Resources, Competitive Advantage and Internationalisation Strategies of Global Firms

Topics: Resource, Strategic management, Management Pages: 8 (2171 words) Published: April 7, 2007
Table of Contents
Introduction¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­1 Resources Audit of Volkswagen¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­.¡­¡­..¡­¡­..2 Strategy Analysis-Country Selection¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­.¡­¡­¡­¡­¡­.7 Conclusion¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­.¡­¡­¡­.¡­..10 References¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­11

The resource-based perspective regards the organisation as a heterogeneous bundle of resources and organisational capabilities that may enable the firms to deploy its resources more efficiently than rivals. In order to stand out in today¡¯s fiercely competitive and globalised market, firms must dynamically manage their unique resources and capabilities to achieve competitive advantage. Therefore, the performances and the decision-making processes of firms are primarily driven by their unique resources and capabilities. In the intensely competitive automobile industry, there must be resources and capabilities specific to Volkswagen that permit them to product at lower cost in relation to other business with inferior resources and capabilities in the same industry.

In this essay, I will first examine the various resources of Volkswagen, including both tangible and intangible resources, to identify the core competences of the company. Following, I will identify Volkswagen¡¯s capabilities, as a resource of competitive advantage, that differ from the others to make themselves consistently outperform the industry average, and how sustainable is their competitive position. In the second part of this essay, I will discuss how managers in Volkswagen making decisions of selecting China to expand with their distinctive resources and capabilities.

Resources Audit of Volkswagen
Barney (1991, p101) define resources of organisations ¡°include all assets, capabilities, organisational processes, firm attributes, information, knowledge, etc. controlled by a firm that enable the firm to conceive of and implement strategies that improve its efficiency and effectiveness¡±. A resource refers to an asset or input to production (tangible and intangible) that an organisation owns, controls, or has access to. An organisation¡¯s resources may be classified under a few categories, for example physical, technical, financial, human and intellectual resources (Johnson et al., 2005).

Volkswagen gains competitive advantage through its superior physical resources. According to Volkswagen¡¯s report, the Group operates 47 production plants in eleven European countries and a further seven countries in the America, Asia and Africa (Volkswagen, 2006). The nature of these plant and machines, such as the age, condition and location of each resource, will determine the usefulness of such resources. However, the value of the physical resources will depreciate over time, either through physical depreciation, obsolescence or changes in the demand for the resources in question.

Another source of competitive advantage of Volkswagen is financial resource. According to figure 1, as of September 30, 2006, the largest proportion of subscribed capital of Volkswagen was held by foreign institutional investors, and German institutions only held approximately 10% of the total shares. International capital markets are important for the funding strategy of Volkswagen as they provide liquidity at favourable conditions.

Figure 1. Proportion of subscribed capital

Furthermore, the technical resources in Volkswagen also play an important role in helping the organisation to achieve competitive advantage. Volkswagen has launched a diversified range of models with high quality standards and customer benefits form the vehicles, including Skoda, Bentley, Bugatti, Audi, SEAT, Lamborghini and commercial cars. The modular strategy implemented by Volkswagen enables it to manufacture diversified products at competitive costs, thereby allowing it to maintain the...

References: Barney, J.B. (1991), ¡°Firm Resources and Sustained Competitive Advantage¡±, Journal of Management, vol. 17, No.1, pp.99-120.
Collis, D.J., (1991), ¡°A Resource-Based Analysis of Global Competition: The Case of the Bearings Industry¡±, Strategic Management Journal, vol.12, pp. 49-68.
Grant, R., (1999), ¡°The Resource-Based Theory of Competitive Advantage: Implications for Strategy Formation¡±, in Segal-Horn, S. (1999), The Strategy Reader, Blackwell.
Johnson, G., Schole, K. and Whittington, R. (2005), Exploring Corporate Strategy: Text and Cases, 7th edition, Pearson Education, London, pp. 115-233.
Peteraf, M., (1993), ¡°The Cornerstones of Competitive Advantage: A Resource-Based View¡±, Strategic Management Journal, vol. 14, pp. 179-91.
Porter, M.E., (1998), The Competitive Advantage of Nations.
Tallman, S.B., (1991), ¡°Strategic Management Model and Resource-Based Strategies Among MNEs in a Host Market¡±, Strategic Management Journal, vol. 12, pp. 68-82.
Volkswagen Group (2006), Annual Reports, downloaded from as at 27th November, 2006.
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