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Organizational Resources
Chapter Summary
Proper management of resources is crucial for the success of an organization. However, it is even more important to take full advantage of the resources at hand. A talented manager can run a company on insufficient resources and ensure its efficient performance. It implies that the employees are the most valuable assets of any organization. Managers who understand how to achieve success through competitive advantage do not need many resources for this. A competitive approach helps them to determine which way the company has to go, and which resources it has to develop and acquire (Harrison & John, 2013). The chapter Organizational Resources and Competitive Advantage discusses internal resources and capabilities that any organization is expected to use as well as the strategies that managers can develop based on these resources and then use to achieve competitive advantage.
Sustainable Competitive Advantage
First of all, the authors introduce the concept of sustainable competitive advantage and discuss the conditions under which organizational resources can become the sources of competitive advantage. Value of resources and capabilities is crucial for an organization. According to Harrison and John (2013), value comes from the ability to use the resource to provide a good or service at a lower cost or to provide a good or service that is more desirable to the consumer (p. 48). Being valuable is not enough for resources and capabilities to be efficient. Another condition is that they have to be unique, because if numerous companies have the same resources and capabilities, none of them can bring the advantage. Moreover, an organization should have necessary structure and systems to use its resources in order to achieve a competitive advantage. As an example, the authors briefly describe how Xerox failed to take advantage of its research laboratory and innovations because it lacked an organization for this.
Furthermore, an organization should be aware of the potential of its resources and capabilities. To meet this condition, a firm should have managers able to understand how the organizational resources can become its competitive advantage and which steps should be taken to realize it. Finally, to stay unique, resources and capabilities should be difficult or impossible to imitate or substitute. Ability of another company to imitate a product or service as well as to substitute it with cheaper or more convenient ones is a direct threat to sustainable competitive advantage. If these conditions are met, a resource or a capability can be regarded as having core competency or a distinctive competence that allows a company to exploit its sources of competitive advantage in multiple businesses (Harrison & John, 2013). The brightest example of this aspect is Disney that was able to extend its animated characters into television, books, and theme parks. The authors also draw a distinction between tangible resources that can be touched or quantified and intangible ones such as organizational knowledge and systems that are more difficult to imitate making them better sources of sustainable competitive advantage.
Organizational Resources to Use
The authors of the chapter under consideration are convinced that organizational resources and capabilities are interconnected. It implies that managers should never ignore the dependence of one resource or capability on another. They should balance the needs of all the resource areas, determine their possible weaknesses, and eliminate these weaknesses to ensure better performance of the organization. With regard to this, Harrison and John (2013) single out five areas where organizational resources and capabilities are concentrated.
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Human Resources
The authors mention that the area of human resources is the most powerful in any organization, Many of the other resources a firm might possess are easy to duplicate, but each human is unique (Harrison & John, 2013, p. 51). Companies may differ in their strategies as for employee selection, but the most important aspect is how they treat and retain them. The authors provide several examples of how companies motivate, train, and reward their employees. They mention training programs as one more source of competitive advantage that results in a workforce with improved skills and new ideas.
Physical Resources
This type of resources belongs to tangible resources mentioned above. It includes locations, machinery, buildings, and other kinds of facilities and equipment used by an organization. While locations can be regarded as a source of sustainable competitive advantage, machinery and plants cannot, because they can be easily imitated (Harrison & John, 2013). However, technological development is something, in which an organization may have a core competency.
Financial Resources
Although finances have little to do with sustainable competitive advantage, the authors admit that having a strong financial position is advantageous for any firm. Such organizations have low level of debt, live through economic crises more easily, and have a good reputation when it comes to creditworthiness (Harrison & John, 2013). In other words, lack of financial constraints makes the life of any firm easier, which is why financial resources are critical for the health of an organization.
Knowledge and Learning Resources
Intellectual assets are especially important for the successful performance of an organization. Harrison and John (2013) divide knowledge into codified and tacit, where the former includes graphs, formulas, and other kinds of written information, and the latter belongs to intangible resources and relates to creative processes that are difficult to imitate. Therefore, tacit knowledge is the most valuable for any firm.
General Organizational Resources
This type of resources is almost impossible to imitate. It includes organizational culture, structure, management systems, and other aspects that make a particular organization unique. The authors use such companies as Nokia and Microsoft to exemplify a successful use of general organizational resources pointing at these companies structure and unique configuration of relationships that make it impossible for the competitors to surpass them.
Basing Strategic Development on the Resources Analysis
Each of the firms resources plays a significant role in building the firms advantages. However, it is crucial to use the right resources for the development of successful strategies, Strategy should be based on what the organization does well relative to competitors or on the capabilities or resources the firm wants to develop that will create a competitive advantage in the future (Harrison & John, 2013). In addition to the evaluation of the existing resources and capabilities (value, uniqueness, possibility to imitate, etc.), a value chain analysis can be performed to identify the firms strengths, weaknesses, and advantages. This type of analysis helps to evaluate the organizations value activities and develop plans for correcting weaknesses and building strengths. It can help choose the best strategy for the firms development.
The chapter Organizational Resources and Competitive Advantage presents the concept of sustainable competitive advantage and describes several ways of how an organization can achieve it. The authors emphasize the importance of the firms resources and capabilities, especially human, physical, financial, knowledge and learning, as well as general organizational resources. Thorough analysis of these resources combined with a value chain analysis can help an organization define its strengths and weaknesses, as well as discover which of its resources may become its sustainable competitive advantages. To achieve this, the resources should be valuable, unique, consistent with the organizational structure, and difficult to imitate. It will ensure the companys sustainable successful performance in the world market.
