Knowledge Management A Competitive Advantage Business Essay


 In the twenty first century landscape with all its uncertainty and dynamism, many firms are competing in a complex and challenging environment which is being transformed by many factors ranging from globalization, technological development and increasingly rapid diffusion of technology, to the development and use of knowledge (Hitt, Keats, and DeMarie, 1998). As such, the foundation of organizational competitiveness has shifted from an emphasis on physical and tangible resources to knowledge (Wong and Aspinwall, 2005) and managing knowledge-based resources has become the key for sustaining competitive advantage (CA) and superior performance (Grant, 1996b; Grover and Davenport, 2001; Jackson, Hitt, and DeNisi, 2003; Sharkie, 2003; and Teece, Pisano, and Shuen, 1997). To deal with this enhanced dynamism and uncertainty of the business environment, one of the current strategic philosophies assisting firms to develop strategic capabilities is the knowledge management. It helps the organizations to systematically acquire, create, share, and use knowledge so as to develop, renew, and exploit their knowledge-based resources, thereby allowing them to be proactive and adaptable to external changes and attain competitive success. 

Review literature:-

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Under the light of the previous researches, some researchers (Davenport and Prusak, 1998; (Zack, 1999) (Alavi & Leidner, 2001) noted that competitive advantage is realized only when the organization's tracking methods and ways are efficient and distinctive and one of those ways is through the knowledge management of the organization that have achieved competitive advantage not for a specific period, but a long term. (Gupta & Mcdaniel, 2002) studied knowledge management and competitive advantage by examining the vital link between the management of knowledge in contemporary organizations and the development of a sustainable competitive advantage. The used variables are conceptualized in terms of organizational effectiveness, efficiency, core competency, costs; knowledge acquirement, knowledge filtering, knowledge configuration, knowledge dissemination and knowledge application. (Goh, 2005) also identified that the field of knowledge management has emerged strongly as the next source of competitive advantage. (Ismail & Ong, 2008). Emphasized that firms can achieve the sustainable competitive advantage by information technology facilities. He sees that even if a firm owned the most sophisticated information technology facilities which are impossible for the competitors to imitate or substitute, and for sure it is rare, but if there is no knowledgeable personnel in the organization, or the knowledgeable personnel in the organization is not willing to utilize these facilities, these facilities would not generate any value to the organization. Obviously, to achieve sustainable competitive advantage, knowledge, willingness to use operations and availability of facilities must co-exist. Hence, the question before the organizations is "how should they develop a knowledge management system to coordinate people, technology and infra-structure to create advantages competitiveness and sustainability in business environments?


Knowledge is a different term from data and information. Data is simply raw facts, measurements etc. Information is organized or processed data that is timely and accurate. Knowledge as defined by (Tiwana, 2000) is the actionable (relevant) information available in the right format, at the right time, and at the right place for decision making.

For example, sales of a particular year will be simply data, if we process the sales data and find sales in the north region is more, it will be information. By applying our experience we can conclude that south region requires more marketing efforts than north, it is knowledge.

Knowledge is a valuable source for the organization because it helps the organization in taking important decisions in the rapid changing business environment. Knowledge is dynamic in nature. This implies that today's knowledge may well become tomorrow's ignorance if an organization fails to update knowledge as environmental conditions change.

Definition of Knowledge Management:-

Knowledge management is an emerging concept and has got many different definitions. The term knowledge management was first introduced in a 1986 in a European management conference. Alternative definitions have been proposed since that attempt to capture the complexities of knowledge management. The 20 American Productivity and Quality Center defined knowledge management as "the strategies and processes of identifying, capturing and leveraging knowledge". (knapp, 1998) defined knowledge management as "the art of transforming information and intellectual assets into enduring value for an organization's clients and its people". Darroch also defined knowledge management as "the process that creates or locates knowledge and manages the sharing, dissemination, and use of knowledge within the organization".  The traditional definitions of knowledge management focused only on the knowledge that is recognized and already articulated in some form. However, increasingly, knowledge management is also incorporating the managing of important tacit knowledge (Sabherwal  & Becerra-Fernandez, 2003). Davenport and Prusak (1998) defined knowledge  management as the management of a corporation's knowledge through a systematic and  organizational specified process for acquiring, organizing, sustaining, applying, sharing,  and renewing both tacit and explicit knowledge from employees to improve  organizational performance and to create value.  Wiig (1994) suggested that knowledge management in an organization must be  considered from three perspectives, each with different scopes and purposes: (a) a business perspective - focusing on why, where, and to what extent the organization must  invest in or exploit knowledge, and which strategies, products and services, alliances,  acquisitions, or divestments should be considered from a knowledge-related point of view;  (b) a management perspective - focusing on determining, organizing, directing, and  monitoring knowledge-related activities required to achieve the desired business strategies and objectives; and (c) a hands-on operational perspective - focusing on  applying the professional skill to conduct explicit knowledge-related work and tasks.  In fact, knowledge management is a principle that is aimed at satisfying and exceeding the customer's expectations (Keskin, 2005). Knowledge management is a relatively new business philosophy. The goal of knowledge management is to identify, capture, store, maintain, and deliver useful knowledge in a meaningful form to anyone who needs it, anyplace and anytime, within an organization. Knowledge management is about sharing and collaborating at the organizational level. Knowledge management has the potential to revolutionize the way we share expertise, make decisions, and conduct business.

History of knowledge management:-

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Knowledge management era started with the use of different programs which include on-the-job discussions, formal apprenticeship, discussion forums, corporate libraries, professional training and mentoring programs. The use of computers in the second half of 20th century brought a revolution in the knowledge management field. It resulted in the specific adaptations of technologies such as knowledge bases, expert systems, knowledge repositories, group decision support systems, intranets, and computer-supported cooperative work which developed the emerging knowledge management field to a large extent.

In 1999, the term personal knowledge management was introduced which refers to the management of knowledge at the individual level (Wright, 2005).

In terms of the enterprise, early collections of case studies recognized the importance of knowledge management dimensions of strategy, process, and measurement (Morey, Maybury & Thuraisingham 2002.

Recently with the use of the Web 2.0, the concept of Knowledge Management has taken into consideration the participation of people and emergence. This line of evolution is termed Enterprise 2.0 (McAfee 2006). However, there is an ongoing debate and discussions (Lakhani & McAfee 2007) as to whether Enterprise 2.0 is just a fad that does not bring anything new or useful or whether it is, indeed, the future of knowledge management (Davenport T. , 2008)

Knowledge management cycle:-

The knowledge management cycle as given by 'Turban' involves six steps. To keep the knowledge management system effective, the knowledge has to be updated with time. The knowledge management cycle works as follows:-

Create knowledge:  knowledge creation is the generation of new ideas, insights or routin. It involves developing new ways of doing things or develops knowhow. Sometimes new knowledge is brought in or sometimes own knowledge is improved.

Capture knowledge:  new knowledge must be identified as valuable and be represented in a reasonable way.

Refine knowledge:  new knowledge must be placed in context so that it is reused. That is where human insights must be captured along with explicit facts.

Store knowledge useful knowledge must be stored in knowledge repository so that others in an organization can access it.

Manage knowledge:  a knowledge repository must be updated so that it holds the current data that is relevant and accurate.

Create knowledge

Capture knowledge

Refine knowledge

Store knowledge

Manage knowledge

Disseminate knowledge

Disseminate knowledge: knowledge must be made available in a right format to anyone in the organization who needs it, anywhere and anytime.

 (turban, sharda, & delen)

Benefits of knowledge management:-

Within the usage of Knowledge Management, the company can have following advantages:-

Innovation with the help of flow of ideas: 

The knowledge management programs can allow employees and departments to see the overall status of the company about a specific development field. With the help of this ability, new ideas and innovative techniques can be emerged with respect to the existing knowledge.

Improving the customer satisfaction by reducing the response time:

With the help of the Knowledge Management usage, the employees of the company will be able to find the opportunity of appropriate solutions to customers with an acceptable response time because KM will allow them to find the necessary information about the demand of the customer more relatively and rapidly.

Increasing the revenues:

With the help of the KM, the necessary product and service that the company provides will be located in the market, with the help of the rapid interdepartmental communication to use the right information at the right time.

Keeping employee dynamic: 

The employees are important to be kept "alive" during critical transactions. With the help of Knowledge Management, the information system that contains the functions of KM can record the value of every employee and allows managers to reward them if they have critical additions to the business process transactions of the company.

Process reduction: 

With the help of KM, the costs and amount operations can be reduced by eliminating the redundancy of process phases and unnecessary ones.

Sustained competitive advantage:

 KM can allow companies to increase the importance of intellectual properties and knowledge-based assets that can be costly to imitate n the market that the company locates in. This can help the company to have a competitive advantage in a long-term period.

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Knowledge management can improve the total efficiency, productivity and revenues in any business transaction if it can be used well.

Competitive advantage:-  

As the global competition becomes increasingly fierce, how to achieve competitive advantage starts obtaining more attention.

(Barney J. , 1991) noted that when an organization is implementing a value creating strategy not simultaneously being implemented by any current or potential rivals, then the organization has a competitive advantage. And when other organizations are unable to copy the benefits of this strategy, it confirms that the organization has a sustainable competitive advantage. In 2008, Barney distinguished two types of competitive advantage: temporary and sustainable competitive advantage. According to him, competitive advantage typically results in high profits, but these profits attract competition, and competition limits the duration of competitive advantage in most cases, therefore, most competitive advantage is temporary. On the other hand, some competitive advantages are sustainable if competitors are unable to imitate the source of advantage or if no one conceives a better offering. Furthermore, refers (Al-hawary & hani, 2009) to competitive advantage as, to create some barriers that make firm's performance imitation difficult. That is, since the competitive advantage is at the heart of firm's performance, it should protect itself from being despoiled and assimilate new sources of technologies, skills, and core competencies.

Michael porter's concept of competitive advantage:-

According to porter, when a firm's profits are more than the industry, it's said to have a competitive advantage. Michael porter identified two types of competitive advantage:-

cost advantage

differentiation advantage

Cost advantage is enjoyed by the firm when it produces the same product as its competitors but at a lower cost. Differentiation advantage results when a firm delivers benefits that exceed those of competing products. Thus a competitive advantage enables the firms to deliver superior value to customers and superior profits for itself.


Knowledge management a competitive advantage:- 

Knowledge management helps in gaining competitive advantage in the following ways:-

Knowledge management can Increase productivity of an organization by applying effective organizational knowledge management. By having your knowledge processes in a structure, it will allow those with the necessary knowledge to quickly share or apply it and you can reduce wasteful meetings and inefficient knowledge bottlenecks. This will help you get more work hours from your employees and create a cost advantage.

The technological solutions can be applied in an organization for knowledge dispersal within an organization. By offering easier, more intuitive ways for your employees to create and share knowledge, your company can produce more and better knowledge than your competitors, thus gaining a quality advantage.

Foster and reward the sharing of knowledge. Whether creating master/apprentice relationships or monetarily rewarding those who share knowledge within your company, take steps to ensure that every employee is trying to share useful knowledge.

It's the knowledge management tools that help the organization in identifying the unmet needs. Having a proactive approach to satisfy those needs is definitively going to provide an organization a competitive advantage. Good knowledge management also allows in identifying the niche markets and by addressing the needs in these niche markets is going  to prove one of the attribute of your organization success.

Almost all organizations are using the knowledge management to remain competitive in market. Taking the example of WallMart, the world's largest retail corporation , it views the knowledge management not only as a way of enhancing profitability and financial growth but also as a way of remaining competitive in a turbulent world of businesses. It has invested a large amount of money in building a strong knowledge management system. It is because of the effective km system that it has emerged as the world's largest corporation. WallMart employs different tools of knowledge management to remain competitive in market. Starting from the simple tools of knowledge management like onthejob discussions, formal apprenticeship, discussion forums, corporate libraries, professional training and mentoring programs to the advanced technologies like knowledge bases, expert systems, knowledge repositories, group decision support systems, intranets, and computersupported cooperative work, it uses each and every technology of knowledge management to have a competitive edge in the market. The knowledge management helped the WallMart in cutting operational costs and building up a value for its shareholders. The employees in WallMart are very much satisfied with the knowledge management system functional in almost all units. With the tools of knowledge management the best employees in WallMart are chosen and accordingly rewards are given. TheWallMart stores reliable knowledge management skills have resulted in enhanced efficiency in service delivery and customer care as well as development of great competition.Hence, an effective knowledge management system is one of the driving forces for WallMart for its great success. The other examples that proved that effective knowledge management can help achieve organization goals and help in remaining competitive in market are sportswear giants Adidas and Nike.



Competitive advantage is at the heart of a firm's performance in today's challenging and rapidly changing environment. To secure the competitive advantage, firms should be able to continuously acquire, create and disseminate knowledge across various levels of the organization. Knowledge is central to strategy formulation and Implementation, knowledge management has become a key strategic task facing managers for achieving success in today's complex and dynamic environments (Muthusamyand Palanisamy, 2004). The shifting winds of change in today's business environment, where the Market place is increasingly competitive and the rate of innovation is rising, have made Enterprises realize that knowledge is their key asset. It is pointed out that the most valuable Assets of the 21st Century enterprise is its knowledge and knowledge workers(Sunman and Kruger, 2004). It is argued that knowledge is displacing natural resources, capital and labor as the basic Economic resource in the "new economy. Knowledge mostly the tacit knowledge is hard to imitate so effectively managing such type of knowledge in an organization is definitely going to lead the organization to a place which for others will be difficult to achieve. Knowledge management helps us in identifying unmet needs in the market. Having a proactive approach to satisfy these needs is going to place your organization above all in the turbulent competitive business environment. So, every Organization should start thinking of a sound knowledge management, because in a knowledge-driven economy it's the only source of achieving success over others.