The corporate strategy of the firm is based on a number of factors and various elements. There are virtually tens of viewpoints and narratives on which a firm can build its core objectives. These viewpoints serve as a basis towards uniform criteria for strategy development and maximum utilization of firm’s capabilities. The corporate strategy making has gone a long way since the industrial revolution and the introduction of mass production. Various theories have been proposed by business theorist and intellectuals that revolve around maximizing a firm’s performance and competitive advantage. The evolution of those thought processes and later experiments in real business environment has led to the conceptualization of “Resource-based Strategy”. (LIU and ZHAO, 2013)
The term “Resource-based strategy” or “resource-based view of the firm” states, that. in order to gain a competitive advantage, the firm must exploit and use at it’s fullest, its existing core capabilities and internal resources. Having said that, this also comes in clear contrast with another well known theory the position based strategy which emphasize that the firm may differentiate its products to that of existing products in the markets produced by its competitors, in order to gain a competitive advantage. The resource based strategy focuses on an analysis of internal resources and capabilities of the firm. The management needs to make an in-depth analysis of the core competencies. It is required that the competitors may not possess those competencies so that by utilizing these resources the firm may obtain a competitive edge on its business counterparts. (Knott, 2009)
Resources and capabilities are foundations of the strategy. Hence, the introduction of both the elements must be provided. There is a distinction between resources and capabilities. Resources could be of various types. These could be capital of the firm, material, machinery, Buildings and properties, intangible resources such as patents or Research & Development. Capability could be defined as the capacity to deploy these resources. It is also important that the resources must be homogenous. This is the most important part because the firm must be differentiated in resources and capabilities than its competitors. Only if the firm holds heterogeneous resources and capabilities it can gain a competitive advantage. If resources are not, heterogeneous other firms would also be having same level of competencies. This way no one would be able to step ahead. (Galabova and Ahonen, 2011)
Immobility is another important aspect. The resources must also not be movable at least in the short run. Again the same logic applies here. If a firm achieves competitive advantage due to some of its internal resources, it will step ahead of its competitors. Now, If another firm is also able to replicate those resources and obtain those resources by providing higher compensation the edge would sooner be ended. Hence, it is very important that core competencies of the firm are immobile and may not easily be transferable from company to company.
One such example is the competition between Apple and Samsung. Both are the giants of Smartphone and tablet industry. But both apply resource-based strategy to remain ahead of each other. Apple’s strategy is to charge higher prices for its products. It’s fully aware of the power and reputation of its brands in the consumer circles. These are its intangible resources which it exploits at its best. On the other hand, Samsung focuses on Smartphone built on Android operating system and focusing on mid-range smartphones to gain an advantage.
Strengths of Resource-based theory
Resource-based theory is the most practical way to enhance performance of the firm. A firm has to go through various stages to step ahead of its competitors. It mimics the procedures of a successful venture to obtain the same level of success as were achieved by the giants of the industry. Resource-based theory, on the other hand, simplifies the procedure by enabling the firm to focus on those areas which it already possess enough expertise and strength, letting the firm advance in the competition due to those core competencies.
The theory enables the firm to obtain expertise and prowess in particular areas of business. Previously the firm would have focused its attention on product differentiation. But using resource-based strategy firm would have focused more on its internal resources and capability. Managers would be obliged to develop resources that lack mobility and could behold for a longer period resulting in a competitive advantage over others.
There are many real-life examples that prove that resource-based theory actually helped firms to obtain a competitive advantage. Walt Disney is among the giants of the entertainment industry. It capability lies in its outstanding business models that range from themes parks to interactive movies. Although there are many other theme parks in the world and at the same time many motion pictures are also operating worldwide. Disney’s success lies in its focus on its business model and exploitation of its tangible and intangible resources to their fullest.
Weakness of resource-based theory
The resource-based theory makes a number of assumptions. In the real business environment, such assumptions may not be available to achieve. For example the theory emphasis on heterogeneity, but in real business environment heterogeneity may be tough to achieve. For a startup firm, that has just entered into the market, cannot avail resources like other market players who are working for a long time. Even if it is able to achieve those resources it would be highly difficult for a business to create differentiation. In a market where there is perfect competition, no firm is able to step ahead and give competition to others. In a perfect market environment, the theory stands invalid as no player is able to create differentiation.
Another notion of resource-based strategy is that the Asset or resources to be utilized must be valuable. The element of valuable is quite vague. There are different perspectives that see value of an asset differently. Some believe value is how it contributes to the effective performance of the firm whereas others believe that the discounted value of the future stream of income must be kept in mind while calculating the value of any resource.
Microsoft and employee development
The company chosen for the purpose is Microsoft Corporation and the HRM function chosen is employee development. Microsoft soft invests heavily into its employee development program. Since the beginning of the company, it has focused on increasing its employee’s capabilities and providing them the best of training and development opportunities. Microsoft’s employee development initiative has been discussed in detail below.
The extent of Microsoft’s employee development could be understood with the amount that it invests. Annually, more than 370 million are allocated and spent on large scale programs and events that are aimed at providing learning and growth opportunities to its employees. (Thursfield and Hamblett, 2001). Contracts are made with the professional groups of education provider that are experts in the field of development and learning.
High Potential employees
Microsoft goes further the concept of general training to its employees. Alongside its general development program, it runs a special development program which is provided to specific employees only. At first, among hundreds of employees, it identifies a specific number of employees after a rigorous set of screening. The employees that clear the screening process are those who hold extra capabilities to perform as initiators, contributors, and leaders. (Pittel, 2014). These employees are inducted in a special training program in which their capabilities are further flourished and improved. After the training program, they are provided special roles and responsibilities for they are specifically prepared.
Microsoft facilitates special conferences that help employees of various levels to interact with each other share ideas, learn, innovate and discuss. These conferences are attended by employees, internal and external executives, and intellectuals from various organizations. These conferences serve as a platform to create a knowledge base for all cadres. The executives tend to understand how employees feel about company’s operations, and employees learn how top level executives are planning for the future. What direction the company is moving into and the strategic turns that the management is about to initiate. (Osborne, 2008)
Another learning opportunity that Microsoft provides to its employees is the functioning of learning circles. These are peer-based learning groups, small in size and focused on developing learning and leadership qualities. These peer-based groups are not limited these works beyond the limits of geographic and functionality rather and serve as a base of mutual support. Being the largest, technological giant of the world, the communication between employees is not restricted to restricted boundaries as the company arranges setup to conduct virtually or otherwise.
These are held for educating employees according to the Coaching action plan. The plan is circled around objectives that are tangible and achievable. A proper audit is taken to make sure it is effectively obtaining its objectives. Matrices and performance measures are set and its continuously observed that the plan is moving in the right direction. The coaching sessions are attended by stakeholders of various responsibilities and thought-provoking sessions help in making more in-depth analysis and solutions of technological and business problems.
The impact of influence
Microsoft is an organization that is watched, observed, analyzed and focused by millions of customers worldwide. The software produced by the corporation has a huge impact on the computer world hence working at Microsoft is a life learning opportunity. The employees that work at Microsoft are working on projects which would be used by the entire world. Hence, employees very well understand that huge responsibility that is conferred upon them by customer’s expectations. As pressurized an environment it seems, it also provides the employees a learning benefit that no other company could provide such enormously. While working on the projects, the employees work with the finest project managers and executives who have created many successful Microsoft projects. Working with them is an enhancing experience. Furthermore, the feedback received from customers around the world provides great insight of the emerging trends. Very few global organizations provide such interaction of customers and employees of the firm.
Greatrated.com one of the most visited website for company’s insight information, conducted a survey with more than 700 employees of Microsoft Corporation. The results produced by the survey were quite astounding as the software giant obtained on average a 92 % employee satisfaction ratio. This ratio cannot be achieved until company is highly focused on its employee’s development program. According to the survey 91 % of the employees termed the environment at Microsoft “great”. Same views are held with respect to bosses with 91 % satisfaction ratio. Rewards, Communication, and Challenges received 92%, 92% and 95% respectively. The employee development program cannot succeed if the employees are not provided enough perks and privileges that match with their responsibilities. The perks serve as a basis to encourage them to carry on with their roles and provide more efforts into their jobs. A list of perks and benefits provided by Microsoft Corporation to its employees are discussed below.
Microsoft provides great campus convenience at its offices. The employees are provided the benefits to carrying on their personal tasks at the offices while doing work. This is done by a range of different services such as Clinics where employees could consult with doctors and physicians. Employees could use the dry cleaning service, or buy items from grocery stores specifically built for Microsoft employees. They could join yoga classes or indulge in sports activities such as Basketball or baseball.
Microsoft employees are provided a great benefit which is not available to the general public at large. They can buy company’s stock at a discounted price. The discount ranges between 8 to 11 percent. Alongside financial health, the company also cares for personal health of its employees. A number of insurance programs are managed by the company to make sure that its employees receive greater health coverage. It also contributes more than $ 2000 their saving accounts created for health purposes. Expression of thoughts is also one of the talked about features of Microsoft Corporation. More than 70% of its employees agreed that the company provides a great atmosphere where they are allowed independently to share their ideas and thoughts regarding the company and its products.
Galabova, L. and Ahonen, G. (2011). Is intellectual capital‐based strategy market‐based or resource‐based?. J Human Resource Costing Acc, 15(4), pp.313-327.
Knott, P. (2009). Integrating resource‐based theory in a practice‐relevant form. Journal of Strategy and Mgt, 2(2), pp.163-174.
LIU, G. and ZHAO, Y. (2013). Adaptive radio resource allocation strategy based on density of femtocell. Journal of Computer Applications, 33(1), pp.127-130.
Osborne, C. (2008). Leadership. London: DK Pub.
Pittel, S. (2014). The 2010 Bower Award for Business Leadership presented to William H. Gates III, Microsoft Corporation. Journal of the Franklin Institute, 351(1), pp.63-64.
Thursfield, D. and Hamblett, J. (2001). Mutuality, learning and change at work: the case of the employee-led development. Employee Relations, 23(4), pp.337-352.