Medium Sized Enterprises essay

While sustainable development is recognized as an essential requirement for achieving economic goals without degrading the environment, major problems arise in implementing the concept of sustainability. At the most basic level, researchers dealing with sustainable development have suggested that the achievement of sustainability requires ecologically sustainable political and economic systems, organizations, and individuals (e. g. , Starik and Rands 1995; Costanza and Daly; Gallup International Institute 1992).

Specifically, governments, consumers, and enterprises contribute and play crucial roles in reaching sustainable development. As a result, if goals of sustainability are to be achieved, small and medium -sized enterprises must be reformed to minimize their negative ecological and social impacts (Gladwin, 1992). It appears, therefore, inevitable that enterprises will be constrained by and dependent upon nature and social aspects. Generally speaking, there has been an active debate among management researchers and practitioners concerning the relationship between sustainable development and competitiveness.

The prevailing view is that the goals of business and sustainability seem hopelessly irreconcilable, as being sustainable implies additional costs for enterprises (e. g. , investments for prevention of negative ecological impacts and cleanup) and a loss of competitiveness. Recently, however, a new perspective has emerged in the literature on management by which sustainable enterprises could also achieve important benefits such as ecological efficiency cost reductions, capturing emerging ? green? markets, gaining first-mover advantage in their industries, establishing better community relations, and improving their image.

This paper reviews the existing literature on sustainable management with a view to identifying the implications of sustainability for small and medium-sized enterprises. Major costs and benefits of implementing sustainable business strategies are described and sustainability as a source of competitive advantage is examined. CONCEPTUAL APPROACH TO COMPETITIVE ADVANTAGE A particular organization has competitive advantage when it achieves a higher return on investment than its competitors, or it is able to do so (Grant, 1996).

Therefore, in order to have competitive advantage organizations must have the ability to obtain higher profit margins than other companies in the industry. Organizations with competitive advantage, however, might show not the highest profit rate. For example, competitive organizations might prefer, for one or another reason, to sell their products and services at a lower price than the maximum price it could mark.

Two major types of competitive advantage can be enjoyed by organizations (Porter, 1985): cost advantage, 2 which is the result of supplying similar products and/or services to low prices; and differentiation advantage, which comes from offering differentiated products and/or services to customers, who, in turn, are ready to pay an additional price which overcomes the additional differentiation costs. While the cost advantage position implies to have the lowest costs in the industry, differentiation advantage refers to offering something unique which is valued by customers. Competitive advantage can derive from one or more factors or sources.

Firstly, literature on strategic management suggests the following major sources of cost advantage (e. g. , Porter, 1985; Grant, 1996): scale economies, learning economies, production capacity management, product design, cost of inputs, process technology, and management efficiency. Secondly, sources of differentiation advantage include tangible and intangible aspects which are significantly valued by potential customers as to be ready to pay an additional price for them (e. g., Porter, 1985; Grant, 1996); tangible aspects refer to observable characteristics of the products and services, their performance, and complementary products and services; intangible aspects, in turn, include social, emotional, psychological and aesthetic considerations which are present in any choice of products and services.

Recently, a major theoretical framework has been developed in strategic management literature which seems to be particularly appropriate for identifying the characteristics that a particular resource or capability must show in order to be a major source of competitive advantage.

This theoretical framework is the resourcebased view of the firm theory and it will be discussed next. Resource-based theory of the firm This theory represents an emerging theoretical framework which is being used by researchers on strategic management, economics, and industrial organization (Mahoney and Pandian, 1992; Barney, 1992). With regard to strategic management, resource-based theory provides a model of how firms compete and achieve competitive advantages.

Specifically, two primary assumptions of this theory are that (Barney, 1991): a) organizations competing in the same industry might be heterogeneous across the strategic resources and capabilities that they control, and b) these resources and capabilities might be not perfectly mobile and, thus, heterogeneity might be long-lasting.

These two hypotheses are used by this theory in determining sources of competitive advantages, thereby completing the traditional strategic management analysis, which is particularly concerned with identifying opportunities and threats (e. g., Barney, 1991, 1992). According to Schulze (1994), in addition to these hypotheses, the resource-based view of the firm also assumes that resources and capabilities are determinants of organizational peformance, meaning that for a particular organization to maximize its 3 peformance, the organization must either own or control the resources and capabilities contributing to produce more efficiently and/or better meet customers= needs. Other assumptions serve to divide resource-based theory as a whole into two schools of thought (Schulze, 1994): the structural school and the process school.

The first suggests that sustained competitive advantage is feasible if the resources used to achieve that advantage are rare, imperfectly mobile, and nonsubstitutable (Barney, 1991). This assumption is also accepted by the process school, which focuses on the conditions and process through which resources generate different types of benefits (Grant, 1991); specifically, it is suggested that capabilities, defined as teams of resources working together (Grant, 1991:120), are considered major sources of competitive advantages.


Conceptual approach to sustainability Since early in the 1980s there has been a growing number of studies, international reports, statements, and agreements concerning with the present and future well-being of Planet Earth. Notable among these documents is the Brundtland report (World Commission for the Environment and Development, 1987:8), which recommends to carrying out human activities in a sustainable manner.

Specifically, sustainable development, defined as ? development which meets the needs of the present without compromising the ability of future generations to meet their own needs? , is suggested. Moreover, the Brundtland report conceptualizes sustainable development in terms of four interrelated strategies: a) managing the impacts of populations on ecosystems, b) ensuring worldwide food security, c) managing ecosystem resources, and d) creating sustainable economies.

Although the Brundtland report=s definition of sustainable development has been widely accepted and endorsed by goverments and other organizations worldwide, it is just a normative abstraction, which is problematic for several reasons (Starik and Rands, 1995), including that it can be perceived as anthropocentric, it is unclear regarding the benefits and costs of intergenerational sacrifice and transfers, and it does not provide a notion about how sustainability should be achieved.

Given the numerous political interests that have used the term sustainability, the ability of a single definition of the concept to satisfy everyone appears severely limited (El Serafy, 1992). Furthermore, no shortage of alternative definitions of sustainable development have been proposed.

Yet, as an emerging paradigm, sustainable development is expected to generate definitional diversity, which should be proactively embraced for the advance of the literature. According to Gladwin, Kennelly, and Krause (1995), the debate over the meaning of sustainable development will go on, and should go on, for a long time, and any chosen conception is but one of many that might be offered at this time.