• What are the possibilities for employing existing assets more profitably? Intangible • For most companies, intangible resources are more valuable than tangible resources • Brand names instill confidence in customers
Like reputation, technology is an intangible asset whose value is not evident from most companies' balance sheets. Intellectual property-patents, copyrights, trade secrets, and trademarks-comprise technological and artistic resources where ownership is defined in law. Over the past 20 years, companies have become more attentive to the value of their intellectual property. For IBM (with the world's biggest patent portfolio) and Qualcomm (with its patents relating to CDMA digital wireless telephony), intellectual property is the most valuable resource that they own.
GLOBAL 5OO COMPANIES AND THEIR MARKET-TO- BOOK RATIOS, OCTOBER 2013
HUMAN RESOURCES Human resources of the firm comprise the expertise and effort offered by employees. Like intangible resources, human resources do not appear on the firm's balance sheet, for the simple reason that the firm does not own its employees; it purchases their services under employment contracts. The reason for including human resources as part of the firm's resources is their stability. Although employees are free to move from one firm to another (most employment contracts require · no more than a month's notice on the part of the employee), in practice most employment contracts are long term. In the United States, the average length of time an employee stays with an employer is five years, in Canada it is nine years, and in Europe and Asia it is longer, ranging from nine years in Britain to in Germany, France, and Japan.
IDENTIFYING THE ORGANIZATION'S CAPABILITIES Resources are not productive on their own. A brain surgeon is close to useless without a radiologist, anesthetist, nurses, surgical instruments, imaging equipment, and a host of other resources. To perform a task, a team of resources must work together. An organizational capability is a "firm's capacity to deploy resources for a desired end result." Just as an individual may be capable of playing the violin, ice skating, and speaking Mandarin, so an organization may possess the capabilities needed to manufacture widgets, distribute them globally, and hedge the resulting foreign exchange exposure. We use the terms "capability" and "competence " interchangeably. Our primary interest is in those capabilities that can provide a basis for competitive advantage. Selznick used distinctive competence to describe those things that an organization does particularly well relative to its competitors. Prahalad and Hamel coined the term "core competencies" to distinguish d1ose capabilities fundamental to a firm's strategy and performance. Core competencies, according to Hamel and Prahalad, are those that: • make a disproportionate contribution to ultimate customer value, or to the efficiency with which that value is delivered; and • provide a basis for entering new markets
1. A functional analysis identifies organizational capabilities in relation to each of the principal functional areas of the firm.
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- Winter '18
- GUANGRUI GUO