Managing Value-Based Organizations
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Managing Value-Based Organizations

It’s Not What You Think

Bruce Hoag and Cary L. Cooper

Managing Value-Based Organizations argues that those who fail to understand management history are destined to repeat it. Research has shown that despite the prodigious output of management books, managers still have little idea why there is so much change in the world of work or what they can do about it. Most, it seems, are still waiting for the dust to settle, expecting instead that in the near future they will be able to go back to doing things the way they have always done them.
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Chapter 6: The Myth of Competitive Advantage

Bruce Hoag and Cary L. Cooper


The myth of competitive advantage is predicated on the notion that one firm can obtain and maintain an insurmountable superiority over all other firms in its industry by making incremental changes to its strategic components. The advantage is said to be derived from collectively fine-tuning the organization’s systems and processes, that is, by increasing the value added by each of the strategic components and by improving the interrelationships between them. The purpose of this strategy is to minimize competition.1 There are five primary channels through which, it is asserted, an advantage can be realized: minimum price, commodity uniqueness, customer concentration, organizational magnitude and, more recently, knowledge. Some firms attempt to create an advantage by selling their products or services at a lower price than any of their competitors. Larger firms, it is argued, who possess the greater market share in a given industry, dissuade competitors from significant expansion for fear of saturating the market with too many similar goods or services. A variation on this channel is the preferred source. Some organizations attempt to make themselves the preferred source by forcing customers to buy replacement parts or expendables from them, or by creating contractual obligations that require customers to use them for subsequent maintenance. Commodity uniqueness refers to attempts by organizations to distinguish their products and services from their competitors in such a way as to make them unique in the marketplace.2 In customer concentration, a firm may attempt to be both inexpensive and unique, but to a smaller...

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