Value Based Theory & Competitive Advantage

Last Updated: 21 Apr 2020
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To remain competitive in the 21st century there are key pillars that an organization needs in order to be a leader in their industry and will enable it to value the needs for their customers globally. These pillars include an effective management style, diversity management and business ethics. These key pillars with a strong organizational culture will enable an organization to gain a competitive advantage over their competitors. In order to be successful in the 21st century market, an organization must be able to identify and adapt to these pillars.

How these pillars are connected to competitive advantage is what this paper is about. Measuring the values for these pillars will allow an organization to work in different cultural environments and come out strong and successful. They will enable a company to gain a competitive advantage in the global market. These pillars will be represented within a 100 year old corporation that has changed in order to adapt to the 21st century market United Parcel Service, UPS. Introduction: Competitive advantage is something that we hear everyone talking about nowadays.

From our CEO’S, teachers, managers, community leaders, small business owners, students, and people who are thinking of embarking in the world of entrepreneurship. The first thing we need to define is what exactly competitive advantage is and why is it so important in today’s world, the 21st century. Competitive advantage is “the ability of one organization to outperform other organizations because it produces desired goods or services more efficiently and effectively than they do” (Jones & George, 2010 p. 22).

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Knowing the definition of competitive advantage is not sufficient for managers to be able to apply a market based value driven management strategy. The authors intend to give the readers an overview of the key pillars that are necessary to develop and maintain competitive advantage globally within organizations. The key pillars that every organization must incorporate are a successful management style, diversity management, business ethics and a strong organizational culture that will facilitate competitiveness in today’s global environment.

Gable and Ellig (1993) introduced a new approach for businesses to coordinate the different decisions and the amounts of information managers are faced with everyday. They called the new approach “Market Based Management”. Gable and Ellig (1993) believed that in order to understand an organization and have it compete at an advantage in today’s market they have to let it act as a free society and apply the market principals. Otherwise they will “find themselves distant competitors to firm that do” (Gable & Ellig, 1993, p. ). In order to apply the market based principals every organization needs to evaluate the eight facets of value driven management (Pohlman, 1997). Pohlman (1997) basically summarizes the theory by stating what is valued is what will ultimately drive actions. In the transportation and logistics industry the customers are one of the main direct forces from the ever changing and evolving task environment in which managers are faced with day in and day out.

The reason that customers are one of the main forces is because it is the customers that end up influencing the decisions, strategies, missions, purpose and values of the corporations in the 21st century. The authors must first define what customers are because customer satisfaction is the main goal of any organization that is in business. “Customers are the individuals and groups that buy the goods and services an organization produces. ” (Jones & George, 2010, p. 186). Customers in the transportation and logistics industry demand delivery of their products in the fastest and most economical way possible without suffering any damage.

We will examine UPS in each of the main pillars (management, diversity, ethics, culture and global interaction). Organizations and managers must analyze forces in the general environment on an ongoing basis. Organizational planning and the decision making that goes into planning are constantly affected by all types of forces in the general environment. Political and legal forces are the results of the changes that occur from new laws and regulations that affect the ways organizations structure their business model (Jones & George, 2011).

Laws are an extension of ethical conduct and practices such as workplace safety and discrimination such as Title V11 of the 1964 Civil Rights Act which prohibits employment discrimination based on race, religion, national origin, sex, color. As well, in 1997 the federal government issued guidelines for accommodating individuals’ rights to religious worship in federal buildings in the “The White House Guidelines on Religious Exercise and Expression in the Federal Workplace” (Jones & George, 2011).

UPS has standardized rules and procedures that are formalized in their Code of Business Conduct which addresses legal and ethical issues and states the company’s values and management philosophies. Since UPS is a global organization, political forces from the general environment such as deregulation and the decline of trade barriers provides the company with increased business opportunities (Jones & George, 2011). These factors also provide challenges for UPS because they must be ever vigilant while operating globally to be sure that their ethical corporate values are being enforced while conducting business outside of the United States.

As a global corporation, “UPS recognizes that it plays a role in acknowledging basic human rights in accordance with our high standards for the treatment of our people” (UPS, 2004). Organizational Culture Organizational culture is defined as “the shares set of beliefs, expectations, values, norms and work routines that influence the ways in which individuals, groups and teams interact with one another and cooperate to achieve organizational goals. ” (Jones & George, 2010, p. 684). UPS creates a corporate culture that fosters an environment of innovation. Innovation is crucial for attaining competitive advantage for companies. Innovation versus imitation motivates companies to launch new products and become pioneers on markets” (Jimenez & Sanz-Valle, 2011). The leadership at UPS understands that to use the imitation model of organizational culture can hold back their employee’s creative growth potential. This can affect the company place in the market since they will always be following the market leaders for an opportunity to bring the next great idea to market.

In the Market-Based management this principle is under “Rules that Promote Prosperity” (Gable & Ellig, 1993). There are direct links between an organizational culture and the employee’s attitude towards changes in employees work environment. “The change within an organization takes place in response to business and economic events and to the processes of managerial perception, choice, and actions” (Pettigrew, 1985). Corporations must be able to adapt to change in regards to their management style.

The ability for corporations to adapt to both their internal and external forces will help them remain competitive in the 21st century (Jones & George, 2010) Research conducted in companies in Malaysia, concluded that “The change process in each organization is unique in each situation, due to the differences in the nature of the organization, the nature of the business, the work culture and values,…and also the behavior and attitude of the employees” (Rashid, Sambasivan, & Rahman, June 2008).

The study exams the links between an organization’s ability to change in regard to the changing markets and demands of their industries, and how employees and manager attitudes toward rapid changes in marketplace can affect the success or failure of change. The researchers in this article show that companies that fail to be fluid in implementing change will have a disadvantage compared with companies that adopt changes more quickly. What should be the concept of organizational culture and climate that UPS is to use to operate in the 21st century? In terms of the basic assumptions, values and beliefs, it is the culture of an organization which dictates the expected employee behavior permits to form a compatible work environment, namely, the organizational climate” (Yahyagil, 2006). Management Behavioral management is defined as “the study of how managers should personally behave to motivate employees and encourage them to perform at high levels and be committed to achieving organizational goals” (Jones & George, 2010, p. 56).

Founded by management scholar Mary Parker Follett, “… was concerned that management theorists of her time were ignoring “the human side of the organization” (Jones & George, 2010, p. 56). “She pointed out that management often overlooks the multitude of ways in which employees can contribute to the organization when managers allow them to participate and exercise initiative in their everyday work lives” (Jones & George, 2010, p. 56). “Follett took a horizontal view of power and authority…” verses the traditional vertical chain of command of her contemporaries (Jones & George, 2010, p. 6). By empowering employees UPS managers can give employees the autonomy to make decisions. In this approach managers serve the organization more efficiently because they can spend their time mentoring and guiding employees, and also gaining insight into worker’s knowledge that assists managers with their primary functions of planning, organizing, leading, and controlling. Diversity What does valuing diversity have to do with a corporation’s ability to obtaining a competitive advantage over its competitors?

In order for an organization to create customer and employee values that maximize value over time, the organization first needs to understand employee diversity management (EDM) and how diversity and management will play a role in obtaining a competitive advantage against the competition. “Treven and Muley (2007) highlight the impact of EDM on competitive advantage and the innovativeness of employees as an outcome to EDM. In other words, by managing diverse employees effectively and efficiently an organization will gain innovation from employees and in turn the corporation will gain a competitive advantage.

The findings within their research “suggests that the organizations that manage employee diversity effectively may gain competitive advantage” (Treven and Mulej, 2007, p 144)” (Olivares , 2011). The positive short term and long term impact that an organization can obtain by effectively managing their diverse workgroups is “Effective EDM can cause lower costs and improved employee attitudes, recruiting efforts, increased sales, market share and corporate profits, increased group problem solving as well as innovation and creativity” (Treven & Mulej ,2007, p. 50). How can EDM lower organizational cost and improve employee attitudes? Treven and Mulej (2007) state that diverse employee feel less inclined to make decisions and are not as satisfied with their careers. This is based on their psychological commitment to the organization they are currently working in because they are different from their co-workers or peers. Based on this alone we can see how a minority employee can suffer a decrease in innovation if not managed properly.

Given that most decisions are made by small groups of people working together, Holman, Knippenberg, Kleef and Dreu (2007) it is necessary for organizations to rely on cross-functional work groups in order for them to achieve and stimulate innovation as well as solve problems to make the right decisions. Holman et al. (2007) was able to show that work groups with diversity fault lines are still able to effectively use their informational diversity if they believe in the value of diversity. Having a work group with pro-diversity beliefs will in fact provide the organizations with a competitive advantage.

This will resonant in the organizations short and long term plans (Olivares, 2011). They were able to “find a significant main effect of diversity belief’s indicating that groups with pro-diversity belief’s performed better than did groups with pro-similarity beliefs” (Holman et al. , 2007, p. 1193 ) in terms of performance. This demonstrates that we must evaluate the employee’s values to be sure that we manage diversity effectively and take into account the significance the pro-diversity beliefs have on the outcome of our employees.

If you have a diverse work group and ineffective EDM that does not value employees you will not be able to create innovative nor will creativity, and that creates a negative attitude among the employees. The lack of EDM would be a value destroyer, “the major reasons given for value destroyers in organizations were a bad attitude or very poor system” (Pohlman, 1997, p. 9). What are some steps that can be taken in order to make sure that organizations value diversity and therefore maximize value over time? Jones and George (2010) summarize effective diversity management into three steps.

The first step is to “secure top management commitment” (Jones & George, 2010, p. 164). Without the buy-in of the top leaders of the organization incorporating effective diversity management would be unsuccessful. “Top managers need to develop the correct ethical values and performance- or business-oriented attitudes that allow them to make appropriate use of their human resource” (Jones & George, 2010, p. 164). The second step is “strive to increase the accuracy of perceptions” (Jones & George, 2010, p. 164).

Managers need to be open to different views and different perspectives and encourage the same among the entire workgroup (Jones & George, 2010). It is also important for the mangers to not be judgmental of the person and also be willing to change their views about the person, issue or event that is taking place. The last step is to “increase diversity awareness” (Jones & George, 2010, p. 164). Most people view other people from their own perspective but the organizations should make sure they have some type of “diversity awareness programs” (Jones & George, 2010, p. 64) in order for the employees to appreciate diversity. A clear example of one way UPS is increasing diversity awareness is through a program called Urban Internship Program. “The program has been around since the 60’s. The program takes managers in the upper level and some middle level managers out of their usual habitats for a month and sends them to work in communities where they might serve meals to the homeless, help rid communities of ghetto and drugs, help migrant farm workers build temporary houses and schools, or teach teachers to manage a classroom” (Filipczak, 1992).

The mangers are drafted and there is no option of saying “no” to this program. “The rationale behind it all is simple. Being aware of an issue is not the same as knowing about it, and knowing about it is not the same as doing something about it” (Filipczak, 1992 p. 43) Olivares (2010). That is an example of a program that can be implemented in order to increase diversity awareness, therefore maximize employee value and in turn maximize customer values over time. Business Ethics

Ethical practices in organizations unquestionably add value and enable corporations to build a competitive advantage. The theory behind Market-Based Management is that the principles of a free and democratic society where people live work and thrive without unnecessary government restriction apply not only to society but to businesses as well (Gable & Ellig, 1993). In successful companies like UPS, strong corporate values and ethics are the underpinning of an effective business model.

Scott Davis, chairman and CEO of UPS states, “UPS’s strong reputation for ethical behavior has enabled us to attract and retain the best people and loyal customers; it has opened doors for us in new and emerging global markets, and allowed us to transform our business to meet changing customer needs. As we continue to seek ways to open doors in new and emerging global markets, our commitment to integrity will allow us to do so” (UPS, 2004). UPS utilizes market based practices in its business model by empowering employees through extensive training and its policies and procedures.

UPS develops employee’s careers and promotes from within by emphasizing that employees must continually seek out positions with greater responsibility (UPS, 2004). In addition, UPS creates vested interest in the company by employees since if offers stock ownership. As a business strategy and value adder over time, UPS believes that if it provides excellent employment opportunities and an excellent work environment for its employees, they will in turn provide excellent quality customer service and value to end users.

UPS is viewed as an industry leader in ethical business practices, business ethics and corporate social responsibility. Strong corporate ethics have profoundly affected UPS’s ability to compete and excel in the transportation and logistics industry. Value Management theory states that what is valued drives action (Pohlman, 1997). UPS values its employees, which it treats like its customers. This is demonstrated through its ethical corporate structure. One of the business strategies employed by UPS is that they recruit talent with diversity in mind.

According to Armstrong, et al. (2010) diversity and equality management systems seek out employees to fill talent deficits with employees that are more similar to customers and who can better communicate and relate to the needs of the customer base. This type of strategic human resource management is associated with higher business performance and added value over time. UPS does not hire simply to fill quotas but because it is the right thing to do, not only from both an ethical and moral imperative, but also a business driver.

Market-based management practices dictate that moral decisions are not at odds with profitability rather doing what is right “enhances profitability over the long term” (Gable & Ellig, 1993). Corporate social responsibility (CSR) programs have become widely used as strategies for organizations to demonstrate their business ethics. These programs can be costly and it is questionable as to their overall impact on creating competitive advantage for the company. There are three drivers for CSR in most corporations: compliance to prevailing laws to avoid legal problems, ethical convictions and a reduction in waste and increase in profitability.

Even though CSR programs can be costly if stakeholders, like the public, feel that they are not being served by the way the organization conducts business sales generally suffer. UPS uses CSR programs such as the previously mentioned Community Internship Program (CIP) where managers spend four weeks with a non-profit agency in rural or urban areas in an effort to improve conditions in those areas, and to gain insight into “walking a mile in another man’s moccasins”. Market-based management shows that pro-social behavior benefits society as a whole as well as the bottom line of an organization.

Trustworthiness is a source for competitive advantage in organizations and its link to wealth creation over time. If the organization’s leaders generate an environment of trust the following occurs; higher employee commitment, better interpersonal relationships between employees and management, a stronger “social contract” or connection between the employee and the organization and a more positive view of human resource policies and procedures (Caldwell & Hansen, 2010).

Consequently, the employee bring “energy, passion and excitement” to his/her role that affect what the person is willing to contribute to the organization and this becomes an enormous source for competitive advantage and value over time (Caldwell & Hansen, 2010). Market-based management states that “a culture of genuine humility and honesty must be established in order to achieve organizational learning and profitability (Gable & Ellig, 1993).

UPS’s mission statement includes principles that promote honesty and fairness through strong corporate leadership that are driven by honest relationships and ethical decision making. The mission of business in a market based society is profit. The business outcome in a capitalistic society is that both the business and the stakeholder benefit from the system. Because there is a power differential between the organization and the stakeholder there is always a chance for an abuse of power. This is where the importance of ethics comes in.

Since the stakeholders (employees, customers, stockholders, the community, etc. ) are directly impacted either beneficially or negatively by the actions of the company, it is crucial that business ethics are in place and operational to reduce harm and maximize business objectives. Robin (2008) states “that business should treat each stakeholder group as if they were partners in the success of the firm”. In other words, what benefits the stakeholder creates value and benefits the business.

This ties into Market-based management because when businesses practice “adherence to commonly acknowledged business ethics (it) makes us all wealthier by reducing the amount of resources we have to devote to contract negotiation and enforcement” (Gable & Ellig, 1993, p. 21). UPS follows a strict adherence to formalized codes of behavior and procedures to ensure business goal are being met while fair and ethical standard are being practiced. Boesso and Michelon (2010) studied the link between corporate social responsibility (CSR) and financial performance of corporations.

The research indicates that CSR must be strategic in order to result in the greatest gain for business and generate value over time. Companies which focus on a few core issues rather than hundreds of more generic issues find better success in competitive advantage and better benefit to society as a whole. Furthermore, the research indicates that increased competitive performance and outcome can also be measured by items other than financial performance. Productivity, innovativeness and human capital are also indicators of competitive advantage and value over time.

As well, the researchers point out that part of the economic value of CSR and stakeholder management is that it brings companies and society together because of the value generated for all parties. The underpinning of market-based management is that it recognizes that the market system is designed to enable groups of people to achieve superior results when working together that are exponentially greater than could be achieved if they were working separately. Organizations like UPS have a “big picture” view of CSR as a value-adder and utilize best practices that benefit the organization and ultimately society as a whole.

Ethical management alone does not guarantee success for a company. Ethical corporate values and practices are but one element of an entire set of practices that lead to competitive advantage and success. Empowering employees through market-based management techniques and a strong commitment to employee development is a fundamental value driver. Ethics as a whole in business is crucial for long term value creation and sustainability for the organization. Globalization In the competitive environment of global markets, value driven management and adherence to specific requirements must be considered before entering these markets.

A business management strategy, such as Value Driven Management, signifies the comprehensive success of a company over time (Pohlman, 1997). In determining long-term results, organizations must also understand the factors and driving components that are crucial to creating these opportunities in global markets (Sherwin, 2010). Through understanding political, economic, demographic, legal, and socio-cultural factors, companies can enter these markets and compete successfully against other companies (Jones & George, 2011).

It is important for the companies to know “the impact of these external factors is processed and greatly affects a firm’s outputs that are the products and/or services produced and the markets targeted and penetrated that impact the overall performance of the firm” (Sherwin, 2010, p. 66). It has been presented that for companies to create the greatest opportunity of output of good and services requirements, such as, Customer Relationship Marketing, CRM and New Product Development, NPD will be needed.

When organizations move from one environment to another, decisive measures must be implemented in order for the consumer within that culture to accept the goods and services offered by the company (Ivanova & Castellano, 2011). By mean of CRM or Customer Relationship Marketing, is one of the strategies used towards incorporating Value Driven Management. This “is a philosophy that is based upon leadership perspectives regarding differentiating customers and prospects by current and future value and meeting individualized and customer needs” (Sherwin, 2010, p. 9). An example of Customer Relationship Marketing is when UPS expanded into Canada, its first global market in 1975. At first, when entering this market, UPS was not given the license needed in order to drive it trucks on their highways. To meet the needs of the government and still perform deliveries for it customers, UPS decorated taxis with their company logo to transport and deliver packages in order to accommodate government regulations (United Parcel Service, 2007).

To satisfy these needs or regulations of the government, it became the responsibility of top-level management or company values to create strategies and procedures in order to allocate their resources effectively (Sherwin, 2010). UPS still continues to do business in Canada today because it had gained the trust of government officials and existing customers by determining their need through their current and future value by using Customer Relationship Marketing strategies. This would not have been realized if top-level management did not comply with overall country values.

It is crucial for companies to determine the owner’s value, or the overall company’s value and the importance of emphasizing the benefits that maximizing value over time has on an organization. “It is not to imply that other values are not equally important, but we must understand when we are working in an organization our job there is to maximize the value for the owners. When all is working well, the values of employees, customers, suppliers, third parties, and owners will be in harmony” (Pohlman, 1997, p. 21). Under these conditions, eginning with top-level management, they must strategize or develop a game plan to utilize every resource, asset, or opportunity within the company; to gain a competitive advantage over competitors within the bounds of the global market they are penetrating. For these reasons it is imperative and recommended for companies to use Customer Relationship Marketing with the values of the company to obtain a competitive advantage over time. In order for companies to succeed in the global market, innovating new products and services are necessary to obtain sustainable competitive advantage (de Brentani, et al. 2010). “Product innovation and the trend to globalization are two important dimensions driving business today, and a firm’s global new product development (NPD) strategy is a primary determinant of performance” (de Brentani, et al. , 2010, p. 143). One prime example of this, is in 2004, when UPS designed and introduced Quantum ViewSM Manage, this would allow for consumer who sent the package to effortlessly monitor the transportation of small parcels within the bound of their supply chains and improve services by using technological applications created by UPS (United Parcel Service, 2007).

In creating this application, this allows UPS to further globalize itself by introducing innovative services such as the Quantum ViewSM Manage. In the case of UPS, initiating a new product development strategy is a crucial element towards product innovation if companies are to eliminate any barrier to entry (de Brentani, et al. , 2010). To successfully implement a new product development strategy, ideas will originate from organizational culture and senior management (de Brentani, et al. , 2010).

It is the environment within the company that shapes the design and direction of innovative ideas and services that will be used and incorporated into global markets. “Thus, both the strategy factors as well as certain intangibles characterizing the firm’s behavioral environment (BE) have been found to affect global NPD program outcome” (de Brentani, et al. , 2010, p. 144). Without the role of management and culture within the organization, companies will not be able to produce more economically or create value for its customers in the global market in which they are seeking to penetrate (de Brentani, et al. 2010). Conclusion In conclusion, organizations that incorporate strong and functional organizational culture, an effective management style, diversity, and ethics will sustain a competitive advantage in the 21st century only if they value the needs of their employees, customers, owners, countries, and organizations globally. Organizational culture will identify how a company will operate in the market, how they will behave in day to day operations, and how they will be able to adapt to change.

Management styles empowering employees will allow them to take more initiative within their work responsibilities which will lead to increased job satisfaction. The authors recommend fro UPS to continue to have an organizational culture that provides an environment which supports the established goals of the organization. For organizations to stay competitive in the 21st century is becoming more and more essential for them to stay on top of their game Second recommendation is to incorporate an effective management style that encourages employees to have more autonomy.

This will allow them to take initiatives in decisions that need to be made within the organization. . Effectively managing employee diversity and making sure that the customer, employee, owners, organization, and external values are all in tune with each other is the mix that is needed in the 21st century in order for an organization to be competitive in today’s global environment.

Third recommendation is to continue to manage diversity effectively and that will enable the group to come up with creative and innovative ideas that will put the organization first in their industry Once the key pillars are defined we need a strong business ethics to refrain from questionable practices and set standards that meet or exceed moral and legal measures. Fourth recommendation, it is important for organizational members to be responsible for maintaining a superior level of ethical behavior.

Last but not least is to make sure we are valuing and adapting to the customers needs globally in order to maintain a competitive advantage in the global marketplace even it means to change the organizations strategy overseas. If UPS fails to follow these key pillars that are necessary in the 21st century it can impact their global operations in both the short and long term. Our recommendation to UPS is for them to continue what they are doing and also continue to evaluate the needs of their customers, employees, owners, rganization, and countries in which they operate to remain successful in today’s globally expanding market on a quarterly base.

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