Acquiring Specific Knowledge

“There are at least two reasons why markets have been more successful than central planning in large economies. First, the price system motivates better use of knowledge and information in economic decision. Second, it provides stronger incentives for individuals to make productive decisions” (Managerial Economics, p.56). Therefore, the manager used general knowledge to make economic decision. For general knowledge to be transferable to specific knowledge, it requires the transaction cost, analysis of the information, and provide an incentive for the good use of information.
First, specific knowledge is associated with transaction cost of information. For managers to gain specific information about their organization and/or competitors, they need to pay transaction fee to get it. For example, Stetson Kennedy wants to gain specific information of how the Ku Klux Klan organization was organized. He needs to pay small amount of transaction fee to join the organization and received the specific information about the organization.
Second, when specific information is acquired from the external parties, the manager must analyze the specific information. Some information may or may not be specific to particular situations; therefore the manager needs to use his/her judgment to make decision about the information received.
Third, specific knowledge can be a power tool for manager to acquire an incentive for their own organization. Incentive is better information gain from external parties. When managers have accessed to better information, manager can design their own incentive to compete with the external parties. For example, the Real-Estate Agents designed their own incentive by gain specific knowledge from external organization and individual.
In conclusion, for general knowledge to be transferable, it requires transaction cost, analysis of information received, and provide an incentive for the good use of information. Information is a powerful tool for the managerial to make economical decision for their own organization and to gain competitive edge in the market institution. Therefore specific knowledge is a key to gain information advantage over the competitors.

Educational Writing

I start to publish some of my educational writing to share with you. I am going to be very busy next week, as i have to take GMAT exam next Saturday. I'm not looking forward to it. It's going to be challenge for me, but I thinking I can do it. I have to think positively. The power of positive thinking give me a extra energy to face the challenges.

I love challenges. Nothing come easy for me. I have to work hard to get it. I'll tell you later how I did on GMAT. That's all for now.

"Creating Competitive Advantage from Outside-in Perspective"

Business level strategy is a matter of creating competitive advantage within the business environment to exploit the market. Before the firm is able to create the competitive advantage, it must know how a business system works. The business system is comprised of resource base (stock of asset), activity system (value chain), and the product its offing (value proposition). These business system components help the firm to create the competitive advantage and create the pathway to sustain it. When the firm is able to identify the components of the business, the next step is to assess the internal environment, which is the strengths and weaknesses, and to identify the outside environment (competitors), which are the opportunities and threats. In this chapter there are two points of view of how to create a competitive advantage. There are the “outside-in” perspective and the “inside-out” perspective. In the next couple of paragraphs, I will argue why the “outside-in” perspective is a key to create the sustainable competitive advantage.

The “outside-in” perspective begins with a development of the firms’ strategy to analyze the environment to assess the attractiveness of market opportunities. The firms must assess the demand of the market of what the customer wants and needs before they can invest the capital and time to create the goods and services. Assessing the market place and the needs of customers can be very difficult; therefore the firms need to choose the strategy that aligns with the core business. There are several strategies discussed in the chapter such as cost leadership, differentiation, and focus. The key goal of the “outside-in” perspective is to be the first-mover in the market. This helps the firms to roll-out the new innovative idea or knowledge before the competitors.

The firms also must assess the internal environment, which are the strengths and weaknesses of the internal resources to create the competitive advantage. By looking from “outside-in” perspective, the firm must not forget about the ability to assess their own strengths and weaknesses in the internal environment. The “outside-in” perspective helps the manager to assess what is feasible or not feasible for the inside environment of the firm’s resources and ability to accomplish the goal.