Management and Development of Business for Sustainability Resources

Management and Development of Business for Sustainability Resources Introduction The resource-based theory basically explores organizations internal capabilities concerning the formulation of strategies that are intended to achieve sustainable competitive advantage both at the market and in the industries where an organization operates.Advertising We will write a custom report sample on Management and Development of Business for Sustainability Resources specifically for you for only $16.05 $11/page Learn More In fact, this theory deals with the competitive environment of an organization but applies the inside-out approach. The theoretical analysis starts with the internal environment of the organization. As a result, the theory is frequently observed as an alternative replacement for the Porters five forces framework which looks at the external environment while taking the outside-in or the industrial structure as the starting point. This paper examines the way internal resources of the firm contribute to the organizations s uccess and sustainability. More emphasis is geared towards the role and nature of intangible and tangible resources in reference to the notion of dynamic capabilities of an organization. The paper also reviews the available literature to shade light on the resource based theory approach and to relate it to how the internal resources of an organization contribute to the success of organization and the gaining of competitive advantage. The resource based approach to the organization strategy The resource based theory is not a new approach to the organization strategy, but it is rather a strategy that has long precursor with links going back to the early works of Penrose. Nevertheless, the resource based theory is majorly associated with works of scholars like Rumelt, Barney, Prahalad and Hamel as well as Peteraf and Grant. These scholars put a lot of emphasis on the organizations internal resources and capabilities in formulating the organizational strategies (De Wall 2007, p.209).Adv ertising Looking for report on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More As indicated, the resourced based view takes into account the organization internal capabilities and resources in formulating the organization strategy so as to attain the sustainable competitive advantage within market as well as at the industry levels (Barney Clark 2007, p.189). In situations where the organization has capabilities and resources that can be organized and reorganized for a company to attain the desired competitive advantage over competing firms, the organization perspective becomes inside-out (Barney Clark 2007, p.189). In essence, the company capabilities become the determinant of the strategic choices the company makes while competing with others in the outside environment. Similarly, in certain situations, the capabilities of the organization may permit the creation of new markets besides adding value to the org anization clienteles (Miles 2012, p.212). This has clearly been depicted by the Toyota hybrid cars and the Apple iPod. In these cases, it is clear that the organization capabilities are paramount to the creation of the organizations competitive advantage. It is also imperative to note that the capabilities will enable an organization to lay much emphasis on the configuration of its value-chain activities. The reason is that the company will stand a chance of identifying the competencies within its value-chain activities that make available the most competitive advantage (De Wall 2007, p.209). For instance, the much revered Toyota manufacturing system that uses the inbound logistics in the form of excellent inventory and material control system ensure that the levels of the inventory are sufficient enough to satisfy the demands of the clients.Advertising We will write a custom report sample on Management and Development of Business for Sustainability Resources specifically fo r you for only $16.05 $11/page Learn More This system ensures that the inventory and the materials are delivered before the customers order for the assembly. Looking into the various activities that are involved in the value-chain such as operations, there are efficient automated plants with inbuilt quality control systems. These are supported by services through the application of warranties and guaranties, sales and marketing which is augmented through the advertisements as well as dealership networks. At Toyota Corporation, the value-chain activities are linked across the company operations. The linkages between the company value-chain to those of its suppliers are designed in such a way that it gives Toyota distinctive capability over its competitors or the core competencies. It is these core competencies that provide competitive advantage for Toyota. Moreover, Toyota is also capable of appropriating the added value that it gets from these value chain activitie s. A distinctive example is seen where Toyota US makes larger profit than three combined largest automobile firms in the US. Desouza (2005, p.89) asserts that, in situations where firms in the same industry are faced with similar conditions, the expectations are that, putting other things to be equal, the firms will have almost equal profits. However, this is not necessarily the case. There is a wide variation in terms of profitability by firms in the same industry as depicted by the UK retail supermarket chain TESCO and its competitor Sainsbury. The Porters argument that the industrial system whereby firms functions and the manner in which firms position themselves within the system determines each of these firms profitability. This contrasts the resource-based view that does not look at the industry structure rather unique bunch of resources together with capabilities that each organization possesses (Barney Clark 2007, p.189).Advertising Looking for report on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More The proponents of the resourceds of the intellectual resources involve copyrights as well as patents that are derived from the technological resources of the organization. For instance, the Dayson manufacturing company relies heavily on the intangible intellectual resource of the creative innovative founder, Dayson James. This intellectual property has never been imitated by any competitor to Dayson manufacturing company. Tacit knowledge within an organization is built through the organizational culture and processes. The employees of such an organization have tacit knowledge that cannot be readily transferred. The good will reputation of an organization is constantly being acknowledged as essential tangible asset that can be damaged easily through negative marketing campaigns and ill-thought strategies (Barney 1991, p.109). Companies like Benetton made a point by allowing debate over their controversial advertisements. The debate seemed to equally draw both detractors and supporter s while at the same time gaining useful and free publicity. Moreover, the way Johnson and Johnson responded to the mischievous meddling with their product Tylenol ensured that its reputation consistently persisted at the top. Competencies As previously indicated, the existence of organizations resources does not confer any benefit to the organization unless they are put into productive use. It is the effective and innovative conformation of these resources that provide competencies to the organization. A competency can be described as the attribute that the company needs so as to be in a better position to compete appropriately in the marketplace (Barney 2010, p.45). Competencies are understood as being the prerequisite to the firm’s competiveness within the industry. The competencies alone do not however confer to the organization any competitive advantage (Beaver 2002, p.213). In fact, the competencies are supposed to be thought of being derived from the company internal bu ndle of resources. For instance, for companies to compete well within the automobile industry, they must be in possession of knowledge requisite to design and manufacture the automobile engine and body. Such knowledge will enable the companies to effectively compete within the industry despite their resource capabilities (Barney 2010, p.10). Core competencies Hamel and Prahalad (1990) argue that the most essential duty for the company managers is to come up with products that are needed to satisfy the customer demands, yet such products have not even been imagined. In order to attain this objective, the company management must go beyond the organization boundaries instead of focusing on distinct and separate strategic business units. In essence, Hamel and Prahalad (1993) were right to claim that competencies are derived from collective individual learning within the organization as well as the ability to operate across the organization boundaries. Therefore, a core competency or dis tinctive capabilities can be described as a group of attributes possessed by the organization that enable it to attain the competitive advantage (Barney 2010, p.110). This implies that, it is the ability of the company to configure its resources in a way that allows the company to successfully compete within the marketplace. The classic examples of companies that have achieved the key competencies are Dell and Benetton. Dell has achieved the core competency by the way it has configured its value chains. Organizations have strained to imitate the dells model of direct sales but they have successfully failed. Similarly, Toyota manufacturing company has attained its core competency in the production of petrol-and-electric hybrid cars. Nevertheless, this cannot be measured with the first mover advantage. Indeed, this materializes to be the sole advantage the company gets from being the first in the global in the marketplace (Kay 1993, p.45). Therefore, core competencies should provide c ompanies with access to a broader market. This has been witnessed in the case of Honda core competencies in the engine design which enabled the company to leverage its capabilities to successfully compete in the car and powerboat market. Besides, core competency should add value to the customer end products (Barney 2010, p.109). For instance, the distinctive capabilities of BMW in engineering have enabled it to manufacture high quality cars normally being sold at premium. The company core competency should equally be hard to imitate by any of the company’s competitors. This implies that the value a company gets from the core competency such as the competitive advantage should be sustained (Divanna Rogers 2005, p.103). Thus, for any company to attain this, it must not allow the competitors to imitate the core competency. Still, the core competency within an organization is normally increased as it is being utilized and mutually shared across the firm. Prahalad and Hamel (1993 ) claim that core competencies are the binding factor within the organization. They spur growth and new developments within the organization. However, core competencies within the organization have to be protected for the organization to generate appropriate rewards. Distinctive capabilities Generally it is the organization distinctive capabilities of its resources that provide it with the competitive advantage. But the capabilities of the organization are distinctive if they are derived from those characteristics that other firms do not have (Holbeche 2009, p.34). Having distinctive capability is only necessary, but not sufficient enough to be successful. The distinctive capability must be appropriable and sustainable. That is, it must persist over time to be sustainable (Divanna Rogers, 2005). The distinctive capability must also be seen to benefit the company rather than the competitors for it to have an appropriable characteristic. The organization distinctive capabilities eman ate from the innovation, the company reputation and architecture. These further relate the organization to the stakeholders. It is this relationship that permits the resources of the organization to offer distinctive capabilities through innovation, architecture and reputation (Barney 2010, p.109). Organization architecture refers to the system of relationships that occurs within and out of the company (Barney Clark 2007, p.189). The internal architecture is the relationship between the organization and its employees and between employees themselves while the external architecture is the relationship between the organization and its suppliers and the customers. In fact, architectural network occurs in the relationships between the organizations with other firms within the industry. However, distinctive architecture is based on the employees output (Holbeche 2009, p.34). It permits the value that is created to be easily and readily distributed by the company. As the basis of distinc tive capability, reputation is especially essential in the markets where the consumers are capable of using their long-term experience to ascertain the quality of the product (Barney Clark 2007, p.189). A firm’s reputation is build through its reliable long-term relationships. In most cases this takes a considerable period of time to develop and nurture. Once this long-term relationship has been developed, the distinctive capability of the firm is attained. A reputation of quality product and better services provides the firm with a competitive advantage that the firm can utilize to secure reprise business and charge premium prices (Beaver 2002, p.213). Firms can leverage such reputations when entering into the new markets. For instance, Sonny leverages its reputation while entering the electronic consumer market. The company capability to successfully and speedily innovate is also another basis of distinctive capability that can be appropriated and sustained (Barney 2010, p .109). A company may manufacture innovative products like the Apples iPods and iTunes. For a number of years, Apple has remained unrivaled in product design and functionality. It has made it difficult for its competitors to imitate its products. The ability to constantly innovate and develop products has ensured Apple with sustainable source of competitive advantage over its market competitors. Competitive advantages that have emanated from innovations are derived from the organizations architecture. Innovative processes may be embodied within the organization routines thereby making it harder for the competitors to imitate (Barney Clark 2007, p.189). Through patents and copyrights, organizations are capable of securing their innovative products and ensure that their values are appropriated. Conclusion The resource based view lay much emphasis on the application of the firms set of internal resources and capabilities to determine their competitive advantages. The delineated resourc es, the firms’ core competencies and the distinctive capabilities have also been explored to show how firms can achieve their competitive advantage. However, both core competencies and distinctive capabilities are terms that are interchangeably used, but they relate to how organizations strive to attain sustainable competitive advantage. References Amit, R Schoemaker, PJ 1993, â€Å"Strategic assets and organization rents†, Strategic Management Journal, vol.14 no.1, pp.33-46. Barney, J 1991, â€Å"Firms resources and sustained competitive advantage†, Journal of Management, vol.17 no.1, pp.99-120. Barney, JB Clark, DN 2007, Resource-based theory: Creating and sustaining competitive Advantage, Oxford University Press, Oxford, UK. Barney, JB 2010, Gaining and sustaining competitive advantage, Pearson Prentice Hall, Upper Saddle River, NJ. Beaver, G 2002, Small business, entrepreneurship and enterprise development, Pearson Prentice Hall, Upper Saddle River, NJ. Co ombs, HM, Hobbs, D Jenkins, DE 2005, Management accounting principles and applications, Sage, London, UK. De Wall, A 2007, Strategic performance management, Palgrave McMillan, Basingstoke, UK. Desouza, KC 2005, New frontiers of knowledge management, Palgrave McMillan, Basingstoke, UK. Divanna, JA Rogers, J 2005, People – the new asset on the balance sheet, Palgrave McMillan, Basingstoke, UK. Hamel, G Prahalad, CK 1990, â€Å"The core competence of the organization†, Harvard Business Review, vol.71 no.2, pp. 75-84 Hamel, G Prahalad, CK 1993, â€Å"Strategy as stretch and leverage†, Harvard Business Review, vol.68 no.3, pp. 79-91 Helfat, CE 2007, Dynamic capabilities: Understanding strategic change in organizations, Blackwell, Oxford, UK. Holbeche, L 2009, Aligning human resources and business strategy, Elsesvier Butterworth Heinemann, Oxford, UK. Kay, J 1993, Foundations of corporate success, Oxford University Press, Oxford, UK. Miles, JA 2012, Management and organization theory: A Jossey-bass reader, John Wiley Sons Hoboken, NJ.