Internal Resources and Capabilities - Strategy
Written by Jason Gordon
Updated at February 9th, 2021
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What are Internal Resources and Capabilities?
Firms create value by exploiting internal resources and capabilities to meet market demands.
What constitutes a resource can be varied and diverse.
Tangible resources include:
- Physical
- Financial
- Organizational
- Technological
Intangible resources include:
- Human
- Reputation
- Innovation
Resources along, generally, do not result in competitive advantage.
Competitive advantage results from how resources are employed.
The value of the resources is measured by the extent to which it contributes to the development of a competitive advantage.
Capabilities
A company’s capabilities concerns it ability to deploy resources.
They generally materialize through the development and exchange of information, knowledge, and processes.
While resources are acquired, capabilities are developed.
The use and execution of capabilities is accounted for within Porter’s Value Chain.
The value chain classified capabilities as primary and secondary.
Primary activities add direct value to the firm.