Product success is not a reliable indicator of company strength

Product success is not a reliable indicator of company strength

Several debates have existed over decades among scholars and businessmen about the main strength of a company, even when there is an introduction of macro and micro environmental factors into the performance of the organization by globalization factors. Therefore, there is a question as to whether the success of a business company is determined by the success of its products (market centric) or it is determined by the activities that occur internally within the company. The other important point that has made this debate to burn is the availability of other factors like resources, competitive advantage, product innovation, market trends, consumer loyalty, consumer base and product value (Tidd & Bessant, 2013).In fact, most analysts previously based on the success of a product as the main measure of the strength of a company. It is also evident that many executives still focus on this metrics on a heavy basis and this makes it to be receiving the most attention from the community of investors. One thing that people forget when they emphasize on the product success only is that the company is still in operation up to infinity. This means that the success of a product cannot be the only factor that can be used to measure the strength of a company but rather consider a variety of other factors of analysis. This does not disqualify it completely from the list of items that determine the strength of a company, but it is just that it cannot be used alone in the analysis. There are several other indicators that show the strength of a company and have power to govern change and sustain the company’s competitive advantage in the long run. This paper discuses in details these several other indicators that are used to measure the strength of a company.

With regard to Freeman & Soete (1997), it is important to note that there are various indicators that have kept on changing with time and the changing business needs. The term reliability is the measure of how consistent an indicator that has been employed by the organization with the aim of gaining competitive advantage and grabbing the available business opportunities. This is commonly called acumen and its knowledge. Porter (1985) asserts that the business success heavily depends on how it generates new knowledge and having the resources to make a move concerning this new knowledge in a quick and intelligent way. By this, we do not neglect the company’s product because it is the one playing a significant role in revenue generation. However, the important indicators are the factors that are responsible for the creation of the product so that it perfectly meets the market standards and the consumer needs. The specific knowledge plays a vital role in exploiting the resources available so that the company can obtain a competitive advantage and this eventually contributes to the strength of a company (Hamel Prahalad, 1991).In this regard, an important innovation strategy should be directed towards the specific knowledge of the firm so that the strength is increased at last. For instance, when there is an innovation strategy that has been applied towards the knowledge of obtaining and processing the company’s product, it means that the company will be gaining strength internally because the strength emerged from internal factors and environment.

Additionally, Slater & Narver (1995), asserts that the product success should be relied upon as the indicator of the company’s strength because when it enters the market, its validity and reliability heavily depends on the competition and market forces available in the market and both of these factors are usually uncertain. However, a factor like technology makes it necessary for a company to use complementary assets in order to produce and deliver new services and products. This means that the firm needs to engage itself in prior commercialization activities so that it builds the required complementary (Grant, 1991).It should however be noted that new processes and products can either enhance or destroy the asset’s value. The best example to this scenario is when IBM increased its direct sales upon the development of computers; however, the disk brakes became useless because the auto industries invested in drum brakes.For any given type of competence, like quality, it needs further ample evidences that can be supported by or manufactured by combination of skills and use of different skills. In this case, competence becomes a key factor in any firm’s development. According to Grant (1991), most firms currently seek to come up with new combinations while at the same time their competitors indulge in improving their competency even when it means imitating the skills and competence of the most successful rival in the market. This means that product creativity will be on a high rate because the firm is seeking to remain competitive in the market and not just produce a product and let it sell in the markets even without considering the tactics of the big competitors.

Another important factor and key determinant of the firm’s strength is the dynamic capabilities that provide a framework that is coherent with the aim of integratingimperial and existing knowledge. This then outlines the blue print that what depicts the strength of a firm in the world market is not the turnover of its products but the ability to demonstrate high timely responsiveness and rapid product innovation, redeployment of internal and external competences and intergradations of management capabilities (McGrath, 2013).This is definitely a paradigm that is emerging for any business firm. This is an attempt to facilitate norms by incorporating conceptual and empirical knowledge that exists in the organization. It is however important to note that the competencies cannot just be assembled readily from the markets on a ready-made basis. According to Tripsas & Gavetti (2000), partnership and collaboration are the key things that for any new organizational learning because they propel the firm to get a glimpse of dysfunctional routines and thus come up with mechanisms of preventing strategic blind spots. The dynamic capability concept avails the doo of learning in inter-organizations. It should however be noted that the organizational capabilities that are core do give way for the core rigidities of an organization. This will mean that learning opportunities in organizations will be close in to the activities that were previous and this means it will be product and transaction specific.

For a firm to manage and survive in a highly competitive industry, it must have the ability to adapt its strategies that are technologically based into the already existing competition. However, introducing a new product in the market possess a great threat to the old firms because it may render their products either obsolete or uneconomical. This brings us back to the drawing board that competency is everything when examining the strength of a firm. In fact, Porter (1985) posts those managers will be judged by how capable they are in identifying, cultivating and exploiting key competencies to foster the growth of the company. Looking at this on a larger perspective, competitiveness comes from the ability to come up with a thing and make it work in a more economical way and at a faster rate than the competitors; this is the core competence that makes products that have been unanticipated to be spawn. The drawing board for competence is the ability of the management team to consolidate and corporate technologies that are wide and the amazing production skills into a specific competence that make individuals empowered to adapt at a faster rate to the opportunities that are constantly changing. This statement can be validated when it is connected to the firm position in the mainstay thought of current firms. This is because serious and strong competence leads to the harmonization of several skills and this are just the basics for the building of an organization that is intelligent. Therefore, for any organization, it should have a very strong competence base and proper management be applied, not just overlooking. Take an example of Canon; it has about 84% of shares in the engines of laser printers but just miniscule share in laser printers. Its secret is to build core competence in engines and not the printers because they have put in place a channel where they continuously obtain feedback from the user.

Another key point to be noted in determining the strength of a company is its leverage position. It should be noted that when an organization has excessive financial leverage, it immerses itself in a very large and inescapable burden within a downtown economy. This means that the company will not be string because it has huge debts outside, even though its commodities are selling highly in the market (Porter, 1985). Therefore, a company that has less debts that are manageable or no debts at all stands a chance to be ranked among the strongest companies because at least they can manage their dues within a short period and still carry out business as usual. It also means that the company can borrow anytime without further restrictions due to huge depts. When a company gets a chance to borrow anytime, it has a readily available source of finance in case an emergency is needed so that the firm keeps its business operations on an ongoing process.

In conclusion, it is evident that the success of a product is not the only reliable indicator of the strength of a company. Although this does not mean that product success cannot be used to measure the strength of a company but it has to be complemented with other techniques and mechanisms. It is also evident from this paper that by the organization with the aim of gaining competitive advantage and grabbing the available business opportunities.  This is commonly called acumen and its knowledge. It is also evident that most firms currently seek to come up with new combinations while at the same time their competitors indulge in improving their competency even when it means imitating the skills and competence of the most successful rival in the market.

 

 

References

Freeman, C. and Soete, L. (1997) The Economics of Industrial Innovation (Third Edition),           London: Routledge

Grant, R. M. (1991) ‘The resource-based theory of competitive advantage: implications for            strategy formulation’, California Management Review, 114–35

Hamel, G. and Prahalad, C. K. (1994) Competing for the Future, Boston, MA: Harvard Business             School Press.

Hamel, G. and Prahalad, C.K. (1991), “Corporate Imagination and Expeditionary Marketing,”      Harvard Business Review, 69: 81-92.

McGrath, R. (2013) The End of Competitive Advantage: How to Keep Your Strategy Moving as            Fast as Your Business. Boston, MA, Harvard Business Review Press

Metcalfe, J. and Boden, M. (1992) Evolutionary epistemology and the nature of technology         strategy, in Coombs, R., Saviotti, P. and Walsh, V. (eds) Technological Change and     Company Strategies: Economic and Sociological Perspectives, London: Academic Press.

Porter, E. M. (1985) Competitive Advantage: Creating and Sustaining Superior Performance,       New York: Free Press. (Chapter on Innovation)

Prahalad, C.K. and Hamel, G. (1990) The core competence of the corporation, Harvard Business Review, 68, 3, 79–91

Slater, S.F. and Narver, J.C. (1995) Market orientation and the learning organization. Journal of Marketing, 59(3): 63-74

Teece, D. and Pisano, G. (1994) The dynamic capabilities of firms: an introduction, Industrial       and Corporate Change, 3 (3).

Teece, D.J., Pisano, G., and Shuen, A. (1997) Strategic Management Journal, 18:7, 509-533

Tidd, J. and Bessant, J. (2013) Managing Innovation: Integrating Technological, Market and        Organisational Change, 5th ed. Chichester: Wiley. (For general background – particularly the critique of Porter)

Tripsas, M. and Gavetti, G., 2000. Capabilities, Cognition, and Inertia: Evidence from Digital      Imaging. Strategic Management Journal, 21: 1147-1161

 

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