Resources Capabilities

Because the past decades have witnessed the rise of ultra-competitive markets, companies have strived to find efficient ways to differentiate themselves from their competitors. Consequently, a growing interest was granted as to how firm resources should be managed in order to achieve temporary competitive advantage and even sustained competitive advantage. According to an article of software business :’The Resource-Based View (RBV) holds that firms can earn sustainable above average returns only if they have superior resources and those resources are protected by some form of isolating mechanism

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

“Competitive strategy involves positioning a business to maximize the value of the capabilities that distinguish it from its competitor’s” (Porter 1980:47). A successful business plan requires first and foremost the formation of an appropriate strategy. Through the implementation of a suitable strategy, the company is able to obtain its own industry niche and gain an understanding of its customers (Porter 1985). Whichever strategy is adopted it must be adequately integrated within the firms goals and missions to achieve a competitive advantage (Parker and Helms 1992).

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.

To begin with, heterogeneity of capabilities and resources of firms, which is explained as “enduring and systematic performance differences among relatively close rivals”, provides a foundation of the resource-based view (Song, et al.,2006). The implication of this assumption is that core competence conveys the valuable and unique feature of products to customers. The RBV disagrees with the opinion that the resources are homogeneous; if homogeneity is assumed to be essential to develop a proper strategy, the strategy can be easily copied by competitors, which will ultimately result in the dissipation of above-normal rents. Conversely, the unique and fixed resources on hand will lead to outstanding performance and ultimately turn to be a competitive advantage, under the circumstances that sustainable competitive advantage is achieved in an environment where competition does not exist.

Diageo’s code for business value creation does involve their tangible assets, however other organizations can easily buy them, so these are rarely the source of competitive advantage. The greatest tangible source that is not easily obtainable by other companies is their own resource to produce raw and unique materials to their own products. Diageo has competitors purchase materials from their owned and operated distilleries and land to make their own product. Intangible assets are difficult to measure and can’t be touched or seen. These assets drive innovation and contribute to Diageo’s success and competitive edge in the market place. Above, examining Diageo’s unique mix of resources explores how Diageo develops certain resources necessary to support corporate strategy. As we have reviewed, Diageo has a purpose, vision, mission and objective, and has strategically implemented internal assets and has the capability and resources to deliver their strategy.

Selecting a business strategy that details valuable resources and distinctive competencies, strategizing all resources and capabilities and ensuring they are all employed and exploited, and building and regenerating valuable resources and distinctive competencies is key. The analysis of resources, capabilities and core competencies describes the external environment which is subject to change quickly. Based off this information a firm has to be prepared and know its internal resources and capabilities and offer a more secure strategy. Furthermore, resources and capabilities are the primary source of profitability. Resources entail intangible, tangible, and human resources.

4. This section includes a number of subsections related to defining strategy (e.g., the type of business to operate, how to structure and finance the company, how to convert competences into competitive advantage, etc.); the formulation and implementation of strategy (intended strategy versus realized strategy); alternative research paradigms (i.e., strategy as an outcome of rational choice, as a craft, or as a ritual); how to operationalize strategy (textual description, partial measurement, multidimensional measurement, and typologies); strategic variables (organizational types - defenders, prospectors, and analyzers); Porter's generic strategies (i.e., cost leadership, differentiation, and focus); conservative (reluctant innovators) versus entrepreneurial firms (aggressive innovators); and strategic missions (i.e., build, harvest, hold, and divest). This rather confusing assortment of terms is made more comprehensible in the graphic below where the various combinations of the dimensions of strategy are indicated as a matrix of choices.

The basis of a firms ability to successfully execute any strategy lie in it’s resources and capabilities.The greatest plan in the world means nothing without the means to carry it out. Resources, defined in the text Modern Competitive Strategy are: “relatively observable, tradable asset[s] that contributes to a firm’s market position by improving customer value, lowering cost, or both.”

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

Strategy formulation has been acknowledged as one of the most crucial factors of ensuring the long-term growth of the business. However, the manner in which strategy is formulated, and most importantly, the nature of the strategy chosen for the company determines its future position in the marketplace (Grant, 2005).

Barney, J. (2004). Firm resources and Sustained Competitive Advantage. Strategy: Process Content Context: an international perspective, de Wit & Meyer , 285-292.

Competitive strategy, after Porter, came to be defined as the strategy of a business unit which seeks to achieve sustainable Competitive Advantage (SCA). The literature on strategy deems the market-based view (MBV) and the resource –based view (RBV) as two approaches to giving businesses the competitive edge they need to compete in their industries. Aside from having competitive advantage as their ultimate goal, the two approaches are also similar in the sense that they both make use of particular tools and models in their undertakings. They also differ in numerous ways,

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).

Alfred Chandler(1963) defines strategy as ‘ the determination of the long-run goals and objectives of an enterprise and the adoption of courses of action of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals’. And Michael porter(1996) sees it as ‘Competitive strategy is about being different. It means deliberately choosing different set of activities to deliver a unique mix of value’.