Resources and Capabilities - Definition & Importance
What is Resources and Capabilities?
Resources and Capabilities are the sources of competitive advantage and the primary source of profitability for any firm. Resources and capabilities empower a company to drive the business and face competition with their products & offerings for the need of customers.
Importance of Resources and Capabilities
Resources and organizational capabilities play an important role in business. They can be explained as:
A) Resources can be divided into:
1. Tangible – Physical and financial assets. Eg: Machinery, offices, warehouses
2. Intangible – Skills, reputation and brand names. Eg: Whatsapp, Disney
3. Human Resources – Skilled Employees
B) Organizational capabilities:
They refer to the business routines, processes and the organizational culture. Identification of core competencies or capabilities can be useful in identifying what contributes more to customer value and which market segments to target. A firm must analyse which resources and capabilities are most important in providing a sustainable competitive advantage to the firm. It should also identify its strengths and weaknesses with respect to its competitors. The firm must ensure that all resources and capabilities are fully employed and exploited. It must focus on regenerating valuable resources and building competencies. In a rapidly changing external environment a focus on internal resources and capabilities is more secure than market focus.
Hence, this concludes the definition of Resources and Capabilities along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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