1. How Commercial Management enhances competitive advantage of Projects and Organisations?
Competitive advantage is feature of a project or organization what allows the project or organization to outperform the competition. A critical success factor may be common to all firms in the market; however, competitive advantage is unique for the project or organization. Commercial management contributes to competitive advantage of projects and organizations in a number of manners. The key factor to realize is that competitive advantage does not only needs to be present but must also be sustainable. A competitive advantage is sustainable when the competitors are unable to copy or emulate it.
The most prominent manner in which commercial management contributes to competitive advantage is a reduction in cost and improving operational efficiency. Commercial management entails that various functional aspect of project like marketing and sales, financial management, procurement and bidding and contract management is carried out to the best of the firm’s ability. For this reason, a sustainable competitive advantage is promoted through commercial management by letting the managers of the project to procure at the lowest possible costs with a minimum of delays. Additional costs of inefficiencies like inadequate handling, contractual issues and financial irregularities is avoided by use of commercial management principles.
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The roots of competitive advantage are indeed based within principles of commercial management. Commercial management makes imitation of competitive advantage difficult as well. Commercial management enables a project manager or business executive to master the market better than its competitors and that they have a skill that is a key factor of success in the field. By following commercial management, the project or company engages in a process which enables it to maintain superior utilization of resources and skills. Also, commercial management lets the project or company to gain those resources which necessary for superior performance in comparison to competition.
The outcome of commercial management is increased competency. A competency is defined as the ability to perform a task or activity with resources. One of the core areas of commercial management includes logistics distribution which emphasizes the importance of customer service to acquire a sustainable competitive advantage. This leads to inevitable evolution of business towards logistics excellence. It also implies that when such projects or organizations are almost always able to pursue a strategy of cost leadership, with logistics costs as low as possible, to gain sustainable a competitive advantage. The key aspect of commercial management is that it is a holistic discipline which permits the organization to improve service, even if logistics costs are rising.
Waste, scarcity and obstructive processes are eliminated by commercial management. Commercial managers are adapt at maneuvering resources to minimize waste and to eliminate obstructive processes through implementation of process control methods and following theoretical models of operational control. Six-sigma and Total Quality Management are two instances of such theoretical models which help in achieving operational excellence for the organizations. Therefore, commercial management enhances competitive advantage of organizations.
2. Describe contemporary challenges to project-led organisations and how these can be met by effective commercial management or outsourcing?
There are several challenges to project-led organizations which can be effectively met through commercial management or outsourcing. Key challenges and their resolution through commercial management discipline is discussed below:
Lack of Accountability is a key challenge to project-led organizations because individual projects are difficult to be monitored for financial and other resources’ inadequacy. Deficiency of accountability within a project can potentially bring a project to complete disarray if misappropriation of resources occur. It should also be emphasized that disharmony within a project team is also caused by lack of accountability while directing teams toward a shared objective is the key aspect of project management. Commercial management contains module of financial and accounting checks within the project team. It also helps to bring about cross-checking in physical count of resources and their records in the books, that minimize the threat of lack of accountability to the project. The organization is, therefore, saved from the potential issues of project failures.
Improper Risk Management another important challenge for a project-led organization is dealing with risk. Risks cannot be avoided; however, taking up too large risks can cause failure of an organization. All project-led organizations are characterized by risk which the leaders of the business entity must manage. The identification of risks requires an understanding of the management cycle which integrates the interest of upstream and downstream partners of the business – for instance, customers and suppliers. Risk assessment also requires an analysis of the life cycle of products.
An important component of commercial management is identifying the risks posed to the project’s assets. There are generally two categories of assets: financial and nonfinancial. Commercial managers are responsible for evaluating risks to the resources for every decision related to the project. Commercial management, therefore, allows to survive and to ensure sustainability of the project-led organization. Beyond the financial management of risks of a project-led organization, in-depth analyses of non-financial business risk are also included in commercial management.
Communication Challenges project-led organizations find communication a key challenge since interaction between project teams is quite weak. Commercial managers possess skills to identify, analyze and evaluate the fields, methods and strategies of corporate communication, modes of communication and communication strategies. For this reason, effective commercial management can help these organizations to overcome this challenge associated with project led-organizations. Commercial managers make distinctions between different categories of business communication according to the nature and objective of the communication. Internal communication is targeted towards the employees of the company itself, while external communication includes all messages and actions aimed at audiences outside the enterprise. By incorporating commercial management, such organizations can, therefore, overcome challenges associated with projects.
Meeting Deadlines all projects are deadline specific. For this reason, meeting a deadline is a challenges common almost all project-led organization. A commercial manager is aware that creating milestones within the project is an important way to meet the final deadline for the project and to sustain an organization’s presence in the marketplace. Commercial managers are adapting at maneuvering resources to deal with challenges of meeting almost-impossible deadlines.
Therefore, it can be concluded that several challenges unique to project-led organizations can be overcome through implementation of commercial management or outsourcing.
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