Grant (1996) perceives the organizations as "a unique bundle of idiosyncratic resources and capabilities where the primary task of management is to maximize value through the optimal deployment of existing resources and capabilities, while developing the firm's resources and capabilities for the future". Strategy is "the match an organization makes between its internal resources and skills, and the opportunities and risks created by its external environment" (Grant, 1991). Strategies emerge from the interaction between the firm and its environment (Nurmi, 1998). According to Porter (1996), the essence of strategy is in its activities, that is, choosing to perform activities differently or to perform different activities than rivals.
The Constitution of Pakistan declares that it shall be the endeavor of the State to take measures for the eradication of illiteracy through formal and informal means and for the expansion of basic education through involvement of community. According to Economic Survey of Pakistan (2005), currently adult literacy rate is 53 percent. Public spending on education as a percentage of GDP is 2.1 percent and has approximately increased by less than one percentage point since 2000-01. Pakistan is devoted to all the International declarations that extends education to be the basic right of everyone. Pakistan is among the signatories of Millennium Development Goals (MDGs) as well as the Dakar World Education Forum 2000.
Higher Education Institutions (HEIs) of Pakistan have increasingly been striving against each other for better quality students and staff. Lynch and Baines (2004) suggested that possession of bundles of competitive resources enable HEIs to compete for customer, government and for other resources. They studied the resource based view of the firm in the context of the UK HEIs and suggested the competitive resources are important in delivering the objectives of HEIs in that they enhance the competitive advantage of such institutions in an increasingly competitive market. Researchers like Macdonald & Stratta, (2001), Wood & Meek (2002) and Taylor (2002) studied the strategic context in which Australian and British universities operate. Increased market focus (Mazzarol, Soutar & Sim Yaw Seng, 2003) and performance-based funding of HEIs have both been researched in international context (Jongbloed & Vossensteyn, 2001). Stilwell (2003) studied competitive criteria that had been used to develop new strategies in Australian higher education. Mazzarol and Soutar (1999) used a simple competence-based approach to HEIs as part of a broaderbased strategy model. Patterson (2001), Pidcock (2001), Thomas (2001), Harley (2002), Taylor (2002) and Willmott (2003) studied strategic planning and its implications have also been explored in HEIs . To the best of my knowledge, concept of competitive advantage has not been studied in relation to HEIs of Pakistan.
This research paper focuses on the dynamics of core competencies in educational sector. The idea is to evaluate whether the core competencies identified in the literature is applicable to the educational sector of Pakistan or not. The first part of the research paper gives an introduction of the paper. Part two deals with relation between strategy and competitive advantage. Part three brings the relevant literature on resource based view and competitive advantage along critical competence model and various core competencies supported by the literature. Part four explores the core competencies mentioned in part three with particular reference of an educational institution. Part five concludes the paper.
II - STRATEGY AND COMPETITIVE ADVANTAGE
Hofer and Schendel (1978) defined strategy as "the match an organization makes between its internal and external resources and skills .... and the opportunities and risks created by its external environment." Michael Porter's (1980) analysis of industry structure linked strategy with external environment. The work of Mintzberg (1985), Pettigrew (1977) and Quinn (1980) on strategic implications of the firm's internal environment focused issues of strategy implementation and analysis of the organizational processes through which strategies emerge. In business the word "strategy" is commonly used at three levels: (1) corporate strategy - what set of businesses should we be in? (2) business strategy - how should we compete in XYZ business? and (3) functional strategy - how can this function contribute to the competitive advantage of the business? (Hofer and Schendel, 1978). At the corporate level, Teece (1980) and Chatterjee and Wernerfelt (1991) analyzed the role of corporate resources in determining the industrial and geographical boundaries of the firm's activities. At the business level strategy, researchers analyzed the relationships between resources, competition, and profitability including the analysis of competitive imitation (Lippman and Rumelt (1982), Reed and DeFillippi (1990) and Rumelt (1984)), the appropriability of returns to innovations (Teece, 1988), the role of imperfect information in creating profitability differences (Barney, 1986) and the way through which resources accumulation sustain competitive advantage (Dierickx and Cool, 1989). Pfeffer (1994) regarded employees and they way the employees work as a source of competitive advantage. Thomas, Delisle, Jugdev & Buckle (2002) suggested that corporate strategy should be aligned with capability.
Gant (1991) in his article "The Resource-Based Theory of Competitive Advantage" presented framework for strategy analysis. The framework had its root in resource based theory. The framework followed a five stage procedure for strategy formulation, analyzing the profit-earning potential of firm's resources and capabilities; selecting a strategy; and extending and upgrading the firm's pool of resources and capabilities. The first deals with identification and classification of firm's resources, appraisal of strengths and weakness relative to competitors and identification of opportunities for better utilization of resources. In second step, firm's capabilities are identified. It deals with acts that a firm can do more effectively than its rivals. Moreover, resource inputs to each capability and the complexity of each capability is to be identified. Step three deals with the appraisal of rent-generating potential or resources and capabilities in terms of their potential for sustainable competitive advantage and the appropriaability of their returns. Step four is related to the selection of a strategy which best exploits the firm's resources and capabilities relative to external opportunities. Last step focus on identification of resource gaps which need to be filled and investment in replenishing, augmenting and upgrading the firm's resource base.
III - COMPETITVE ADVANTAGE
Resource-based view and Competitive Advantage:
The groundbreaking work of Prahalad and Hamel (1990) resulted in a lot of discussion in the area of "core competence". The concept is evolved from the resource based view (RBV) of the firm. The RBV theory of the firm is evolved from the work of Penrose (1959) and has been developed in work by Wernerfelt (1984). It emphasized the fact that competitive advantage rests on the firm's possession of unique difficult to imitate skills, knowledge, resources and competencies (Wernerfelt, 1984; Rumelt, 1984). RBV recognizes that resources and capabilities not only provide the basic direction for a firm's strategy, but also are the primary source of profit for the firm (Grant, 1991). Moreover, the firm's resources and capabilities influence it's growth and performance (Penrose, 1959; Barney, 1991; Mahoney and Pandian, 1992). RBV explains how a firm can obtain the differentiation and acquire sustainable competitive advantage (Hoskisson et al., 1999). In the last decade, RBV received a lot of attention in the strategic literature and generated a lot of discussion in the areas of strategic management, economics and organization theory (Galbreath, 2005).
Grant (1991), the pioneer in regarding the RBV as a theory, highlighted that strategy should be defined as a match between an organization's internal resources and skills and the opportunities and risks from its external environment. Firm's resources comprises of all assets both tangible and intangible, human and non-human that a firm possesses or controls and that facilitate it to devise and apply value-enhancing strategies (Barney, 1991, Wernerfelt, 1984). Grant (1991) also criticized the 1980s development on strategic analysis based on link on strategy and external environment. RBV does not only lay particular stress on the internal analysis and neglect external analysis, but combine the two also (Collis and Montgomery, 1995). Researchers like Wernerfelt (1984), Barney (1986), Dierickx and Cool (1989) and Peteraf (1993) made significant contributions in RBV's foundation in its early days. In this regard, Barney (1991) framework suggesting that sustainable competitive advantage is due firm's valuable, rare, imperfectly imitable and substitutable resources is noteworthy.
Competence Hierarchy: From Core Competence to Critical Competence
Lei, Hitt and Bettis (1996) defined firm's core competencies as a set of problem-defining and problem-solving insights. A firm's competitive advantage is derived from this unique knowledge (Spender, 1993). The ambiguity of this distinctive 'unique knowledge' makes it inimitable and the maintenance of its heterogeneity is essential for a sustained competitive advantage (Peteraf, 1993). Imitation of these core competencies is difficult as the imitator will have to follow same 'learning path' and make the same 'irreversible' investment (Barney, 1991). Selection, building, deployment and protection of core competencies vary from firm to firm. This variation is likely to result in difference in corporate performance (Hamel, 1994). Possession of core competence is not an end in itself. More important thing is the presence of the ability to leverage core competencies for the benefit of the firm. Prahalad and Hamel (1990) in their concept of strategic architecture
Prahalad and Hamel (1990) suggested that for a sustainable competitive advantage, it is essential for the firms to chart out a path for the future. Hamel (1994) described the hierarchy and differences between meta-competencies, core-competencies and constituent skills. "The distinction between the various levels of competencies is more a matter of convenience but understanding of hierarchy of competencies is essential - from meta-competencies (logistics in case of FedEx) to core competencies (package tracking) to constituent skills (bar-coding)" (Hamel, 1994). Critical competence is the ability of a firm to successfully identify, nurture, develop, upgrade and deploy its hierarchy of competencies to attain sustainable competitive advantage (Srivastava, 2005).
So far sustainable competitive advantage, managers should invest time, effort and resources in developing the ability to manage its hierarchy of competencies of which meta and core competencies are utmost important. Firms may differ on the basis of their different competencies; however, their critical competence is universal (Srivastava, 2005).
Critical Competence Framework:
The critical framework of Srivastava (2005) covers all the aspects related to competencies and skills in a firm and provides a holistic, intuitive framework for designing the enterprise-wide strategic architecture of the firm. It also urges a firm to focus not only on developing or acquiring core competencies but continuously upgrading, nurturing or abandoning them in relation to internal and external environment.
Competencies Pool: Barney (1991) regarded all the assets, capabilities, organizational processes, firm attributes, information, knowledge, etc., within the domain of firm resources. Bogaert, Martens and Cauwenbergh (1994) classified these resources into three categories: physical capital, human capital and organization capital. Hall (1992) highlighted difference between assets (having resources) and skills or competencies (doing resources). Srivastava (2005) argued that every organization has its own set of 'doing' resources. The competencies pool at any given point in time spell out the capabilities of the firm (useful as well as not so useful). Firm may load the pool with new competencies and remove the redundant competencies. The pool also includes some dormant competencies which may be utilized as and when the need arises. Firm should continuously work on its bundles of competencies for gaining competitive advantage.
Competencies Hunt: All the resources in a firm are not strategically relevant (Barney, 1991). The firm's resources that hold the potential for sustainable competitive advantage are strategic assets (Amit and Schoemaker, 1993; Barney, 1991). These are difficult to trade and imitate scarce resources and capabilities (Barney, 1991). Hamel (1994) suggested that a firm may have around 10-15 core competencies and a couple of meta-competencies. These distinctive competencies give an organization an edge over its competitors (Hall, 1992). Both meta and core competence should provide superior customer value (Srivastava, 2005).
Competencies Enlightenment: Srivastava (2005) suggested that identification of meta-competencies makes management of these easier. The 'competencies enlightenment' process guides the firm's future strategy. Hamel (1994) argued that firms will possess not more than a couple of these generic meta-competencies. It would save the firm from spreading their resources 'too thin' and enable it to focus resources in a directed way. Once meta-competencies of an organization are identified, the managers have to identify the core competencies in their firm.
Deployment: Successful firms leverage their competencies by deploying them to their businesses. Firms have to ensure that competencies fit with internal and external environment. It would prevent any unmanageable dissonance. Successful firms are not only aware of how to deploy their core competencies but also recognize the dynamic nature of this resource.
Nurture: Further to the existence of core competencies in an organization, it has to nurture these to ensure organizational success. Prahalad and Hamel (1990) states 'Core competence does not diminish with use. Unlike physical assets, which do deteriorate over time, competencies are enhanced as they are applied and shared.' Eaton and Lipsey (1980) highlighted that if these capabilities and competencies are not nurtured, they will erode as the time passes. Dierickx and Cool (1989) pointed that that strategic stocks are subject to stock erosion and, therefore, need to be constantly monitored. Organizations should nurture core competencies and should not waste its resources in nurturing its non-core competencies. Organizational culture and architecture should support its core competencies. In particular, organizational architecture of a firm should also suitably designed and created to support the desired core competencies (Srivastava, 2005).
Develop: Firms always try to copy the actions of successful organizations (Lippman and Rumelt, 1982). Organizations must continually learn and enhance their core competencies for sustaining a competitive advantage. Failure to do so will lead to other organizations imitating the firm's competencies and bringing an end to its competitive advantage. Therefore, firms should continually invest and upgrade its core competencies for a sustained competitive advantage (Helleloid and Simon, 1994). A firm can upgrade or acquire new competencies through internal development, market procurement, inter-firm collaboration or mergers and acquisitions.
Abandon: The dynamism in competencies propose that some competencies may become obsolete over time and do not provide sufficient value. Organizations should divest such competencies. Prahalad and Hamel (1990) suggest that competencies are the result of accumulated share learning and require a lot of time. Firm's managers should be conscious of the fact that it is very easy for core competencies to become 'core rigidities' (Leonard-Barton, 1992). O'Driscoll, Carson and Gilmore (2001) suggests that firms should be sensitive to the internal and external factors and avoid getting into a 'competence trap'. Managers must exercise caution so as not to abandon a core competency without giving sufficient thought. Although, it is not prudent to nurture an unutilized core competency because nurturing a competency demands substantial resources. However, building a core competency again from scratch will not only be very costly but the accomplishment may be next to impossible.
Dynamics of Core Competence
Prahalad and Hamel (1990) suggested that core competence possesses three traits. It adds to the perceived customer benefits, competitors find it difficult to imitate and an organization can use it to influence a wide variety of markets. Quinn and Hilmer (1994) suggested that firms should focus on core competencies and out source other activities. It would not only maximize returns by concentrating on what a firm do best and providing significant entry barriers to competitors but also enable it to optimally utlize external supplier's strengths and investments and reduce investment and risk, shorten cycle times, and increase customer responsiveness.
Mascarenhas, Baveja and Jamil (1998) conducted case studies of 12 multinational companies to analyze the dynamics of core competences. The companies selected were leaders in global market position and were characterized by their high levels of profitability, longevity, or low top management turnover. They represent firms from diverse industries ranging from manufacturing to service sector and from industrial to consumer products. Firms were based in Germany, India, Japan and United States. They grouped the identified competences in to three categories: reliable processes, superior technological know-how and close relationships with external parties.
Superior Technological Know-How: This requires a deep understanding of a subject area. It can be developed by an early, substantial and continuous involvement in the area. It includes knowledge of the scientific properties, inter-relationships, and latest developments in a subject area. Firms can leverage on this knowledge if competitors do not have a similar knowledge base and if the knowledge can be converted into superior products for customers.
Reliable Processes: These processes yields expected results quickly, consistently and efficiently, with minimum possible disruptions and inconvenience to the customers. These could range from decomposition, re-integration transfer of skills across functions, currencies, or countries or ability to combine various inputs to customize a product to meet a customer's particular needs. Such processes can facilitate research and development of new products, in zero-defect manufacturing, in consistently obtaining rapid regulatory approvals, in international sourcing without disruptions, in executing cross-border transactions efficiently without snags or losses, and in transferring an operating system or organizational culture internationally or to an acquired organization.
Close External Relationships: A close external relationship with suppliers, regulators, professional organizations, distributors, and customers yields several benefits to a firm. The partner and the firm can identify and work on opportunities for mutual benefits. For instance, suppliers may suggest ideas for new product development or execute rapid design changes needed in parts. Distributors can provide access to market access and customer information. Professional organizations can provide superior talent. Customers can suggest new competencies that the firm should develop.
Kay (1993) and Lynch & Baines (2004) identified among other factors, reputation and innovative capability as competitive resources of the university.
University Reputation: It is important to build long-term relationships with students to recruit to courses. It would result in students' undertaking studies throughout their lives. They also become employers, donors or partners at later points in their lives. Reputation enables an organization to communicate favorable information about itself to its stakeholders. It also supports a university in its outreach activities and for commercial and public sponsors of research. Reputation yields long-term competitive advantage to the university as the students select courses on the basis of perceived expertise and reputation of teaching staff (Hughes, 1988; Moore, 1989). Key factors enabling universities to achieve competitive advantage include the image of quality education, strong market profile and development of offshore teaching operations in coalition with overseas partners (Mazzarol & Soutar, 1999). Researchers like Fram & Lau (1996), Thomas (2001) and Harley (2002) emphasized the importance of research in developing reputation of teaching university.
Innovation Capability: Innovation is the ability or capability to undertake totally new initiatives that go beyond the current strategy. Lynch and Baines (2004) regard innovation capability as one of the most difficult resource to develop in higher education institutions because of the need to maintain quality of provision without damaging academic standards. It is equally applicable to teaching (learning and development process innovations-e.g. development of new courses, e-learning), research (e.g. patents) and outreach/commercialization (e.g. new commercial products and services) (Kay, 1993; Taylor, 2002).
EVALUATION OF COMPETENCIES IN EDUCATIONAL SECTOR - CASE OF GIFT UNIVERSITY, PAKISTAN:
GIFT University is situated in Gujranwala in the province of Punjab of Pakistan. The ground-breaking ceremony of the campus was performed by an eminent personality of Gujranwala Haji Aziz-ur-Rehman on 11th August 2001. Establishment of GIFT University was announced on 1st July 2002 and admission to various Master and Bachelor level programs commenced in the faculties of Computer Science, Business and Commerce, Management Sciences, Arts & Social Sciences. The University was formally inaugurated by Honorable Lt. Gen. (R) Khalid Maqbool, Governor Punjab, on 30th September 2002 and its first semester began on 17th October 2002. The name GIFT stands for Gujranwala Institute of Future Technologies.
It has been granted charter by Punjab Assembly, through the GIFT UNIVERSITY GUJRANWALA ACT 2004, ACT XIV of 2004 thus making it the only chartered university between Lahore and Islamabad of that time. It is one of the pioneers to offer 4-years bachelors program of international standard in Pakistan. The University has truly emerged as a national University with student body from 3 provinces and 18 cities. More recently, it has emerged as the ETS approved centre in Pakistan making Gujranwala only the fourth city in Pakistan after Lahore, Karachi & Islamabad to have access to online TOEFL examinations.
The University is currently offering 4-year Bachelors with Honors programs in Accounting & Finance, Business Administration, Computer Science and Textile & Fashion Design. At Masters level it offers programs in Accounting & Finance, Business Administration and English Language & Literature. From the outset, the University has placed special emphasis on its career oriented course curriculum, designed keeping in view modern day challenges. It gives students the edge with practical training in the trade and industry, helping broaden their horizons and tweaking their skills. The torchbearers are the faculty members consisting of eminent academicians who are breaking new ground by sharing their extravagant educational backgrounds and enriching experiences. The student body of the University has been steadily growing at a rate of 30% every year and a stream of highly qualified professionals is taking charge in leading organizations in Pakistan and abroad.
The case of GIFT University is prepared to analyze the core competency perspective in educational sector. GIFT University is related to the education and training industry. Research was conducted by approaching and interviewing the top executives of the firm who are familiar with the firm's way of doing business. The executives were given the general definition of the core competence and were requested to explain the University's perspective on it. The information provided by the executives was cross-checked through observation and through other documentary sources such as newsletters, newspaper, company reports, prospectus and company website on the internet. The information requested pertained to areas such as history of the organization, human resources, sales and marketing functions, in-house R&D, global tie-ups, technology acceptance and implementation, etc. At the end, the executives were contacted again to check the accuracy of reporting and to make any desired changes.
Strong External Relationships:
GIFT University strives for the close external relationships. It kept on inviting the guest speakers from industry and from other universities. It has very strong ties with Gujwanala, Sialkot and Gujrat chambers of commerce and industry. GIFT invites not only Principals and Vice Principals of other regional educational institutions, but also senior management of the leading industries to its functions and meetings. Professional from the industry are in the board of studies of each department of GIFT University. The career development office of the GIFT University acts as a link between the fresh graduates and the employers. Moreover, the alumni association also facilities in arranging jobs for the fresh graduates. GIFT has also established very strong links with Gujranwala and Sialkot Banker's clubs. The consultancy role of the faculty facilitates the regional industry in getting the up-to-date knowledge and expertise of the relevant field. Faculty members of the GIFT University are invited as guest lecturers quite often. Marketing development of the GIFT also make GIFT appearing in leading national newspapers.
In the area of teaching and training, GIFT has developed reliable systems over a period of time. In case of curriculum, the course outlines are developed by the senior members of the faculty and approved by the board of studies of each department. This board comprises of members of faculty of GIFT University, relevant professionals and the member from Higher Education Commission of Pakistan. Once approved and offered, these course outlines are monitored for contents and coverage through heads of each department. The final exam paper has to be submitted in advance of the final term. In order to ensure the secrecy of the paper, the teacher, himself, get it photocopied and handover in signed and sealed envelopes to the examination department. On the exam day, the paper is opened in the presence of the teacher and passed on to the invigilation staff. A copy of the all the quizzes, assignments, projects and other evaluations are also kept for evaluation of consistency and rigor. New faculty hiring is done through a formal recruitment procedure. An important feature of this system is a formal structured presentation by the new faculty member to the incumbent faculty members of the relevant departments. GIFT maintains a separate office for the commencement of classes and for the management of timetable. In order to ensure timely arrival in the classes and to fulfill the HEC requirement of 37.5 contact hours, faculty members are required to sign the class log-in register. If a faculty member misses a class, he/she is required to take make-up class in the same or the next week. GIFT university has also maintained teaching guidelines (the name of the document is "Instructor's Semester Checklist") for the members of faculty. It guides faculty members about all the steps that a faculty member has to take before, during and after a semester. Further to this, member of the faculty sits into each other classes to support each other in improving teaching. GIFT University maintains an online feedback system. University receives feedback from its students on teaching and other facilities (cafeteria, transport, resource center, computing facilities, student affairs, library, etc.) provided by the university. These reliable systems help GIFT in scoring good HEC ratings and in gaining off-shore partnerships.
GIFT University has the best faculty resources of the Gujranwala. It has largest number of on campus PhDs in the region. Most of the faculty members have foreign exposure. GIFT University has arranged various teacher training workshops for its faculty members. Participant Centered Learning and the Case Based Method, based on Harvard Business School teaching resources and conducted by the Faculty Member of Lahore School of Management Sciences and English Language course conducted by Berlitz International are note-worthy. GIFT University has spent huge resources in the automation and computerization of its internal affairs. It has its own software house in the name of Softshake. Around 75 % of the teaching and around 85% of all the other matters records are kept in the computer system. GIFT Education System, a customized software developed by Softshake, assists student in various areas ranging from course registration, add/drop to final result checking. Student can access this system both on and off campus. Further to this, Employee attendance software, GIFT transport system, Online recruitment application for the new employee, online complain system and online prospective students' request are other examples of the GIFT superior technological know-how. Around 65% of external and around 85% of all internal communication is done through email and Microsoft Exchange Server respectively.
Since its inception, GIFT University is striving for the best quality education in the region. The vision of the GIFT is to bring about a change in society by becoming a leading educational and research institution that utilizes the latest technology and provides intellectually stimulating, professionally relevant, progressive and innovative education that is consistent with our national values and is accessible to all. Due to the its case based MBA and very strong MSc in Accounting and Finance, GIFT University is very popular choice of the students of not only Gujranwala but also from other cities. At undergraduate level, GIFT was the first university that offered four years honors program in accounting and finance and business administration. Further to this, there is no single institute in Gujranwala that offers Bachelor in fine arts and design. The strong reputation of faculty and the programs offered by the University has made it one of the top choices of the regional employers. A number of members of the faculty has published case studies and research articles and presented conference papers nationally as well as internationally. Moreover, a number of faculty members are also engaged in consultancy assignments. It has also signed a number of MoU with leading national and international bodies.
GIFT being a new and private sector university is enjoying a lot of management flexibility. The focus of the MBA program on the Harvard case base method and of MSc. accounting and finance on the Chartered Financial Analyst qualification offered by Institute of Chartered Financial Analysts resulted in both program to have the up-to-date curriculum. Moreover, the university's faculty evaluation framework encourages to research and produce case studies and research papers. Looking at the export potential of the region, University is also planning to launch a specialization track in Import and Export at both undergraduate and graduate level. In the final year of BBA, BSc. Accounting and Finance, MBA and MSc., faculty members use research articles from leading business journals.
Organizations possess unique resources which differentiate them from the others and give the competitive advantage. Organizations based their strategy on this competitive advantage. All core competencies studied in the case of GIFT University are consistent with the ones identified in competitive advantage literature. There was sufficient support for each so one can safely suggest that superior technological know-how, reliable processes, close external relationships, reputation and innovation capabilities are among the core competencies of the organization and they are also applicable in the education industry. Moreover, as per the situation, a university can rest its competitive advantage on any one or more of these.