Resources, Capabilities, and Core Competencies
- The resources of a firm can be tangible and/or intangible. Resources can also be called assets.
- Tangible resources are assets that can be observed and quantified. They are things that firms “have.” Examples include property, personnel, raw materials, plant and machinery, finances, patents, trademarks, copyrights, etc.
- Intangible Resources are assets that represent “how” a firm does business. They are typically rooted deeply in the firm’s history and are accumulated over time. Intangible resources may be more valuable than tangible resources as they are less visible and, therefore, more difficult for competitors to analyze, understand, imitate, or purchase. Examples of intangible resources include undocumented processes for innovation and improvement, which are embedded in an organization’s culture, the reputation the firm and its products have with customers and suppliers, etc. Therefore, a competitive advantage based on an intangible resource can sometimes be more sustainable.
Capabilities and Core Competencies
- Capabilities are defined as the integration and interaction of specific tangible and intangible resources to achieve the desired business outcome. These business outcomes may be a new product design, high-quality manufacturing, superb sales teams, etc.
- Core competencies are the combination of resources and capabilities instrumental in delivering end-products that beat the competition by providing more value to customers over an extended period of time. Some characteristics of Core Competencies are that they are:
- Adaptable: to exploit opportunities or neutralize threats in the external environment
- Unique: possessed by no other current or potential competitors
- Costly or Impossible to Imitate: costs for other firms to develop is prohibitive or cannot be easily developed by other firms
- Versatile: used to produce many end-products
Creating Competitive Advantage
Competitive advantage at the product or firm-level is a set of inimitable and unique features of the product or firm that the target market perceives as significant and superior to those of competition.