What is resources and competence analysis?

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Volume 20, Issue 5, September 2002, Pages 435-450

https://doi.org/10.1016/S0272-6963(02)00023-2Get rights and content

Resource based view theory

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The activities and processes of the organization utilize certain assets. These assets are called resources. These resources can be created within the organization. They form the internal resources. Such generated resources are organization-specific. Otherwise they could be obtained externally from the suppliers available in the resource markets. They form the external resources. The externally obtained resources are organization-addressable. In addition resources can be categorised as specific or non-specific. Those resources which can only be used for extremely specialized intentions and are significant to the organization in adding value to goods and services are called specific resources.

Non-specific resources are less specific and are less significant in adding value. Also resources can be broadly classified as tangible and intangible. The physical assets that an organization possesses are called tangible resources. The physical resources, human resources and final resources come under this category.

The intellectual resources, technological resources and the organizational reputation together form the intangible resources. The patents and copyrights of the organization are typical examples of intellectual resources. The innovation capacity and innovation speed are examples of technological resources. Reputation is basically good-will that the organization has acquired among the customers. It is a critical resource of an organization.

Competencies

An organization should posses some characteristics in order to have the ability to compete with other organizations in the market place. These characteristics form the competencies of the organization. For any organization to survive in an industry competencies are must. At the same time competencies cannot be useful to an organization when they stand alone. It is when they combine together in the right combination that they help the organization to attain competitive advantage. For instance consider an information technology organization. For this to compete in the software industry it should posses the competencies to write programs and design tools which have to be combined together to provide it with the competitive advantage in the industry.

Distinctive Capabilities

An organization’s resources which are critical in imparting it with competitive advantage are called distinctive capabilities. When the capabilities originate from an attribute which other firms do not have then they form an organization’s distinctive capabilities. In addition to having a distinctive characteristic it should also be sustainable and appropriable.

When a distinctive capability is able to continue functioning over a period of time it is said to be sustainable. When the organization which holds a distinctive capability is able to benefit mainly from it then it becomes appropriable. An organization can derive the distinctive capabilities mainly the organizational architecture, organization reputation and innovation. The relationships between the organization and the stakeholders are critical in developing these three aspects of the organization.

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Strategic capability is the term used to describe the strengths and weaknesses of an organization. It can also be defined as an organization's ability to survive and prosper depends on its strategic capability. This can be defined as the adequacy and suitability of its resources and competences. As the above definition illustrates, capability is assessed in terms of competences and resources. Competences and resources can be classified as either threshold or unique.

Threshold competence can be defined as those activities and processes needed to meet the customer's minimum requirements.

Threshold resources can be described as those resources needed to meet the customer's minimum requirements. Resources can be tangible or intangible in nature.

Core competences are the activities and processes through which resources are deployed in such a way as to achieve competitive advantage in ways that others cannot imitate or obtain

Unique resources are those resources that critically underpin competitive advantage and that others cannot easily imitate or obtain. Resources can be tangible or intangible in nature.

Part b) Discuss the capabilities required to sustain competitive advantage.

Competitive advantage is the ability of an organization to generate greater returns than those of competitors over the long term. These are opposed to short-term tactics which provide a temporary advantage.

It is clear that unique resources and core competences are of great importance in creating a sustainable competitive advantage. According to Johnson et al (2017), resources and competences must have four qualities to achieve a competitive advantage. These four qualities are value, rarity, inimitability, and organizational support.

Value is concerned with the value placed on resources and competences by a customer or an organization. It is the extent to which resources or competences allow o customer or organization to take advantage of opportunities, and/or neutralize threats.

A single unique resource or core competence may have the potential to create competitive advantage by itself. The importance of rarity is that if a resource or competence is generally available then an organization's competitors will have access to it in the same way as the organization does. In which case, the resource or competence does not confer any advantage to the organization compared to its rivals.

Inimitability means that a resource is difficult for competitors to imitate. Generally, it is difficult to base competitive advantage simply on possession of tangible resources, since they can often be imitated or simply bought in. Inimitability most frequently resides in the competences involved in linking activities and processes in ways that both satisfy customer priorities and which are difficult for competitors to imitate.

Organizational support focuses upon whether or not an organization is able to support its capabilities, including its processes and systems. For example, an organization may have a unique and valuable patent but is not able to exploit it because it does not have the sales force to sell the resulting product.

Part c) Discuss the contribution of organisational knowledge to the strategic capability of an organisation.

Knowledge management is connected with the theory of the learning organization. It is founded on the idea that knowledge can be a major factor in creating a sustainable competitive advantage and should form part of an organization's strategic capability. Knowledge is thus seen as an important resource and may in itself constitute a competence as it can certainly underpin many competences.

Organizational learning has become particularly important as business environments become increasingly complex and dynamic.

It becomes necessary for strategic managers to promote and foster a culture that values intuition, discussion of conflicting views, and experimentation. A willingness to back ideas that are not guaranteed to succeed is another aspect of this culture as there must be freedom to make mistakes.

Knowledge management is becoming increasingly important in helping organizations sustain competitive advantage. The aim of knowledge management is to exploit existing knowledge and to create new knowledge so that it may be exploited in turn.

Part d) Identify and evaluate the strengths and weaknesses of an organisation and formulate an appropriate SWOT analysis.

SWOT analysis summarizes the key issues from the business environment and the strategic capability of an organization that is most likely to impact on strategy development.

This allows organizations to adopt and apply innovative methods and technologies to identify business problems and evaluate strategic options and manage solutions.

Strengths and weaknesses are essential during the analysis of the organization’s strategic capability. By conducting a SWOT analysis an organization aims to match its strengths with the available market opportunities that it can exploit.

Strengths that do not match any available opportunity are of limited use. Strategies need to be developed that convert weaknesses into strengths to take advantage of some particular opportunity.

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