With the development of science and technology, Information System (IS) plays irreplaceable role in organizations. This paper will discuss different understandings of sustainable competitive advantage (SCA); we will also look into how Wal-Mart and Saudi Aramco obtain SCA from IS. Finally, the similarities and differences in how IS provides a SCA will be analyzed.
Competitive Advantage & Sustainable Competitive Advantage
It was in 1930s that the view of competitive advantage was first mentioned in "dominance theory" by Chamberlain (cited in Xia, Ye, and Cai, 2010). Since then, scholars and researchers have defined competitive advantage (CA) with different meanings. Cater (cited in Alali, 2007) thinks that CA would be a unique position that the firm could develop compared to its competitors. Bamberger (cited in Alali, 2007) consists CA is a position of superiority in an industry or market. "Hofer and Schendel think that competitive advantage is the uniqueness of market positioning an organization through its allocation of resources relative to its competitors" (Xia, Ye, and Cai, 2010, p.685). From this kind of view, CA often resulted from resources and capabilities (Colgate, 1998). Colgate believes that resources refer to "assets, strengths and weaknesses, and stocks of available factors"; capabilities include a serious of marketing process, such as product development, market research, brand management etc (Colgate, 1998, p.80). To sum up, competitive advantage is the attributes of the enterprise which made itself beyond or better than their competitors in the specific business.
Sustainable competitive advantage (SCA) completes the definition of CA on the perspective of continuous improvement. Porter (1985, p.11) believes that "sustainability is achieved when advantage resists erosion by competitive behavior". Specifically, "additionally sustainability can only be produced when the resources and capabilities are durable, that is, they do not physically depreciate" (Colgate, 1998, p.80).
There are many factors which influenced a firm to gain SCA. Kettenger （cited in Alali,2007） and his colleagues points there are two categories factors which are environmental factors (includes industry changes, political changes, competitor restrictions and environment changes) and foundation factors (which means changes on the following aspects: size, geographic, product scope, vertical scope, organizational base, learning curve, technological resources and information resources). Obviously, no matter technological resources or information resources, information technology plays a significant role on gaining SCA.
Case study of SCA in Wal-Mart and Saudi Aramco:
Wal-Mart
Wal-Mart is an American company which operates a chain of department stores and warehouse stores. It is the largest retailer company in the world and it was the world's largest public corporation by revenue (http://www.forbes.com/lists/2010/18/global-2000-10_The-Global-2000_Sales.html). It operated in 14 countries which include UK, Canada, US, Mexico, Brazil, Argentina, Puerto Rico, China etc (http://walmartstores.com/AboutUs/246.aspx). The application of IT in War-Mart could be summarized in 4 steps and 2 projects (Chen, Ji, and Kong, 2008).
Steps:
1969-1979, mainly focus on operating internal system
1980-1993, building communication network between stores and headquarters
building IT system to share data with supplier to manage inventory
1994-2001, emphasizing on E-Commerce
2001-2004, focus on assistant activity sectors
(cited in Chen, Ji, and Kong, 2008)
Projects: unit: dollar
Table 1 Two Projects of Wal-Mart
Year
Project
Investment
1987
Satellite network connecting the store and headquarters
24 million
1991
Retail Link used to share the information about sales, shipment, orders, returns and other data with suppliers
4 billion
(cited in Chen, Ji, and Kong, 2008)
Wal-Mart has invested lots of money in the process of IT to obtain competitive advantage. In the year of 1987, Wal-Mart's 25th anniversary, the company completed the Satellite Network, the largest private satellite communication system in the US which can provide two-way voice, data and one-way video transmission between its headquarters, stores, regional offices and distribution center locations. (http://walmartstores.com/aboutus/7603.aspx)
Wal-Mart's supplier network called Retail Link, which was initiated in 1991. It used to providing daily sales data as a data warehouse. The application of Retail Link, by which suppliers can access to sales, shipment, orders, returns and other data about their products selling in Wal-Mart stores. Retail Link has shown the value to both parties by sharing information (http://fscavo.blogspot.com/2006/04/inside-peek-at-wal-marts-it-systems.html).
By the application of information system, Wal-Mart is always one step ahead of their competitors. To sum up, distinguished IT capabilities can heighten the organization's competitive position and acquire more profits than competitors. When the competitive advantage can be continued, organizations build sustainable competitive advantage. (Xia, Ye, and Cai, 2010)
Saudi Aramco
Saudi Aramco is the state-owned national oil company of Saudi Arabia. It is the largest oil corporation in the world with the largest proven crude oil reserves and production. Oil production started in Saudi Arabia in 1933 when California Arabian Standard Oil Company (Casoc) affiliated of Standard Oil of California (Socal, today's Chevron). In 1939, another American company joined in the oil exploration and production called Saudi named Texas Company (Texaco, part of Chevron). By 1944, Casoc changed its name to Arabian American Oil Company known as Aramco. "Standard Oil of New Jersey and Socony-Vacuum Oil (both now Exxon Mobi) joined Socal and Texaco as owners of Aramco in 1948". Later on, these four companies were known as sister companies to ARAMCO. (Alali, 2007,p. 928)
Existing Competitive Advantage of Aramco:
The reserve of crude oil and gas is the main CA of Saudi Arabia. The ownership of Oil transport company which covered all over the world is the other CA of Saudi Arabia. In addition, Saudi Aramco's terminal capacity can reach to 10 tankers per day. Above descriptions are the existing CA of Saudi Arabia. (Alali, 2007, p.928)
IT becomes sustainable competitive advantage:
Earlier CASCO started in 1930s as mentioned when there is no basic infrastructure in the country and even Saudi Arabia has not got unified yet. CASCO planned to construct its own communication system since they found that the fields are at a distance of hundreds of kilometers. Therefore, the basic infrastructure of IT was set up:
The basic telephone switches
Cabling infrastructure
Microwave systems
(Alali, 2007)
By using the IT system, the company minimized traveling and reduced decision making time; improved performance and engineering efforts. Because the needs of development, Saudi Aramco build a huge communication infrastructure from communication to computing and including the process and control of plants, oil tanks and information super highway. The IT system is composed by:
Telephone services
Computing services
Networking services
Wireless communication service
Satellite connection service
Internet/Intranet services
Process and control services
High Frequency services to communicate with ship over the world
Other services that support operation in the desert areas
Aramco for quite long time had its own TV channel and Radio channel
(Alali, 2007)
Specifically, there are several reasons for Aramco to build their communication infrastructure and IT system:
1) They recognized they need to communicate with other areas where their markets are.
2) Aramco was owned by four major companies, those companies wanted to have a fall access to information in Aramco.
3) Aramco's facilities span a very large area of the east cost of Saudi Arabia, these areas needed to be on contact for decision making and operation.
(Alali, 2007)
Similarities & differences:
The apparent similarity of the two cases is that companies invest huge money on building their own communication infrastructure and IT system. In the meanwhile, these investments bring outstanding performance as return. Furthermore, they keep innovating on IT to differentiate themselves from their competitors. It is obvious that the objective was achieved by the application of IT and cooperation with related business company. Actually, these appearances should attribute to the property of governing and managing IT which means to obtain sustainable competitive advantage, therefore the company can survive in a competing environment,.
Because the Wal-Mart is a retailing company, the achievement of obtaining SCA is bringing more customers and selling more products. All IT infrastructures used to provide better service to customer. For these reason, Wal-Mart lay particular stress on management, such as logistic management, warehouse management, etc. Otherwise, Saudi Aramco belongs to manufacture, it more focus on producing process. All application of IT designed to improving productivity, minimizing production time, decreasing cost, etc. So the achievement of Saudi Aramco is Price advantage, by control of oil production to get more SCA. In short, the achievement of getting SCA in War-Mart and Saudi Aramco are different, they are management and control separately.
