It is important for every business to clearly understand how resources and capabilities affect firm performance. As Grant (2005) defined, resources are the productive assets owned by the firm and capabilities are what the firm can do. In fact, companies that have sustainable competitive advances have been developed and exploited based on their internal resources and capabilities. Furthermore, they have successfully exploited external environment. In this essay, I will explore the topic area of ‘Resources & Capabilities’ with regards to a UK’s fashion group; the prominent designer label, Burberry GRP. In particular, the research will focus on the Strategic Business Unit of Burberry; understanding and explaining how they utilize the resources and competencies to achieve a competitive advantage. In order to do this, this paper will address on theory based from work in the areas of the ‘Resource-Based View’ and ‘Resources and Capabilities’ as well as using theoretical frameworks to give a holistic view of the strategic issues Burberry. After their reform, Burberry recovered rapidly, after the crisis of September, 2008. With 500 stores in over 50 countries, total revenues grew from 27% to £1,501 million which is more than double its nearest rival, Chanel (with total revenues of £ 651, 3). Retails revenues reached £ 962 million and wholesale achieved £ 441 million (Burberry’s a and Chanel financial report, 2012). As a result, Burberry has substantial surplus resources and is therefore able to withstand and compete in the hypercompetitive fashion market sector. Thus, Burberry achieved brand value up to more than £ 2, 5 billion in 2012. Gucci, Prada and Chanel gained approximately of £ 5.8, £ 4.95, and £ 4.2 billion respectively.
The Resource-Based View
In 1990s, the role of resources and capabilities become known as the basic for firms strategy and the primary source of profitability coalesced has become the resource-based view. Resources and capabilities are an important component of strategy to archive the competitive advantage. According to the resource based view (RBV), assets and capabilities create value for the firm that leads to a sustainable competitive advantage (Hall, 1993). Burberry, Chanel and Gucci all compete in the same environment, yet Burberry is superior in performance. A Resource-Based View argues that Burberry is distinguished not by the environment, but by their internal resources. Peteraf (1993) adds to this view by arguing resources have to be heterogeneous and not perfectly mobile in order to transform a short run competitive advantage into sustained competitive advantage. Based on Grant’s model, through VRIN frame work, this research will now find out how Burberry use their resources to initiate their organizational capabilities and competences and ultimately achieve their strategic Capability.
As displayed in Grant’s model showed above, in order to maintain operations, companies must have tangible, intangible, and human resource. “Tangible resources are known to be the easiest way to identify and evaluate” (Grant, 2005), however, this author assert that intangible resources contribute to total asset value much more tangible. Also, Hall (1992) mentions, intangible assets like the “feedstock” of capabilities are essential for a sustainable competitive advantage. They are assets without specific physical forms; such as intellectual property rights, trademarks, copyrights, technical know-how, brand name, reputation and so on.
Prahalad & Hamel (1990) move away from the RBV and coined the term ‘Core Competencies’ to distinguish those capabilities fundamental to a firm's performance and strategy. These are the organizational capabilities that are achieved through the effective deployment of a firm’s resources. Core competencies are distinctive and differentiating competencies that lie at the heart of an organization. This includes not just the...