Xinyuan Fashion Dress Manufacturers Resource-Based Analysis - Example

Xinyuan Fashion Dress Manufacturer’s Resource Based Analysis Author Course Tutor Date Table of Contents 1.0 Overview of the company 3 2.0 Introduction 3 3.0 Organization’s Capabilities 3 3.1 Importance of capabilities to the company 4 3.1.1 Capabilities as a source of Direction 4 3.1.2 Capabilities as the basis for the Company profitability 5 3.2 The company’s capabilities and competitive advantage 5 4.0 Resources and capabilities Analysis 6 6 4.1 Company Resources 6 4.1.1 Human Capital 6 4.1.2 Managerial skills 7 4.1.3 Perceived Company Reputation 7 4.2 Company's Capabilities 8 4.2.1 The Company's culture 8 4.2.2 Internal Auditing 8 4.2.3 Company Communication 8 4.3 Dynamic Capabilities 9 5.0 Strategic Capabilities 9 5.1 Benchmarking 10 5.2 Balanced Scorecard 10 5.3 Value Chains 11 6.0 Conclusion 11 References 12 1.0 Overview of the company Xinyuan Fashion Dress Manufacturer is a fashion dress making company that has built international reputation. It is a professional company that involves in the export and production of garments. The Company has been in the operation for over seven years and has qualified professional sales, quality control and follow-up team. The Company’s annual turnover is USD 5,000,000, and its business line is knit and woven garments. Other products in this line include skirts and dresses, blouses and shirts, jackets and coats, shorts and tops. In order to offer better services to its customers, in 2011 the company expanded its scale of operations to 1,200 square metres. With the capacity of 150 machines, the company can produce 800,000 garments in a year. The company also offers ODM and OEM services. Due to fair price, high quality products and services, the company attracts customers from America, Australia, Europe, HK, and Thailand. The company intends to cooperate with business partners across the world. 2.0 Introduction Strategic management mainly focuses on how organizations can generate and have sustainable competitive advantages. The concept of Resource Based Analysis argues that competitive advantage is attained when a company has resources that are rare, valuable, imperfectly substitutable and imperfectly imitable by the competitors. The Resource Based Analysis of a firm is based on an assumption that the heterogeneity of resources across organizations is sustainable over time. According to the theory, organizations are able to make super-profits in equilibrium, and thus it is a static view (Ambrosini and Bowman, 2009). This paper will identify and assess the Resource Base Analysis for Xinyuan Fashion Dress Manufacturer and how the company is able to achieve competitive advantage in the textile industry in the United States. 3.0 Organization’s Capabilities According to Tuan and Takahashi (2010) the basic inputs in an organization are internal resources like physical equipment, financial capital, human resources, reputation among others. The production of these resources is dependent on other factors. The company is able to create competitive advantage by bringing its individuals resources together in a way that enhances the company’s capabilities. Therefore, it is through capabilities that the company is able to create competitive advantage. Xinyuan Fashion Dress Manufacturer is able to improve its competitiveness in the textile industry through its capabilities for quality, delivery and cost reduction. Capabilities occur in three different types; specific, organizational and processes capabilities. They can be characterized as employees’ skills, or intangible resources like reputation which are presumed to be specific. These are some of the capabilities for this company. The management, through the company’s processes integrates and reconfigures the available resources to produce new resources that help the company achieve competitive advantage (Ambrosini and Bowman, 2009). 3.1 Importance of capabilities to the company According to Grant (1991) the firm’s resources and capabilities are used as a foundation of its long-term strategy. However, this is argued based on two perspectives. The first perspective is that organization’s internal capabilities offer direction to the strategies the organization intends to develop, and the second perspective is that capabilities are the major source of profit for the company. 3.1.1 Capabilities as a source of Direction The starting point for the company in formulation its strategy is a statement that explains the identity and purpose of the company in business. This is clearly represented in the company’s mission statement. However, customers’ tastes and preferences are not stable; their identity keeps on changing and also the technology is volatile, thus focus on external environment do not provide a good foundation for developing long-term goals (Carmeli and Tishler, 2004). Basing on this argument, company’s individual capabilities offer a stable basis upon which it can define its identity in the market. Defining a business on the basis of what it can offer provides a good platform for strategy formulation than defining it on the basis of the needs it seeks to satisfy. Therefore Xinyuan Fashion Dress Manufacturer companies needs to define its market broadly but not narrowly in order to benefit from their internal capabilities. However, having a broad market offers little value if at all the company cannot develop its capabilities to serve its customers on a wide front. The strategies for the company are based on upon creating and exploiting its internal capabilities which enables it to adjust to and exploit the external changes (Barney, Ketchen and Wright, 2011). 3.1.2 Capabilities as the basis for the Company profitability Xinyuan Fashion Dress Manufacturer’s ability to earn more profit depends on the attractiveness of the industry and having competitive advantage over its competitors. The ability of the company to build a cost advantage is possible if the company has efficient production plant, high process technology, sources of raw materials that are cheap and use of low-wage labour. Also, the company has a differentiation advantage depends on product reputation, increased sales and quality services (Lockett, Thompson and Morgenstern, 2009). 3.2 The company’s capabilities and competitive advantage Competitive advantage is a business strategy that helps to company to reduce its costs of production, explore opportunities in the market and to reduce threats from the competitors. The company has a competitive advantage through its cost-leadership strategies, innovation and quality products. The company is able achieve the cost strategy that makes it have competitive advantage over its competitors due to: insisting on cost reduction through the process of innovation, investing in modern machinery, efficient business operation system, improving employees’ operations and the productivity (Granados, 2004). The company also performs better than its competitors in textile industry through the quality strategy. In this strategy, the company focuses much on the producing quality garments, satisfying customers’ needs, strict quality control measures and by meeting product requirements requested by its customers. Through innovation the company ensures that it introduces new product designs to the market before the competitors, emphasizes innovation in the production process and ensures that its marketing team actively involves in novel marketing. All the single capabilities in the company are integrated into a single strategy that aims at attaining competitive advantage in the industry (Helfat and Peteraf, 2003). 4.0 Resources and capabilities Analysis According to Carmeli and Tishler (2004) many researchers analyze the performance of organizations based more on their resources and not on their market activities. This is because individual organizational resources and capabilities lead to competitive advantage which places the company above-normal performance. Resources are factors owned and controlled by a company internally. On the other hand, capabilities are the abilities by a company or firm to position its resources, normally through integration, by use of company process to achieve the desired objectives. Resources are based on input while capabilities are based on functions or process. The resources of the company include human capital, managerial skills and perceived company reputation while its capabilities include company culture, internal auditing and communication. 4.1 Company Resources 4.1.1 Human Capital The efficiency and effectiveness of human capital for the company provides an avenue for attaining competitive advantage. The RBV holds that employees' skills and competences are a strategic resource to the company (Carmeli and Tishler, 2004). Xinyuan Fashion Dress Manufacturer has built its human capital with skills and competences that are unique and inimitable by its competitors. The work force helps the company to produce unique and quality garments that compete favourable in the market. Most of employees the company recruit are highly educated, have high job experience and are competent enough to tackle issues that arise in the company. Its work force is highly motivated, responsible, trustworthy and confident with their own abilities and feelings for the company. The company has also a very competent marketing team that help in the promotion and advertisement of the company's products, which leads to increase the sales. 4.1.2 Managerial skills Top management in the company includes the CEO and the senior managers. The integrated skills of the whole top management affect the performance and competitive advantage of an organization. The company has management that understands the economic performance and the potential of the company, and thus the company always manufactures products that satisfy consumer needs. With the support from the CEO, the senior managers have been able to move from administrative kind of management to company leadership, and are acquitted with managerial skills that help drive the company towards the competitive edge. The management also works as a team, and have complementary skills which makes is possible to satisfy various conditions that help the company achieve and sustain its competitive advantage (Tidd and Bessant, 2011). 4.1.3 Perceived Company Reputation The company has created good reputation among its customers, and this represents the overall assessment of the company's current position, assets and future performance. Most competitors are not able to cope up with the esteem and prestige the company has created through a favorable reputation. As a result of having a favorable reputation, constituents are attracted to the company and are often willing and ready to pay a premium for the engagement (Granados, 2004). The company enjoys the following competitive advantage due to its recommendable reputation: The company is able to charge premium prices on its garments It attracts good investors and applicants The company is able to access capital markets The employees have developed strong morale to work There is improvement in economic and non-economic operations Delayed entry and mobility to the industry by competitors 4.2 Company's Capabilities 4.2.1 The Company's culture Organizational culture is the beliefs, values and principles that guide the management system, practices and behaviours in the organization (Helfat et al, 2009). The management of Xinyuan Fashion Dress Manufacturer is guided by moral values and practices which are interacted to create competitive advantage. The company has developed a culture of corporation and this has helped it to maintain high performance standards. The culture of the company is characterized by the following: All members of the company are involved in the operations of the company All employees share the same values, beliefs and symbols The company has the potential to acclimatize to the external environment through re-institutionalizing its behaviours and processes All employees are guided by the company's mission It is because of such culture that the company has been able to attain high performance targets, and match the market needs. 4.2.2 Internal Auditing This is a process the management uses to examine and evaluate how the company functions. The company continues to compare its actual performance with expected performance using relevant indexes which helps the company to realize greater achievements. Internal auditing has helped the company to improve on its efficiency and effectiveness by teaching employees to perform their duties well since it points out their weaknesses (Sussan and Johnson, 2003). It also motivates employees and prevents them from engaging in actions that may be dangerous to the company. 4.2.3 Company Communication Organizational communication is the system which management uses to explain and clarify job requirements and policies of the company, and gives feedback to all the employees (Acedo, Barroso and Galan, 2006). Xinyuan Fashion Dress Manufacturer has an effective communication system that allows dialogue between management and other employees, which helps to promote understanding, awareness and appreciation for the company's strategic goals. Organizational communication system is effective and accepted by the stakeholders if it is appealing and delivers coherent. The company uses both upward-downward and downward-upward communication system, where employees are allowed to share their knowledge and ideas with the top management. As a result, employees develop a feeling of belonging, and they are highly satisfied, productive and committed to their work, which leads to high performance and eventually competitive advantage. 4.3 Dynamic Capabilities These capabilities involve change and adaptation since they assemble and integrate other resources and capabilities (Helfat and Peteraf, 2009). Capability branching analysis applies to both operational and dynamic capabilities with similar magnitudes. Capability branching and transformation reflect similar capability development process both in the founding, development and maturity levels in the capability lifecycle. A dynamic capability may facilitate capability branching, and this can be illustrated through acquisition. One form of dynamic capability like redeployment capability may operate upon another form of dynamic capability like Research and Development capability. However, individual dynamic capability cannot take action upon itself to change itself. Also, in the capability lifecycle, capabilities can easily develop and branch along without the dynamic capabilities acting. The company experiences the dynamic capabilities which require the company to adapt to changes that occur both in the internal and external environment. Ability to adapt to changes helps the company to survive in the industry. 5.0 Strategic Capabilities Strategic capability is the ability of an organization to change its way of operation so as to create a favourable business environments. Capabilities are termed as strategic if the lead to change or have the capacity to result to change (Di Benedetto, DeSarbo and Song, 2008). In this case, the change should be positive in order to create a competitive advantage for the company. The company’s strategic capabilities are analysed in terms of its strategic resources, capacity, quality, competence and how mobile these factors are. In order to evaluate the company’s strategic capabilities, focuses is put on tools like Benchmarking, Balanced Scorecard, Value Chains and Ratio Analysis. 5.1 Benchmarking According to Vorhies and Morgan (2005) benchmarking is a framework that involves inter-firm comparison and is established through gathering data from the external environment. The company compares its performance to those of its competitors which helps it to improve in areas where it performs poorly. The company has also been able to increase its efficiency level in the production of garments and reduced costs of production after understanding how the other industry leaders’ processes operate. With the availability of modern technology and professional manpower, the company hopes to improve its performance further. The company compared its processing unit to that of its competitors, and basing on the comparison, it realised that it has a more efficient and effective processing unit than most of the competitors. This is why it produces better garments that attract many customers from within and international markets. Strategic benchmarking helps the company to set strategic goals. The company intends to increase its workforce and expand its capacity in order to continue manufacturing quality products that can compete favourably on the international scene. 5.2 Balanced Scorecard As mentioned earlier, the company has got qualified management team which assist in the formulation of strategic goals. The company ensures that management gets information that helps them to improve on their level of performance. The performance of management in the company is measured using different perspectives, that is internal perspective, customer perspective, financial perspective and through innovation and learning (Banker, Chang and Pizzini, 2004). Through the internal perspective, the company focuses on improving the skills of managers so that they fit the processes and that the can make decisions that help the company grow. Customer perspective helps the company to maintain quality products, and use of after sale services to attract and retain its customers. On the other hand, financial perspective guides the company in using financial measures to improve its performance. Managers are encouraged to consider improving all the sectors in a balanced way to help the company achieve high performance in all the areas. Also, through innovation and learning, the company has been able to retain competitive in the textile industry by acquiring new skills and developing new designs that attracts many people. 5.3 Value Chains Value chain is the internal activities the company undertakes in the designing, production, marketing, delivering and supporting the products (Krajewski, Ritzman and Malhotra, 2007). The value chain of the company reflects its strategies and how to implement them. The company activities are supported by various employee functions which include procurement, technology development, human resource management and company infrastructure (Möller and Törrönen, 2003). The company is strategically different from its competitors base on it manages its internal activities. For instance, it can use any supplier of its choice to distribute its products. The company has got a strong R&D team that helps in finding new technologies to facilitate production of new products. With the help of enthusiastic marketing team, the company will be able to expand target market. 6.0 Conclusion Conclusively, Beauty Fashion dress manufacturer has attained competitive advantage in the textile industry because of its resources and capabilities. Capabilities offer direction to the company, and also act as a basis for the company’s profitability. Therefore, there exists a positive relationship between company capabilities and its competitive advantage. The paper indicates that Company resources include human capital, managerial skills and perceived company reputation while capabilities comprise of the company’s culture, its internal auditing and the communication process. The paper further identified dynamic capabilities as those capabilities which rely on change and they adapt to those changes. Lastly, strategic capability is the capacity of the company to adjust its way of operations in order to establish good business environment. Beauty Fashion dress manufacturer is strategically potential, and if it maintains its business trend, its future remains bright. References Acedo, F. J., Barroso, C., & Galan, J. L 2006 “The resource‐based theory: dissemination and main trends”, Strategic Management Journal, 27(7), pp.621-636. 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A 2005 “Benchmarking marketing capabilities for sustainable competitive advantage”, Journal of Marketing, pp.80-94. Read More