Resources and Capabilities
Each and every company looks for an advantage that should put it above the rest of its competitors. There are various ways and strategies that have been developed for the purposes of trying to ensure that a given company’s management is able to put in place such measures. This increased competitive advantage is meant to ensure that the company can be sustainable and profitable for the long term, and thereby providing its shareholders with the desired return that they would like to have on their money. The company’s competitive advantage is defined as the search for a position that is favourable to the company and one that places at a better position to its competitors. This competitive advantage may be analyzed in two ways. The first one is to look at how competitive the industry is as a whole. This will distinguish between the given segments of the market from another. There is also the second fact that a company needs to analyse what makes it a cut above the rest (Porter, 1985).
One of the ways in which a company can improve its competitive edge is by the management realizing that it needs to develop a strategy that will work best for the company. That strategy will be best advised if it takes into consideration all that the company has and how these can be utilized best. It should also be able to analyse this with consideration as to the environment or industry that the company operates in. This will be able to lead to the creation of the most effective strategy. Strategy has been defined as the ability of the management to match what resources are available to the company as well as the different capabilities that the company has to the opportunity that is available in the industry (Grant, 2010). The resources and capabilities are the internal factors that are available to the company. The consensus is that these are the factors that can be affected to improve the effectiveness of a company. This is due to the instability of external factors that may affect the company.
Resources and capabilities
There is need to initially create a distinction between the resources of the company and the capabilities. To begin with we look at the resources that are available to a company. The resources of the company may be thought of as the physical assets that are available to the company. These are mainly what the company has for the performance of its function. Proper utilization of these resources is what will give the company a competitive edge. In this case they can be grouped into a number of categories.
The first one is the tangible resources that the company has. This is the easiest of all of them as it basically involves identifying the assets that a company has. These include the likes of plant, equipments and buildings. Here there are basically two considerations that are given to these assets as far as trying to develop the strategy of the company is concerned. The first is how can the existing assets be utilized to derive the greatest economic value from these assets? The second is how can the management improve the profitability that the company is able to get from the existing assets which the firm owns?
The second category of resources is the intangible resources. These are hard to value but of greatest value to the company. This has to do with those aspects of the company that have no physical representation but are considered to be valuable for the company’s continued operation. This may include such parts as the brand name of the company and the research and development or R&D that the company has. The R&D is mostly valuable to manufacturing companies that usually rely on new technologies for continued sales. These are sometimes referred to as reputational resources. These resources may be the most significant ones to a company.
The final resource may be that of human resource. This is the other part of the resources that one cannot quantify but one that still plays a significant part in the contributing to the company’s competitive edge. This will usually involve the identification of the right skills, talents as well as competencies in the people that work with the firm. This will usually enable the company to align its strategy with the available manpower. It is also one of the most difficult resource to manage as there are many variables involved.
The other aspect of the strategy should be a consideration of the company’s capabilities. This is the capacity of the company to make good use of the resources that it has to ensure that the strategy developed is well implemented. This is the most important part of the strategy development and it is one that the management should pay a good amount of attention to. There are two ways in which the capabilities of the company can be categorized. In one case there is the identification that it is dependent on the firm’s functions. There is also the categorization that a company’s capabilities can be analysed based on the value chain analysis.
When the companies are evaluated on a functional perspective there are seven distinct functions that can be identified. These range from corporate functions to sale and distribution functions. A company may choose to assign a given order to all these functions depending on the importance that each of them will be assigned. When the considerations are made using the value chain analysis, the porter’s model can be used. This makes two distinctions between the primary activities and the support activities.
The case of Barclays
In this case we take to consider Barclays bank. This is a bank that was started as a partnership in the 17th century and has over time grown to become among the largest banks in the world. The bank has grown through acquisitions and prudent financial management that may be attributed to the conservative strategy that it has taken over the years. This strategy has enabled it to be among the most resilient financial institution in the industry. It is also one that has made the headlines recently for a number of reasons.
In looking at the resources that the bank has we may begin with an analysis of the tangible resources. In the case of Barclays the bank has under it numerous holdings of properties to which it has been able to gain cash flows from. These properties will also be able to do so for a very long time to come. This has given it an edge in the banking industry where cash flow is a very important aspect for the long term success of the company. One such property is the newly opened Barclays centre in Brooklyn New York. This was opened in September of 2012 (Kleinfield, 2012). Some of these properties it keeps for the rental income. Some that it acquires when loans default, may be sold off to recoup the amounts owed. One such is those that it acquired in Germany known as Baubecon (Reuters, 2012). This provides the company with the much needed capital base when it requires it.
When it comes to the intangible assets of Barclays bank, the first thing would be name of the bank. The financial institution has been known for a long while as a solid financial institution. The banks brand is known worldwide, as it has operations in all major countries. The brand name that is associated with Barclays may be proven valuable by the fact that after the African unit of the bank merged with ABSA of South Africa the new name that was adopted was that of Barclays. This is gathered from the press release that the company released on 6th December of the year 2012. This goes to show that the recognition of the bank’s name is superior in many of the markets that it operates in. There is also the fact that the brand name of the company has been on the top 100 brands list released by the Interbrand survey. In spite of its brand recognition reducing somehow to the point that it lost the position this year (Tobin, 2012), it still remains a well known name in the world of banking.
The human resource that Barclays as a bank has is that of the talented people it attracts. It has been able to employ some who are well versed with the knowledge of banking which has assured the firms of success. The talent that the firm recruits is one that is also capable and talented. One of the ways in which this can be deduced is by looking at the history of the bank in the appointment of its top managers. These are the CEO, whose appointments for the past couple of years have made the headlines. At the end of the financial crisis there was the appointment of Bob Diamond. Bob was initially part of the investment arm of the bank and had been working with Barclays for over 14 years at the time of his appointment (Treanor & Traynor, 2010). After his resignation was the appointment of Anthony Jenkins who was also a firm insider with the experience of working with the firm (Kollewe, 2012). He was part of the retail arm which shows the mix in talent that goes into these appointments. The bank has also taken the approach of hiring those who are not part of the bank for key top position. Usually this is in cases where these individuals have a talent pool that they need. There was news that the company intended to appoint Hector Sants who was a former CEO of the Financial Service Authority to head its compliance side (Wilson, 2012).
Barclay’s capabilities would lie in finding ways in which it integrates all the above resources to provide it with a competitive edge above its peers. For the company to achieve a competitive advantage its resources need to be both scarce and relevant. The holdings that Barclays has are not easy to find. This is for both those that it develops internally or it acquires through various means. One good example is by its acquisition of Lehman brothers after the collapse of the firm. This provided the company with an edge as it could now have operations across both divides of the Atlantic. This was initially hampered mainly due to the difficulty caused by differential regulatory treatment. Lehman also had in its books some assets that were greatly valuable to the financial industry and was the envy of most other financial institutions. The relevance of these instruments lay in the fact that most of them are used on a daily basis in the financial world. Take for example the derivatives that Barclays facilitates and those that it acquired during the buying of Lehman brothers. These are instruments that most companies need to hedge against many of the losses that may be experienced in the financial world.
For the bank to sustain this competitive advantage it has ensured that the resources it has are for one durable. One of these is the brand name Barclays that has survived the centuries even with most senior banks closing shops. These resources have to be hard to transfer, in that the resources cannot be moved easily in between companies. This can be exemplified by its acquisition of Lehman brothers where the assets of the acquired company could only be gained by buying the company. These have continued to give Barclays good returns. Finally those resources have to be less replicable. In that the company assets cannot be easily copied by a competitor who would otherwise gain on the competitive advantage. As cited this may be exemplified by the newly built Barclays centre. The location and the potential of the centre are very difficult for any company in the financial service industry to replicate.
Barclays bank provides us with a good opportunity to analyse a firm that has gained a competitive advantage and utilized its resources and capabilities to maintain this competitive advantage. For one there is the human resource, starting with the CEO that has defined the functions of the company. These functions have utilized to develop the capabilities of the firm. There have been concerted efforts among this same human resource to acquired resources, tangible, intangible and human that cannot be replicated, cannot be transferred and are durable. These three qualities of the resources of the company have enabled the firm to maintain this competitive advantage. There are different strategies that the bank has adopted for this. One of them is hiring a diverse team that will provide the bank with the needed human resource to maintain this competitive advantage.