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Producing sustainable competitive advantage Essay

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஽ Academy of Management Executive, 2005, Vol. 19, No. 4

Reprinted from 1995, Vol. 9, No. 1

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Producing sustainable competitive advantage through the effective management of people*
Jeffrey Pfeffer
Executive Overview

Achieving competitive success through people involves fundamentally altering how we think about the workforce and the employment relationship. It means achieving success by working with people, not by replacing them or limiting the scope of their activities. It entails seeing the workforce as a source of strategic advantage, not just as a cost …show more content…

The point here is not to throw out conventional strategic analysis based on industrial economics but simply to note that the source of competitive advantage has always shifted over time. What these five successful firms tend to have in common is that for their sustained advantage, they rely not on technology, patents, or strategic position, but on how they manage their workforce.
The Importance of the Workforce and How
It is Managed
As other sources of competitive success have become less important, what remains as a crucial, differentiating factor is the organization, its employees, and how they work. Consider, for instance, Southwest Airlines, whose stock had the best return from 1972 to 1992. It certainly did not achieve that success from economies of scale. In
1992, Southwest had revenues of $1.31 billion and a mere 2.6% of the U.S. passenger market.4 People
Express, by contrast, achieved $1 billion in revenues after only 3 years of operation, not the almost
20 it took Southwest. Southwest exists not because of regulated or protected markets but in spite of them. “During the first three years of its history, no
Southwest planes were flown.”5 Southwest waged a battle for its very existence with competitors who sought to keep it from flying at all and, failing that, made sure it did not fly out of the newly constructed Dallas-Fort Worth international airport.
Instead, it was restricted to operating out of the

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