Introduction
This essay summarizes Chapter 3 of the Book: "Foundation in Strategic Management by Jeffrey S. Harrison/Caron H. St. John sixth edition, titled "Organizational Resources and Competitive Advantage." The summary mainly focuses on the strategic value of internal resources and capabilities, value chain analysis and firm performance.
Discussion
Competitive advantage may be available to companies such as Zappos.com that have valuable resources including getting obsessed with customer service to incorporate the emphasis of speedy delivery as well as paying postage both ways if the customer is dissatisfied with the purchase. Secondly, a firm must have quality employees as manifested in the success of Zappos.com by keeping the employees happy through building honest and open relationships. Lastly, another competitive advantage for firms is to adopt an exclusive high-tech open culture with the goal of building teamwork and a family spirit among employees. Therefore, it is prudent that managers understand the methods of taking full advantage of valuable resources to achieve competitive advantage by full exploitation of their human resources, exclusive or unique culture and a strong brand name.
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However, there are many circumstances that make a valuable resource a candid source of viable competitive advantage. The conditions include sustainable competitive advantage, resource interconnectedness, human resources, physical resources and financial resources. Moreover, there are knowledge and learning resources, general organizational resources, resource analysis and the development of the strategy.
The Strategic Value of Internal Resources and Capabilities
First, based on sustainable competitive advantage, internal resources and capabilities are classified into five general categories of physical, knowledge, human, financial as well as organizational. Generally, capabilities alongside resources become strengths with the capacity to create competitive advantage if the resources or capabilities are valuable and are unique. In case the resources or capabilities are valuable, they allow the company to utilize external opportunities while neutralizing the external threats. Generally, the value is derived from the ability to exploit the resource to offer a good or a service at a lower cost or to offer a good or a service that is highly desirable to the customer. However, in itself, the value does not make a resource a source of competitive advantage; other conditions must, therefore, be met. Secondly, if the resource is unique, and several firms have a certain resource or capability, then the circumstance is described as competitive parity, no firm has the advantage. On the contrary, if only a firm has a valuable resource or capability, then the resource or capability can be a source of competitive advantage.
Nevertheless, a unique, as well as valuable resource or capability becomes a source of competitive advantage if the firm is suited to the utilization of the resource or capability. That is to say, the firm's structure and systems are suitable for taking advantage of the competitive advantage. Also, the company's managers must be aware of the potential of the resource or capability which can lead to competitive advantage and have the initiatives to accomplish the advantage.
Secondly, there is resource interconnectedness which has implications for managers of a firm. The consequence of resource interconnectedness for managers is that none of the resource areas can be ignored. Thus, if one of the resource interconnectedness becomes weak, all the other resources can be affected. Therefore, strategic managers have the duty to balance the needs in other resources and to establish if weakness in either of them is affecting development towards the attainment of the firm's objectives.
Value Chain Analysis
Companies can as well be defined by their value-creating activities. The value chain categorizes company's organizational processes into different activities that create value for their customers. Thus, managers have the responsibility to establish major resources and processes that show strengths, areas that require improvement as well as opportunities to develop a competitive advantage through examining firm's value chain.
Value chain analysis includes basic and support activities such as supply chain management, distribution, and location management, internal operations management, post-transaction contacts management and marketing management. Once a company has described and documented it’s basic and support activities it can use the value chain analysis to guide the strategy of developing basic and support activities. The support activities are then compared to the activities of the main competitors. Based on the analysis, the company can pursue to develop a competitive advantage in any of the basic or support activities or in the manner they are combined or in the way internal activities are connected to the external environment. Thus, the organizational strengths, weaknesses, and performance with respect to competitors are determined by the cumulative effect of the value chain activities and the way they are linked in the company and with the external environment.
Firm Performance
Firm performance can be categorized into the traditional financial performance and the broader stakeholder-based measures of firm performance. Traditionally, just like many business disciplines, the discipline of strategic management has focused on financial returns as the main measure of firm performance. Further than the risks linked with the pre-occupation of financial returns, there are reasons to consider other company performance measures and financial measures. Even though profits provide value to the majority of a company's stakeholders, they are not an accurate manifestation of the total value the company creates. The firm's activities provide more of both materials alongside intangible value to a wide range of stakeholders, for instance, employees receiving financial compensation, benefits, and satisfaction from working with the firm. The satisfaction may be derived from how well the employees are treated, opportunities given for personal growth, the fun they have, the contacts they develop as does the financial remuneration they get. Just like the stakeholders, employees as well contribute to the company's operations. Eventually, the company and its managers are responsible for employees.
Conclusion
In order for a firm to take advantage of the strengths or overcome weaknesses towards achieving competitive advantage, it must utilize its internal resources and capabilities through the development of strategies.
Reference
Harrison, J. S., & John, C. H. S. (2013). Foundations in strategic management . Cengage Learning.
