A firms resources and capabilities are used to build the firms core competencies which, in turn, are the building blocks for the firms strategy and its:
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The tangibility of a firm’s resources is an important consideration within resource-based theory. Tangible resources are resources that can be readily seen, touched, and quantified, such as physical assets, property, plant, equipment, and cash. In contrast,intangible resources are resources that are difficult to see, touch, or quantify, such as the knowledge and skills of employees, a firm’s reputation, and a firm’s culture. In comparing the two types of resources, intangible resources are more likely to meet the criteria for strategic resources (i.e., valuable, rare, difficult to imitate, and nonsubstitutable) than are tangible resources. Executives who wish to achieve long-term competitive advantages should therefore place a premium on trying to nurture and develop their firms’ intangible resources.
Capabilities are what the organization can do based on the resources it possesses, another key concept within resource-based theory. A good and easy-to-remember way to distinguish resources and capabilities is this: resources refer to what an organization owns, capabilities refer to what the organization can do (Figure 4.4 “Resources and Capabilities”). Capabilities tend to arise or expand over time as a firm takes actions that build on its strategic resources. Southwest Airlines and WestJet, for example, have developed the capability of providing excellent customer service by building on their strong organizational cultures. Capabilities are important in part because they are how organizations capture the potential value that resources offer. Customers do not simply send money to an organization because it owns strategic resources. Instead, capabilities are needed to bundle, manage, and otherwise exploit resources in a manner that provides value added to customers and creates advantages over competitors.
Some firms develop a dynamic capability, the unique ability to improve, update, or create new capabilities, especially in reaction to changes in its environment. Said differently, a firm that enjoys a dynamic capability is skilled at continually adjusting its array of capabilities to keep pace with changes in its environment. Google, for example, buys and sells firms to maintain its market leadership over time, and is highly ranked as the most attractive place to work. Apple has an uncanny knack for building new brands and products as the personal technology market evolves. Not surprisingly, both of these firms ranked among the top thirteen among the World’s Most Admired Companies for 2013.