There are many factors that determine which companies are successful in the global markets (Peng et al. 920). Strategy formulation and implementation is the primary factor that determines prosperity of companies in the modern markets. This is because of increased competitiveness of firms and the ever changing business environment.
One approach that was traditionally used in the formulation of strategy was the resource based view. Organizations differ from each other because of the resources that are found within them.
Resources include manpower, finances, time, skills and equipment. Resource based view of strategy focuses on the effective use of what is available within the organization so as to enhance performance (920). In this approach, attention is given to the effective use of resources so as to differentiate the potential of a company from others.
The business level model of entrepreneurship focuses on the risk taking and profitability side of organizations. This model describes how companies can ensure that they are profitable by organizing their activities structurally. Businesses consist of a number of functions which if utilized appropriately lead to the satisfaction of customer demand.
These business functions require management so that they are run effectively. Functions such as production and transportation enable companies to obtain products which if marketed well create sales and profits. The resource based view of strategy ensures that business functions are organized according to the available resources.
This ensures that positions are adequately staffed, time is not wasted, energy is saved, materials used efficiently and personnel retained. The disadvantage of this approach is that it neglects the impact of external factors that affect performance such as competitors, market prices, government policies and weather conditions.
The corporate level model of diversification focuses on the role of managers in ensuring growth of their companies through diversification. Business functions need to be diversified so that they remain relevant in the global market.
Diversification is also important since the business environment has become unpredictable and in a state of constant change. Organizations nonetheless should remain stable despite the changes and this is made possible through effective corporate strategies. Diversification is easily achieved through use of resources. This ensures that there is stability in operations and that planning is done to discover ways of achieving growth through acquisition of new resources.
The resource based approach ensures that strategies for global diversification are practical and in relation to available resources. However, this approach fails to recognize that in the current world it is not necessary to plan using available resources only. There are options such as outsourcing and leasing which make use of other people’s resources. These options are accessed when the external environment is explored.
In conclusion, the resource based approach of strategy is applicable in both the business model of entrepreneurship and the corporate model of diversification. The resource based approach in the development of strategies that aim at creating global competitiveness since markets have become dynamic.
Organizations can create competitive advantage by maximizing on the resources that they have so that they outdo competitors’ activities and products. The resource based view of strategy contributes to the development of the global strategy since it recognizes that firms differ in their capabilities and resources. By taking advantage of strengths and reducing the impact of weaknesses, organizations can develop strategies that will ensure that they remain competitive in the global market.
Bibliography
Peng Mike W, Wang Denis Y and Jiang Yi. “An institution-based view of international business strategy: a focus on Emerging economies”. Journal of International Business Studies. 39(2008): 920–936. Web.