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Category: Business and Industry

Date Submitted: 09/02/2011 08:54 PM

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Resources and capabilities are the assets of a firm. Profits are obtained with the use of resources and capabilities in terms of their ability to establish competitive advantage. But as long as profits are generated, other rivals can imitate the advantage, so the sustainability is concerned.

Resources are defined in tangible and intangible as follows:

1. Tangible resources are physical, such as capital equipment (plants, office premise, manufacturing machines), raw materials, etc. They constrain the firm’s set of production possibilities and impact its cost position. Key characteristics include the size, the location, technical sophistication and flexibility of plant and equipment, the location and alternative uses for land and buildings, and the reserves of raw materials. Besides, a firm owns financial resources, such as cash, debts and credits. It indicates the firm’s borrowing capacity and its internal funds generation. Tangible resources are found in the financial statements such as the balance sheet. They are shown in the market value. A preliminary analysis can be made by rations like liquidity ratio and EPS (earning per share). Although the ratios and the financial data are useful to have a first review of a firm’s ability, it does not fully show the real strength and weakness.

2. Intangible resources are hidden inside the organization. Such intangible resources are technology, skills, intellectual property, reputation, and the most important one – human resources. Intellectual property is protected by patent and copyrights. Research facilities have rooms for innovation. Reputation among customers and suppliers is established through the brands, quality and reliability. Human resources are the most important one because employees own the skills and experiences which determine the productivity of a firm. Employees use their skills and experiences to contribute to the firm, so the firm is capable to do business. Moreover, the commitment and...