Thursday 30 March 2023

Organizational Resources

Aside from gaining a competitive advantage through capabilities, organisations can also leverage their unique resources to gain or increase their competitive advantage. Resources come in two forms, Tangible and Intangible, and either or both can significantly grow an organisations competitive advantage.

Resource types Examples
Tangible ressources Financial Internally generated cash, cash on hand, borrowing capacity
Physical Machinery, Building, Computing & Telecom equipment, raw material sources(forestry, mining, etc), Retail outlets, Warehouses, Real estate, inventory, etc
Intangible resources Technology Product innovations, Creative products, Prototypes & models, Designs & Plans, Knowhow, Production processes, Innovation processes, software & It Systems, Organizational routines & systems
Relational Product reputation, Brand loyalty, Customer relationships, Alliances, Supplier & Distributor relationships, relationships/Reputation with stakeholders (Government, shareholders, public, etc)
Human Capital Skills and expertise, training, motivation, creativity & Adaptability, Commitment, team cohesion, leadership abilities, coordination

We may wonder which resources provide the most value to an organisation, it is generally accepted that just like capabilities the resources which increase the Price-Cost wedge are the most value added. What that means is that resources that can widen the gab between providing a good or service and the price which it can be sold ate are the resources that provide the most benefit to the organisation. Ideally these value-added resources are also rare, that is an organisations rivals do not have access to them, providing the organisation with an advantage.

Tangible vs Intangible resources

Which is better? well as always it depends on the industry, for example if the industry is logging, then having access to a high quality but cost effective forestry would potentially be a high value resources, however in an industry such as Consulting then having access to highly skilled, motivated workforce would prove to be the highest value resource. 

In general research has shown that overall, intangible resources greatly outweigh tangible ones in organizational value in recent times. Basically how firms do things generates more value than what they do. This is the case, because in the modern economy organisations have much more access to financial and physical resources in the modern market, greatly decreasing the advantage a firm can gain from anything that can be purchased.