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Article Excerpt
Abstract
This study aims to identify the core competencies of the air-cargo forwarding industry and to investigate the relationship between core competencies and sustainable competitive advantage (SCA). This study therefore adopts the resource-based view of the firm to examine the cause-and-effect relationships of internal dimensions such as resources, capabilities, and logistics services on SCA in the air-cargo forwarding industry. In addition, several external factors affecting SCA were examined. Structural equation modeling was used to conduct a confirmatory factor analysis between the survey data and theoretical framework. Results indicate that resources, capabilities, and logistics services all positively influence SCA. Capabilities are considered to be the most essential internal dimension influencing the SCA of air-cargo forwarders. In terms of the capabilities dimension, staff capability to provide better customer service was the critical factor. In addition, strategy alliances are regarded as the essential source of external assistance in achieving SCA. The results of this study will be useful for conducting future strategic planning of air-cargo forwarding.
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International freight forwarders (IFFs) are key logistical intermediaries in international trade. IFFs provide a variety of functions that facilitate the movement of cross-border shipments (Murphy et al. 1996). Functions most frequently offered by IFFs include paying freight charges, tracing and expediting shipments, and making routing recommendations for shippers (Murphy et al. 1995).
The economics of the freight forwarding business are very attractive. Compared with extremely capital-intensive, asset-based transportation companies, air-cargo forwarders, with a highly variable cost structure, strong cash flow, and relatively little fixed asset investment, can easily be started with a small amount of initial capital. Since the threshold for market entry is relatively low, competitive pressure in the freight forwarding market never eases.
The air-cargo business in Asia is expected to expand rapidly in the future. According to Boeing's World Air-cargo forecast for 2004/2005, the world air-cargo growth should expand at an average annual rate of 6.2 percent over the next two decades, with overall traffic tripling from current levels. Moreover, intra-Asia air-cargo constitutes 15.4 percent of the world's air-cargo traffic in tonnage, and about 7.6 percent in tonne-kilometers. This leads to a tremendous demand for air-cargo forwarding services in this region.
Therefore, IFFs must change in order to survive tremendous volatility from regulatory change, technological advances, customer pressures, and savvy competitors (Murphy et al. 2001). Lu and Dinwoodie (2002) pointed out that business process reengineering could help IFFs face future challenges. However, few previous studies related to air-cargo forwarders were conducted from the perspective of strategic planning to achieve sustainable competitive advantage (SCA). This study fills this gap in the logistics-related literature. Moreover, in contrast to past relevant research indicating the importance of developing strategic plans to confront future challenges, few studies of air-cargo forwarding have focused on how to develop sound strategic plans.
This study aims first to identify core competencies and then to investigate the relationship between core competencies and the SCA of air-cargo forwarders. This article adopted the resource-based view (RBV) of the firm to investigate the cause-and-effect relationship of internal dimensions such as resources, capabilities, and logistics services on SCA for air-cargo forwarders in Taiwan. In addition, some hypotheses regarding external factors affecting SCA will be examined in this study.
THEORY AND HYPOTHESES
Conceptual Model
The RBV is considered a useful tool for corporate strategy formulation (Fahy and Smithee 1999). The RBV was originally developed by Wernerfelt (1984), who believed that corporate advantages come from quantity, quality, and frequency of use of internal resources, instead of from the external environment. The RBV of firms mainly emphasizes their internal strengths and weaknesses, in contrast to industrial organization, which focuses on firms' external opportunities and threats (Grant 1991; Foss and Eriksen 1995).
According to the RBV approach to strategic analysis, the resources and capabilities of a firm are the central considerations in formulating its strategy (Grant 1991). This study follows previous research by Grant (1991), Fathy (2000), and Hafeez et al. (2002), which identified sources of core competencies such as resources and capabilities. In addition, Anderson et al. (2002) and Lai (2004) emphasized that logistics service differentiation is crucial to corporate competitive advantage and performance. Therefore, this study added a logistics service dimension to examine the effects of resources, capabilities, and logistics services on the SCA of air-cargo forwarders.
SCA is achieved due to core competencies, which involve "the collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technology" (Prahalad and Hamel 1990). The actual term sustainable competitive advantage (or SCA) emerged in 1985, when Porter discussed the basic types of competitive strategies firms may possess to achieve SCA. Coyne (1986) wrote that if consumers judge one company as able to provide irreplaceable products that others cannot, this irreplaceability would serve as the SCA that comes from internal resources and capability.
However, if air-cargo forwarders attempt to create SCA only through internal resources, IFFs will probably lose the power of networking with complementary business partners. Therefore, SCA could be derived from two main sources. One can look for advantages in a firm's endowments of resources (Barney 1991; Peteraf 1993) and the configuration of activities (Porter 1996), or explore the positioning of firms with respect to their competitors (Porter 1991). The internal factors (resources, capabilities, and logistics services) affecting SCA are discussed in the first three hypotheses within the RBV research framework. As for the external factors affecting SCA, these will be discussed in the subsequent three hypotheses. The conceptualization is schematically depicted in Figure 1.
[FIGURE 1 OMITTED]
Hypotheses
A firm's resources at a given time may be defined as those tangible and intangible assets that are tied semi permanently to the firm (Caves 1980). Barney (1991) pointed out that firms compete on the basis of unique corporate resources, that is, resources that are valuable, rare, difficult to imitate, and nonsubstitutable. This view of the firm is based on the assumption that resources are both heterogeneous across firms and imperfectly mobile (Hunt and Morgan 1995). Marino (1996) also defined resources broadly as the assets, knowledge, capabilities, and organizational processes that enable a firm to conceive and implement strategic decisions.
Resources are the very essence of SCA because a firm's ability to gain and preserve its profitability depends on its ability to defend its advantageous position, which basically relies on its resources (Conner 1991). Therefore, the above discussion leads to the following hypothesis:
H1: Resources have a positive effect on the SCA of air-cargo forwarders.
The concept of capabilities is not new. Penrose (1959) coined the notion of distinctive competence as "the capacity of the firm to better allocate and use resources to gain economic rent." Capabilities are considered to be complex bundles of skills and accumulated knowledge exercised through organizational processes that enable firms to coordinate activities and make use of their assets (Day 1994). Hafeez et al. (2002) indicated that capabilities are formed through the coordination and integration of activities and processes, and are the product of the collective learning of individual assets. They define capabilities as "the ability to make use of resources to perform some task or activity."
The core competence or core capability of a firm is the firm-specific knowledge system that exerts competitive advantage, which may pertain to a knowledge base, a technological...
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