The paper "The Importance of Resource Management" is a perfect example of a management literature review. Resource management is crucial to the value addition since using resources is as important as owning them or processing them as Penrose (1959) stated. In addition, the methods and use of resources produce different results to firms having similar resources in the same environmental contingencies, (Zott, 2003). Heterogeneity in the firms’ outcome given similar conditions is dependent on the decision made in bundling, leveraging of resources and structuring. When a firm generates a greater utility for the customers more than competitors do, the firm has a competitive advantage.
Competitive advantage leads to increased wealth, (Hoopes, Madsen, and Walker, 2003). The purchasing and supply chain management is an important factor in the allocation of resources in the modern business world, Makadok (2003). The management decides on whether to produce its raw material or acquire them in the process of resource management and the creation of value to customers and wealth to owners. The decision to produce or purchase and the bargaining power keeps a firm on a competitive edge over its competitors.
This is because the firm is able to cut on costs hence increasing the profit margin. Structuring Resource Portfolio Makadok (2003) argued that an effective portfolio of resources enhances the value creation. The process of structuring i. e. accumulating, acquiring and divesting are influenced by the environmental situation that eventually establishes the contribution to a firm. Therefore, managers adjust the structuring processes with regard to environmental unpredictability. Acquiring Barney (1986) described the acquisition as purchasing resources from factor factors. A firm can acquire factor resources by forming mergers and acquisition to take advantage of the synergy of factors of production.
However, uncertainty creates ambiguity with the regard of resources required to develop a competitive advantage. Therefore, companies require a repertoire of resources specifically the intangible resources since they are more flexible. Slack resources are required to change the current capabilities or in the creation of new ones to respond to the uncertainty of the volatile environment. However, creating a repertoire of a fully developed and useful slack resource such as specific knowledge sets in most cases is costly and highly risky, (Hoopes et al.
2003). Thus under uncertainty, real options help the firm to absorb shocks of environmental changes with regard to opportunities and threats that would face a firm. Accumulating This refers to an internal accumulation of resources by a firm. Accumulating is crucial to a firm since strategic factor markets do not fully provide all required resources to a firm. Internal accumulation of resources enables a firm in isolation mechanisms, (Thomke and Kuemmerle, 2002). Isolation mechanism reduces the chances of imitation thus increasing the competitive advantage based on the resources at hand.
Under uncertainty conditions, companies are most likely to fail to respond to competitors’ action or unexpected opportunities. For example, when a firm does not have an adequate human resource with managerial skills, it will be difficult to exploit an opportunity when it appears such as demand on the introduction of a new product in the market. This leads to the competitors exploiting the opportunity. Therefore, accumulating skills on employees enables a firm to respond to a sudden demand for their skills in time. In less munificent environments, internal development of available resources is crucial since resources cannot be outsourced in these environments, Makadok (2003).
Therefore, a firm develops its internal resources for future needs and opportunities to keep itself at a competitive edge over the competitors.
Barney, J. B. 1986. Strategic factor markets: Expectations, luck, and business strategy. Management Science, 32: 1231–1241.
Hitt, M. A., Dacin, M. T., Levitas, E., Arregle, J., & Borza, A. 2000. Partner selection in emerging and developed market contexts: Resource-based and organizational learning perspectives. Academy of Management Journal, 43: 449 – 467.
Hitt, M., Harrison, J., Ireland, R. D., & Best, A. 1998. Attributes of successful and unsuccessful acquisitions of U.S. firms. British Journal of Management, 9: 91–114.
Hoopes, D. G., Madsen, T. L., & Walker, G. 2003. Guest editors’ introduction to the special issue: Why is there a resource-based view? Toward a theory of competitive heterogeneity. Strategic Management Journal, 24(Special Issue): 889 –902. Hunter, L., Beaumont, P., & M
Makadok, R. 2003. Doing the right thing and knowing the right thing to do: Why the whole is greater than the sum of the parts. Strategic Management Journal, 24: 1043– 1056.
Penrose, E. T. 1959. The theory of the growth of the firm. New York: Wiley.
Sirmon, D. G., & Hitt, M. A. 2003. Managing resources: Linking unique resources, management and wealth creation in family firms. Entrepreneurship Theory and Practice, 27: 339 –358.
Thomke, S., & Kuemmerle, W. 2002. Assets accumulation, interdependence, and technological change: Evidence from pharmaceutical drug discovery. Strategic Management Journal, 23: 619 – 635
Zott, C. 2003. Dynamic capabilities and the emergence of intraindustry differential firm performance: Insights from a simulation study. Strategic Management Journal, 24: 97–125.