Organizations deploy a variety of strategies to increase their competitive advantage including innovation, outsourcing, improved quality, and better customer experiences (Rockwell, 2018). Leverage provides an alternative method for organizations to improve their competitiveness by financing a section of the business through issuing stock, or loans (Graham et al. 2012). Leveraging to be precise, involves the use of an advantage, for instance a small initial investment, credit or other borrowed funds to obtain the desired result, that is competitive advantage. Leveraging has a myriad of benefits for organizations.

A main merit of leveraging, is that it allows organizations tax benefits that can be used to reduce interest payment in debt (Graham et al. 2012). The amount of debt that a firm incurs while leveraging debt over equity for opportunities for reinvestment comes with interest payments. However, the tax for the firm will reduce with the increase in debt. A number of tax breaks are accorded to businesses that choose to reinvest their debt back into their businesses (Ozcan et al. 2012). These benefits in many instances, will offset debt cost and allow the company more advantage over any other company that may decide to acquire debt without benefit.

Leverage can extend from financial leveragingwhich is employed in organizations to reduce the amount of equity used to fund operations, to human resources, marketing, organizational culture, customer information, cognition or even the organizational identity among others (Mazzei&Ravazani, 2008). All of these are strategies that organizations use to stay ahead of their competition. Utilizing leverage to increase competition advantage in these instances can be employed in different ways for instance, purchasing or updating hardware and machinery, promoting diversity and inclusion education in the workplace to target global markets, promoting the creation of new knowledge, streamlining of processes, adoption of new technologies as they are updated, and updating the organizational culture in line with the mission, vision and objectives (Rockwell, 2018).

With better tax benefits, processes, technologies, and a diverse and skilled employee base, organizations will be in a position to not only finance its operations, but also increase its intellectual output, and improve their quality which will in turn translate to better competitive advantage. Additionally, tax benefits allows organizations to reduce their costs a situation that increases their advantages in the market.

References

Graham, J., Leary, M., Roberts, M. (2012). A century of capital structure: the leveraging of corporate America. University of Pennsylvania.

Mazzei, A., Ravazzani, S. (2008). Leveraging bifferences for competition: an exploratory study. Conference: The 7th International Congress Marketing Trends

Ozcan, S., Sorensen, B., Yesiltas, S. (2012). Leverage across firms, banks and countries. Global Financial Crisis Conference.

Rockwell, S. (2018). Leveraging organizational identity for competitive advantage. Graziado Business Review, 21(2).

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