ORGANISATIONAL MANAGEMENT

Organisational Management

Organisational Management

Introduction

A Organisational overview emphasizes that a firm utilizes its resources and capabilities to create a sustainable competitive advantage that ultimately results in superior value creation and above normal profits. This view combines both the internal and external environments. There has been much literature written on this topic since the 1980s. In this essay, I will discuss the link between a firm's resources and sustainable competitive advantage and the characteristics and strategic implications of the Organisational overview of a firm.

Background

The Resource Based View of a firm (RBV) has grown in popularity since the late 1980s. It was originally developed by Wernerfelt in 1984 as an attempt to build a solid foundation for the theory of business policy, (Clulow et al, 2003). However, the importance of firm-specific resources was recognized as far back as the 1930s by economists; Chamberlin and Robinson. These economists suggested "that the unique assets and capabilities of firms were important factors giving rise to imperfect competition and the attainment of super-normal profits" (Fahy,1999). This was further developed in 1959 by Penrose who suggested that a firm is more than an administrative unit; it is also a collection of productive resources the disposal of which between different users and over time is determined by administrative decision (Penrose, 1959). Towards the end of the 1980s, there was increasing dissatisfaction with Porter's Forces Model which had dominated that decade. This model concentrates its emphasis at an industry level. This led to the emergence of the RBV of a firm which acknowledged the importance of company specific resources in the context of the competitive environment.

The concept of firm's resources heterogeneity is the basis of RBV. The significance of this concept as a new direction in the field of strategic management was largely recognized in 1984 with the article "A resource-based view of the firm" by Wernerfelt which in 1994, was awarded the Strategic Management Journal best prize indicating that RBV was now a vital part of strategic management literature. He suggested that evaluating firms in terms of their resources would lead to insights that differ from conventional perspectives.

In 1991, Barney developed this concept further and developed a framework to identify the characteristics of resources needed to generate sustainable competitive advantage.

Resources & Capabilities of a Firm

One of the main principles of RBV is that all resources are not of equal importance. More emphasis is placed on the characteristics of advantage-creating resources. These resources can be divided into three groups: physical capital resources, human capital resources and organizational capital resources (Collis & Montgomery, 1995).

Physical capital resources are the physical technology used in a firm such as equipment, raw materials and geographic location. These represent the tangible assets of a company. Human capital resources are the training, experience, judgment, intelligence, relationships, and insights of individual managers and workers in a firm. Organizational capital resources include the firm's reporting structure, its formal and informal planning, controlling and coordinating systems, as well informal relations among groups within a firm and between a firm and its ...