Competitive Advantage in the Service Industry : The Importance of Strategic Congruence, Integrated Control and Coherent Organisational Structure – A Longitudinal Case Study of an Insurance Company

Abstract: Competitive advantage has received considerable attention. Few studies have however chosen a holistic approach taking multiple aspects and organisational levels into consideration. This research has the goal of filling parts of this void. The aim is to deepen the understanding of competitive advantage in the service industry by analysing how alignment of strategy, control and organisation structure on multiple organisational levels impacts competitive advantage of a service company over a long period of time.Based on the idea of multiple factors and the importance of connecting different levels with each other, including production level, a framework for the service industry is developed based on the ideas of Nilsson and Rapp (2005). The framework is used to analyse the rich data gathered in a longitudinal case study of an insurance group embracing the environmental changes and the choices taken as well as the resulting competitive position.According to the analysis, the Insurance Group is not ensuring an overall coordination of its activities, although there is a fit among some dimensions. The level of misalignment increased over the time, as a result of changes in the environment and less than consistent management decisions. Although the Insurance Group has been profitable and increased its market share since its foundation, the competitive advantage, measured as performance compared to market average, decreased. The declining performance combined with the increasing level of misalignment supports the assumed importance of reaching a consistent positioning among strategy, control and organisational structure. It can therefore be presumed that strategic congruence, integrated control and coherent organisational structure influence competitive advantage. However, due to the semi-protected insurance market the effects are weaker than they probably would have been in a more competitive and unpredictable market.The Insurance Group inherited valuable and unique resources at its foundation. Their apparent stable value ensures the Insurance Group a competitive advantage, although no activities are undertaken to strengthen or even to maintain them. It can therefore be concluded that an integrated approach of competitive advantage where both positioning framework and valuable resources are used as complementarities seems to be beneficial when competitive advantage is studied.