Competition Does Make You Better!

 

The competitive advantage of IT service firms are primarily driven by three resources it controls. Managers need to continuously assess the value-creating potential of their firm’s internal resources and figure out how such resources can lead to better performance. These resources include: human capital, namely, employee’s education, knowledge, training and experience; organizational capital referring to internal organizational infrastructure; and management capabilities as reflected in the skill set and expertise of managers. Efficient utilization of available organizational assets is the key to high firm performance and therefore this study seeks to answer the question as to when do managers effectively utilize their firm resources.

Dr. Lahiri’s analysis suggests that top managers in the same industry perceive competition differently and competition does improve overall performance of firms in the industry. Additionally, he finds that managers who sense a greater threat of competition tend to deploy and utilize their pool of human capital, organizational capital and management capability more effectively and achieve greater performance.

Therefore, based on this study, he suggests that to a certain extent competitive rivalry among firms could lead to positive outcomes for firms that are proactive. Secondly, managers need to evaluate the extent of competition that prevails in their industry. When managers sense greater threat of competition, this need not be seen very negatively, as such firms can plan and engage in effective strategic moves and countermoves potentially leading to better resources usage and attainment of higher performance compared to the rivals.

Lahiri, S. 2013. Relationship Between Competitive Intensity, Internal Resources, and Firm Performance: Evidence from Indian ITES Industry. Thunderbird International Business Review, 55(3): 299-312.