The resource based view of strategy explains that the performance of companies is impacted by the available resources and capabilities. This approach to strategy is advantageous to the firm as it enables managers to prioritize and effectively use the available organizational resources.
It is indeed true that resources are scarce and limited. Organizations therefore have to use what is available according to the importance of tasks. This view of strategy enables managers to examine the order of importance of various organizational activities. Based on this list, the manager is able to offer the most important activities the opportunity to utilize resources first.
Resources vary from equipment, money, time, personnel and skills. The resource based view forces the managers to strategize on how best these resources can be put to use in their companies.
According to the business-level model of entrepreneurship, optimization of resources is very important. Optimization is defined as making the best use of what is available. The purpose of businesses is to make profits (Morris, Schindehutte and Allen 727). Profitability usually depends on the ability of companies to use their resources well. Resources such as time should be managed using schedules and plans of action.
Personnel and skills can be managed by human resource management techniques and proper leadership. Equipment on the other hand can be managed through optimization whereby the most important activities are accorded the first chance to use them. This approach increases profitability by increasing effectiveness and efficiency in the use of resources.
The resource based approach however undermines the firm’s ability to adapt to change. This approach was developed and widely used many years ago. There are newer challenges in the business environment that make it difficult for managers to achieve profitability simply by properly allocating resources.
The corporate-level-model of diversification looks at the interests of the company as a whole on matters such as stability and growth (Rasheed 3). There are many aspects of an organization as a corporate. For instance, professionalism, code of ethics, organizational culture and communication channels are factors that describe the character of corporations.
The corporate-level-model of diversification describes how organizations have had to broaden their view on business. There has been the need to diversify the approach to management and use of resources in the current world. Despite this, the resource based view of strategy enables managers to make the best use of what is available despite the hard business environment in which they operate.
It is important that resources are allocated to the most important activities so that all crucial matters are taken care of first. This approach however does not react to the changes that occur regularly. Since the environment of today has unique challenges and diversification needs, strategy development should be based on more changeable methods.
The resource method limits strategy development to what is available and capabilities that are already there. The current world requires strategies that seek acquisition of new resources and addition of skills and capabilities.
In summary, the resource based view should be considered by all managers since all organizations utilize what is available so as to achieve their goals. The resource based view can also help in development of the global strategy. This is because even in the global markets, there is scarcity of resources.
Funds limit the ability of organizations to enter new markets, create products and acquire other companies. Implementation of global strategies depends on a company’s ability to optimize on their available resources. Efficiency in the use of resources determines whether a company will successfully implement its global strategies.
Works Cited
Rasheed, Howard S. “Growth or retrenchment strategy choices for declining Entrepreneurial firms: The effects of performance and resources”. Journal of Business and Entrerpreneurship. 1-20. Web.
Morris Michael, Schindehutte Minet and Allen Jeffrey. “The entrepreneur’s business model: toward a unified perspective”. Journal of Business Research. 58(2005): 726–735. Retrieved from https://www.academia.edu/1002583/The_entrepreneurs_business_model_toward_a_unified_perspective