of problems of scientific and technological advance at the enterprise at the expense of the maximum approach of educational process to production. The system “plant — technical university” is customer-oriented system and actually is analog of target contract preparation (the higher education “institution-student-enterprise”). It provides not only staff replenishment by young competent specialists (nearly 100 % level of employment of graduates in branches and fixing of shots at the enterprises), but also motivates students to more careful studying of subjects, both in the theory, and in practice.
Graduates of university practically don’t need time for adaptation on production, acquaintance to labor collective and output, to his customers and consumers as they master all this, since the 2nd course. Actually, already at the beginning of the 5th course students know where will carry out the degree project, its subject and as where will work after the institute termination. It confirms that fact that on labor exchange in five years graduates didn’t address.
High quality of education is reached by interaction of tacit and explicit knowledge during all educational process of the student. Let’s consider one of spiral turns of knowledge during preparation of the student of ship-building specialty.
Training in engineering specialties for ship-building branch in the Russian Federation is carried out within 5 years. On the first courses the student receives basic
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knowledge in the field of shipbuilding and at the end of 2 courses comes for factfinding practice. During this period he or she works as the assistant to the engineer and watches his actions, carries out small instructions. Tracing work process, the student adopts knowledge from the engineer which has no language articulation, only action. At this grade level there is a process of socialization of knowledge. After practice passing the student writes the report, describes processes, using metaphors, analogies, images, and own vision. At this stage curators of practice don’t wait for correctness of the description of process of work or inventions, they seek to carry away the student, to draw his attention to trifles which he or she can use in the further study. Thus, attempts of the student to explain the received knowledge is externalization process.
Continuing the training on senior courses, the student not only studies the program of engineering specialty, reads literature on a professional profile, but also in parallel works at a plant. At this stage there is a continuous fixing of theoretical knowledge at practical level. One of obligatory actions during the work on production is acquaintance with fundamental documents (instructions, standards and other) directly for a position held by the student. Participation in meetings of members of crews, and also identification on personal experience discrepancy of theoretical and practical knowledge and bottlenecks on production forms at the student new knowledge by addition already known to it earlier. Thus, at this grade level process of a combination of knowledge takes place.
Process of internalization is most pronounced when writing final qualification work. Students, who are trained on the system “plant — technical university”, are more practically oriented than their colleagues, who are trained on a regular basis. In their graduation projects together with the thesis supervisor, they solve the problems, which directly faced with the production, develop new techniques and methods ofwork. As a result, know-how, competitive advantages for the enterprise and the student himself become one of the highly motivated key employees.
Thus, the system of “plant — technical university” enables students to high quality education and a brighter future, and enterprise — replenishment of highly qualified labour resources and conditions for the formation of key competencies, innovation and competitive advantage.
3. Suggestions
“The plant — technical university” system well proved in the field of preparation of engineering specialties as nowadays as during the Soviet period at the defensive enterprises of the country. Such objects always made the knowledge-intensive production of the highest quality. Unfortunately, today similar form of education for training of specialists in the field of economy, ecology, or any other doesn’t exist. In the conditions of turbulent environment and the rigid competition of the company are necessary not only highly skilled engineers, but also representatives of other specialties.
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The modern system of preparation in Russia, except especially difficult engineering specialties, according to Bologna Process makes 4 years and gives the chance to form curricula under the specific customer. Since 2009, the state tries to introduce system “applied bachelor degree” which allows to sharpen knowledge of students under a concrete field of activity. In the Arkhangelsk region according to programs of the higher education this experiment doesn’t work. In this regard, the majority of graduates with great difficulty find work in the specialty and hard adapt for work in the organization. The company needs an extra time on personnel preparation, and often reeducation, in connection with discrepancies of programs of training and a real situation in business.
Based on personal experience, I can tell that coming to the organization, the person has enthusiasm, desire to work, desire to be necessary to the company. He or she wants to see the contribution to the common cause, but he can’t share the knowledge with colleagues. But in too time, he or she understands that slows down process of an exchange of knowledge, because of existence in the arsenal of only theoretical knowledge, lack of experience and information on specifics of the markets. On the one hand, it is a stress for the worker, on the other hand, the organization, employing the worker, can’t receive demanded return from the new employee and advances by means of a salary his future successes.
Training in specifics of work directly on a workplace, unfortunately, has so no good results, as at employees who were trained on “plant — technical university” system. In these conditions, the enterprises and educational institutions need close cooperation for development of joint programs on training. Development of the educational programs based on practical experience of the student, will allow the student to see system from within, to make exchange of information and experience without temporary logs, to propose the solution of existing problems in the final qualification work and to introduce them on production.
Today the training system according to programs of bachelor and master degree allow to study not only obligatory subjects, but also subjects of a choice. The last, in turn, can become more focused on practice and directly be carried out during work at the enterprise. Such approach, in our opinion, will lead to training in improvement of quality of education and achievement of goals of the organizations in particular, and to growth of economy of the region and its welfare as a whole.
References:
1. Andrews, K. (1987) The Concept ofCorporate Strategy, Irwin, Homewood, Illinois.
2. Prahalad, C. K., Hamel, G., (1990) The core competence of the corporation,
Harvard Business Review, vol. 68 (3): 79-91.
3. Selznick, P., (1957) Leadership in Administration, New York: Harper.
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4. Ansoff, I. (1965) Corporate Strategy: An Analytical Approach to Business Policy for Growth and Expansion, McGraw-Hill, New York.
5. Oxford English dictionary (2013) Definition of competence in English http:// www.oxforddictionaries.com/definition/english/competence?q=competence.
6. Nonaka, I. & Takeuchi, H. (1995) The knowledge-creating company. HowJapanese companies create the dynamics of innovation, Oxford university press, New York.
7. Lepak D. P. & Snell S. A. (2002) Examining the human resource architecture: The relationships among human capital, employment and human resource configuration, Journal of Management (28): 517-543.
8. Lopez-Cabrales A., Valle R. & Herrero I. (2006) The contribution of core employees to organizational capabilities and efficiency, Human Resource Management (1): 81-109.
9. Atchison, T. (1991) The employment relationship: Untied or re-tied, Academy of Management. Executive 5 (4): 52-62.
10. Boyatzis R. (1999) Building on competence: The effective use of managerial talent. In G. Salaman (Ed.), Human resource strategies: 260-272.
11. Lado A., & Wilson M. (1994) Human resource systems and sustained competitive advantage: A competency based perspective, Academy of Management Review (19): 699-727.
12. Turner D. & Crawford M. (1994) Managing current and future competitive performance: The role of competence. In G. Hamel & A. Heene (Eds.), New York: Wiley: 241-264.
13. Portnews (2011), The total demand in the shipbuilding frames up to 2020 http:// shipbuilding.ru/rus/articles/Ship_personals/.
14. Fedko, V., Dolgun, B. (2004) Experience of introduction of the integrated system of education “plant — technical university.” The engineering education 2004 (2): 146-155.
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