‘Resources underlie competencies, whereas competencies build resources’
Discuss this statement and explain under what conditions both resources and capabilities can create a competitive advantage for a company
Introduction
This essay will discuss how resources and competences are linked with regards to a firm’s performance and under what conditions they can be fully utilized to create a competitive advantage for the company in question.
Main
Generally it can be found that in a particular industry some firms will out- perform other firms usually to do with their internal environment. The main reason for this is due to the resources and competences, or capabilities that a firm possesses. Resources refer to ‘inputs to an
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Superior efficiency helps a company attain a competitive advantage through a lower cost structure. Superior quality means that a customer perceives greater value in attributes of the product therefore will be willing to pay a higher price. Successful innovation provides a company with something unique that another firm may be lacking in. Superior responsiveness to customers differentiates a firm’s products and services and can lead to brand loyalty and premium pricing.
However resources and competencies are not always strengths to the company, for example if the resources are not efficient or up to date with current technology, then no matter how strong the competencies, the resources will have a negative effect on the quality or production rate. Inefficient resources may also result in high costs and take up space.
To asses an organisations resources and therefore determine its possibilities and strengths, Porter’s Value chain analysis (1985) can be used, which determines which activities add value to the product or service. Porter identified primary and support activities, and the firm’s profit depends on the effectiveness in performing these activities efficiently so the customer is willing to pay more for the product than exceeds the cost of the activities in the value chain. It is in these activities that a firm has the opportunity to generate superior value and a competitive
Acquisition and organisation of resources can be critical success factor in an organization. While on the other hand, change requires a firm to gain expand and utilise resource such as human, financial, knowledge as a crucial asset. Resource based approach supports this view and as Tywoniak (2007) claimed by that resource based view is the most dominant theory in history of management. This is achieved by targeting state of sustained competitive advantage by controlling resources and capabilities. This view emphasis on the need for a ‘fit’ among capabilities and external market, and since each firm has unique capabilities and resources, this result in achieving strategic
The value chain, made by Michael Porter, is really important to see how a company structure is created. The value chain is constituted by two parts: support activities (firm infrastructure, human resource management, technology development, procurement) and primary activities (inbound logistic, operations, outbound logistic, marketing and sales, service). (Johnson et al. 2011, p.97-99)
One of Porter’s main contributions was Porter’s value chain. The value chain is all the activities an organization undertakes to create value for a customer. According to Porter, there are two ways to gain an edge over competitors. A firm must provide comparable but value but perform the activities on the chain at a lower cost, or; Perform services in a unique way
Barney, J. (2004). Firm resources and Sustained Competitive Advantage. Strategy: Process Content Context: an international perspective, de Wit & Meyer , 285-292.
He suggested that sustained competitive advantage derives from the resources and capabilities a firm controls that are valuable, rare, imperfectly imitable, and not substitutable. He further added that the resources and capabilities can be viewed in form of tangible and intangible assets. There are four different categories of resources financial, physical, human, and organization.
A company’s strengths are found within their own company and members. Depending on how well and to what extent a company uses its resources determines just what its strengths are. These strengths may be what they do better than other companies, what they do different from other
For a business to be successful and have a competitive advantage, it is important to evaluate the company’s resources and capabilities (Pitt & Koufopoulos, 2012). Resources in a company are the productive assets owned (tangible or intangible) whereas capabilities are what the company can do with this (Grant, 2010). “Establishing competitive
Through an internal environment analysis, companies can identify and understand their own unique resources, capabilities, and competencies that are required for their sustainable competitive advantage. Resources, capabilities, and core competencies are the foundation of competitive advantage. There is no competitive advantages are permanently sustainable in any companies, so they have to consist on their current advantages and develop new advantages by internally understanding and analyzing their resources and capabilities. Competitors have their own unique resources, capabilities, and core competencies to create values for their customers. Both tangible and intangible resources, which include individual, social and organizational phenomena, are combined to generate capabilities. In turn, company’s capabilities are used to build core competencies. Also, core competencies are as a source of competitive advantage for a company to win in the competitive market.
This strategy emphasizes the use of an organization’s resources and capabilities to achieve a core competence that cannot be imitated by competitors. Furthermore, the resource based school argues that if an organization distinctively improves its internal capability; that is being able to have effective inside machinery to deliver products and services to customers, the organization will enjoy a massive advantage in the market. This school also argues that in order to have a competitive advantage, an organization must have resource and capabilities that are sophisticated to those of competitors (QuickMBA,
Resource-based analysis of the firm determines which resources and capabilities result in which strengths or weaknesses
In conclusion, it is evident that Human resources models, concepts and assumptions are of high value to the organisation’s success by valuing and managing is most valuable assets, the employees. If the concepts are wrongly used or
Resources are the source of the firm’s capabilities. Resources are bundled to create organisational capabilities. Some of a firm’s resources are tangible and intangible. Tangible resources are assets that can be seen and quantified. Intangible resources include assets that typically are rooted deeply in the firm’s history and have accumulated over time. Intangible resources are relatively difficult for competitors to analyse and imitate. The four types of tangible resources are financial, organisational, physical and technological. And the three types of intangible resources are human, innovation and reputational (Hanson, D., Hitt, M., Ireland, R. D., & Hoskisson, R. E., 2011, pp. 75-78).
The mid-eighties witnessed the emergence of a growing body of work collectively labelled the resource and capability-based view of the firm (RBV). In reality, Resource Competence View (RCV) first adopted an “economic” orientation. Pioneer studies (Wernerfelt, 1984) , Barney, 1986, 1991, Dierickx and Cool, 1989, Peteraf, 1993) focused on the type of resources and competencies that could offer to its owner a sustainable competitive advantage. Therefore, resources and competencies approach first appeared as a theory of competitive advantage or a theory of “performance of the firm” (Argyres & Zenger, 2007).
1) Barney, J., (1991). Firm Resources and Sustained Competitive Advantage, Journal of Management, vol. 17 (1991), no. 1, pp. 99–120.
exists when the firm is able to deliver the same benefits as competitors but at a