The competitive advantage can be obtained by the use of specific strategies in an international context: off shoring and outsourcing. These, however, have limitations such as the ephemeral nature of the benefit obtained and difficulties such as building effective collaboration reflected by the need to pay particular attention to differences in professional and national cultures (between partners). The market orientation as a basis for the reconfiguration of the organizational chart and may be useful for the establishment of a value system designed to strengthen the competitive advantage.off shoring outsourcing, competitive advantage, value system, organizational patterns, market orientation, culture.

Corinne Rochette

English

Research Papers in Economics

   
 
 
                                  Studies in Business and Economics 
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THE COMPETITIVE ADVANTAGE AS A RESULT OF AN 
ORGANIZATIONAL CHART BASED ON MARKET 
ORIENTATION 
 
      
ROCHETTE Corinne 
 
 
Abstract: 
The competitive advantage can be obtained by the use of specific strategies in an 
international context: off shoring and outsourcing. These, however, have limitations such as the 
ephemeral nature of the benefit obtained and difficulties such as building effective collaboration 
reflected by the need to pay particular attention to differences in professional and national 
cultures (between partners). The market orientation as a basis for the reconfiguration of the 
organizational chart and may be useful for the establishment of a value system designed to 
strengthen the competitive advantage. 
 
Keywords:  off shoring outsourcing, competitive advantage, value system, organizational 
patterns, market orientation, culture. 
 
 
 
1. Introduction 
 
  Competitiveness is one the most important preoccupations of either public or 
private organizations. It is defined as the capacity to face competition. Within the last 
decades, companies have adopted specific strategies like relocation or outsourcing 
(part 1), in order to strengthen their competitiveness. These strategies aim at rethinking 
the whole configuration of the system of value creation, what we call an organizational 
chart.  Recent cases of relocation and the failure of some cases of outsourcing (many 
examples of Chinese subcontractors becoming competitors of the western companies 
whom they used to work for) aim at examining the durability of the competitive 
advantage obtained in this manner (part 1) and lead us to underline the interest in 
developing a real orientation towards the market within the companies, with the 
purpose of consolidating the relationship between actors – parties involved in a system 
of value creation (part 2). These actors come from different technological and/or 
national cultures. This article intends to present some references of the origins of 
competitive advantage on the basis of an organizational chart of a simplified chain of 
value (part 3).                                                                                                                              
 
 
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2.  The search for a competitive advantage 
 
Competitiveness used to be analyzed by economists like Adam Smith and 
David Ricardo, who emphasized in their works the need for any type of organizations, 
states or companies, to concentrate their efforts on dimensions that give them 
advantages, i.e. resources and particular expertise. These elements were intended to 
be difficult to imitate, exploit or discover by the competition.   
  Competitiveness has been treated, for a long time, from an economic point of 
view in the sense of controlling the cost. In this approach, developing a competitive 
offer on the market means to be able to offer lower prices than the competition. “Being 
competitive” is being able to offer a lower price than the competition. We are focusing 
here on two types of strategic choices aiming to controlling the cost: the outsourcing 
strategies (for example the subcontracting), and the relocation, in particular within the 
strategy of an international development. Each of these two choices demands 
rethinking the way richness is created and adopt a particular model of organization. 
 
2.1. Relocations, outsourcing and the approach “resources – abilities” 
 
  The wave of relocations (specific kind of internationalization) experienced 
by capitalist economies appears within the will to develop an advantage based on cost, 
obtaining profit from cheaper work force, an easier access to raw materials and 
attractive taxation, altogether meaning particular resources. Relocation also requires: 
particular abilities regarding the places chosen for reassign the production (estimating 
the risk and the interest of the targeted territories) and choosing one’s partners, on one 
hand, and the implementation of the business out of the country of origin (sizing the 
production means, recruiting labor force, adapting management style), on the other 
hand. If identification of resources is not a challenging problem, identification and 
management of abilities might be difficult to tackle.  
  Indeed, while developing a business in a new environment, the company is 
forced to face the need to rethink the implementation of its abilities and to identity new 
ones. The company tackles an environment governed by other codes, different 
practices and a new cultural context, to which it must adapt, because it rules the way of 
functioning. The business and management model defined for the countries of origin is 
not always adapted to target countries. For example, Pizza Hut in France and Séphora 
in Japan experienced less success, even failure, due to non-adaptation of their 
business pattern to a particular cultural context.  
  We find this cultural difference within the constraints needed to be tackled 
when it comes to outsourcing strategies, which represent the other strategic choice 
that allows developing competitiveness in price. Outsourcing means entrusting a 
partner (for example a subcontractor) with some tasks or duties (production, transport, 
maintenance, recruitment and/or training, distribution). This choice is the result of an 
examination of distinctive abilities. The company focuses on high-value creating work 
and functions for which it has particular know-how. The importance given to abilities    
 
 
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belongs to a more systemic approach, tackling competitiveness as the result of a 
system of creating a higher value than the one existing on the market. The choice of 
outsourcing generally comes from economic and/or strategic analysis. Economically, 
sometimes it is less costly to subcontract than to produce on the spot; strategic 
outsourcing allows transferring resources of the outsourced functions to higher-value 
creating functions (already in the main company), and also maintaining a certain 
control over actors likely to modify the rules of the game within a particular line of 
business. Indeed, a small-sized company having particular capabilities (resources and 
abilities) can become a serious competitor (developing a competitive price or exploiting 
a particular market sector) or an important asset for a competitor in the framework of a 
partnership, thus representing an element likely to question the competitiveness of a 
company.  
  Therefore, the fact of owing a rare resource or a particular ability, of combining 
and managing them efficiently leads to competitiveness. This makes us consider that 
competitiveness isn’t purely economic, but it has a non-economic dimension.  
  
2.2. The competitiveness issued out of opportunist behavior is transient 
– from “relocating abroad” to “relocating back to the county of origin” 
 
  If cutting costs unmistakably generates a type of competitiveness, 
observations show that it is more and more insufficient to ensure for a company higher 
performance than its competitors on the long run. The high performance of a company 
doesn’t only mean its capacity to offer a better price, but it lays more and more on its 
ability to rapidly put on the market a new product or a service, of a higher quality. 
Therefore, other criteria than price gain more value. The competitiveness based on 
cost usually has an advantage less durable than the one laying on innovation or 
quality. As researchers have proved, the waves of relocations back to the county of 
origin are explained by the loss of some advantages in terms of cost, on one hand, and 
by the will of placing the confrontation on another field than the one of costs and 
prices, on the other hand. The case of Romania proves this development. Some of the 
companies that have had relocated their production to Romania because of 
advantageous cost and labor force rethink their strategies nowadays. Indeed, due to 
increasing salaries, they are losing this advantage and find themselves forced to 
relocate their production to countries where labor is cheaper (Pakistan, India, etc.), or 
relocate back to their county of origin and try to identify and develop a new axis of 
competitiveness (innovation, new positions in terms of quality). The opportunist 
behavior of relocation leads to questioning its duration. These companies must adapt 
and they hardly manage to get an advantage from a particular organizational 
configuration. Indeed, the adopted organizational chart is frequently, even constantly 
recast; therefore experiences cannot reflect their best. When adopting a new 
organizational chart, companies begin a new experience curve, even if some abilities 
and resources of the previous configuration are reinserted into the new organization.  
                                                                                                                             
 
 
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3.  Market orientation at the basis of new organizational charts 
 
3.1 Integrating market orientation for a sustainable competitiveness 
 
  In all cases, these developments need to rethink the way the business pattern 
is organized, to find new types of organization that give a more sustainable competitive 
advantage and to adopt a market orientation, as it was underlined by works developed 
during the 90’s. Indeed, it leads to overrunning the idea that the competitive advantage 
is based only on economic criteria and becomes interested to its non-economic 
dimensions. Reinforcing the awareness of dimensions that need to be integrated into 
the rational decision, market orientation makes the company pay a particular attention 
to certain actors and key elements (consumers, suppliers, distribution, competition, 
technology) and to their behavior in a prospective dimension. While implemented, 
market orientation begins to mean developing appropriate behavior (collection and 
dissemination of information) and distillation of a market oriented culture.  
  This way, a market oriented company will adopt an organizational chart 
opened to the outside world (behavioral dimension) and the dissemination of a culture 
putting “the interests of the consumer first (…), in order to develop a business that 
makes profit on the long run”. As many researchers have proved, it allows finding, at 
every level of the value chain, the means to develop an advantage, and, therefore, to 
rethink the pattern of creating value around reinforced connections internally (between 
positions, employees) and externally as well (in relation with business partners and 
other actors - e.g. consumers). Relocating back to the county of origin can be 
understood as inadequate market orientation when choosing the area of relocation, but 
outsourcing strategies generally mean an appropriate assimilation of market 
orientation. In the first case, inadequate identification of consumers’ needs, 
underestimating competition and ignorance of the contribution of suppliers and 
distribution reveal a lack of market orientation. In the second case, it allows to clearly 
identify the strong positions that create competitiveness and the weak ones, which 
need to be reinforced through a partnership whose implantation means adopting an 
organizational chart that we can qualify as being open. Indeed, the borders of the 
system of value are not the borders of the company. Figure 1 shows this configuration. 
 
    
 
 
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Figure 1 – Collected system of value, erupted system of value 
 
 
3.2. New organizations for a more sustainable competitiveness – towards 
a chain of value erupted, but constant 
 
  The competitiveness has been widely tackled in the Porterian perspective as a 
result of a particular configuration of lines of business intended to reinforce the position 
of the pair product/market. The search for a competitive advantage through relocations 
and outsourcing leads to the revision of the way that value is created adopting new 
organizational charts for the companies. Talking about Mr. Porter’s works, relocations 
and outsourcing leaded the companies to reconfigure the chains of value, passing 
most of the time from a “collected“ chain of value (whose links were entirely controlled 
and managed by the same single entity) to an erupted chain of value; we will rather 
talk about a system of value. Every link can be assumed by different entities 
(geographically and/or legally), as these entities dispose of one or several resources, 
one or several strong and specific abilities (figure 1). The search for a competitive 
advantage requires a reflection on the configuration of the chain of value, meaning the 
articulation of the positions and the lines of business of the company. Based on the 
(totalit  é des maillons
de la cha  î  ne de valeur
internalisés) 
Enterprise A
Exploding value system 
Entreprise A
Entreprise C
Entreprise B 
Entreprise D
Maillon 1
C1-R1
Maillons 2 
et 3
C2-R2 
C3-R3
Maillon 4 
C4-R4
Maillons 6, 
7 et 8
C7-R7
C8-R8
”Picked” value System
All the links 
internalized in 
the value 
chain 
Enterprise A
Enterprise C
Enterprise B 
Enterprise D
Link 1
C1-R1
Link 2 
and 3
C2-R2 
C3-R3
Link 4
C4-R4
Link 6, 
7 and 8
C7-R7
-R8
R = specific resources  C = specific competences 
Optimizing the use 
of skills and 
resources                                                                                                                            
 
 
Studies in Business and Economics 
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approach “resource based”, which emphasizes the identification of specific assets 
(technological, human, physic, organizational, reputation) and abilities (“interaction 
between technology, group training and organizational processes”), we can notice that 
competitiveness comes at the same time from a particular configuration of business 
actions and from the use of specific assets. We can consider that a market oriented 
company disposes of abilities (comprehension of the environment, behavior) and 
specific resources (information, relations with suppliers, distributors). In the perspective 
of developing a sustainable advantage, the relation with business partners, as a 
specific asset, has been underestimated for a long time. Anyway, there are a lot of 
people that recognize the interest of having stable organizational charts and the 
economic advantages that come out of them (experience effect), but they emphasize 
that it can bring difficulties, especially within an international multicultural framework. 
Indeed, the practice and behavior are strongly impregnated by the culture and values 
of each party involved. 
 
 
3.3. Developing a collaboration-based system of value, founded on 
shared values: inspiration from competitiveness poles 
 
  
  Therefore, it is obvious that developing collaborations with partner companies 
can reinforce economic and non-economic competitiveness on the long run. This is the 
way new patterns of collaboration can be developed. The example of competitiveness 
poles is a good example. They are a perfect synthesis of partnership, of economic and 
non-economic competitiveness. They consist of abilities put on a network, of a kind of 
erupted system of value. As some researchers showed, “passing from an 
organizational chart on the paper to its functioning in real life is an enormous 
managerial challenge”. Among the challenges evoked, the author (R. Colle, 2008) 
emphasized the challenge of “making persons coming from different professional 
cultures work together” and interrogates himself on the way to “stimulating 
collaboration-based behavior”.  
  This brings a new perspective on the comprehension of the probabilities of 
success of relocating and outsourcing strategies. It makes us integrate a new indicator 
(the variety of cultures at stake) in order to evaluate the deposit of competitiveness 
issued from this kind of collaboration systems. Indeed, in the framework of relocating 
strategies, the companies find themselves directly confronted with the difficulty of 
making individuals and structures issued from different culture (not sharing the same 
values) work together. Outsourcing practices require achieving a conciliation of 
different technical and professional cultures. Thus, building and managing the 
collaboration relation becomes a major key ability.  
 
 
    
 
 
                                  Studies in Business and Economics 
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 4.  Conclusion 
 
  The economic competitiveness (based on lower costs and/or prices) was the 
first form used by researchers and businessmen. But nowadays, even if it remains 
decisive, the research of a competitiveness based on non-economic variables emerges 
as a valorized way of reflection and strategic development. In the framework of 
relocation and outsourcing strategies, it is obvious that the integration of the relational 
variable can allow the development of more sustainable competitive advantages and 
the limitation of opportunist behavior reinforcing the links between the actors of the 
same system of value. The integration of the relational variable becomes a distinctive 
ability, but it is also a resource that allows building a sustainable competitive 
advantage. It needs to rethink and adapt the organizational charts, on one hand, and 
identify exactly the associated resources and abilities. These two steps are particularly 
significant for businesses belonging to an international framework, because of the 
critical nature of cultural differences. 
  
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propositions and managerial implications, Marketing Journal, 54, 1-18. 
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Analysis&quot; Resource Based &quot;and identification of strategic assets&quot;,

Competitive advantage: creating and sustaining superior performance,

Market orientation: the construct, research propositions and managerial implications,

Paradoxes of marketing,

Succeeding in CEE by introducing a true market orientation: a reflection from the Romanian case, Marketing Decisions,

The Effect of a market orientation on Business Profitability,

THE COMPETITIVE ADVANTAGE AS A RESULT OF AN ORGANIZATIONAL CHART BASED ON MARKET ORIENTATION

http://eccsf.ulbsibiu.ro/RePEc/blg/journl/5112rochette.pdf

THE COMPETITIVE ADVANTAGE AS A RESULT OF AN ORGANIZATIONAL CHART BASED ON MARKET ORIENTATION

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