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Why might one argue that the use of labour is the main component of a firm's profit strategy - Coursework Example

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Labour as the Main Component of a Firm’s Profit Strategy
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Human labour is the most important component of achieving competitive advantage in firms in the modern days (Gibbons and Woock 2007). Human capital advantage is the ability to get exceptional human talent into the firm. …
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Why might one argue that the use of labour is the main component of a firms profit strategy
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Download file to see previous pages Human capital advantage is the ability to get exceptional human talent into the firm. The human advantage is achieved through combination of processes such as innovation, learning and cooperation. It is important to develop employees and teams in order to create a firm that is able to learn within and out of industry cycles. The supporters of Resource based view argue that human labour are resources that offer above normal returns and not assets bought and traded. This is because physical assets are usually purchased and are available in the market, therefore, competing firms having the free discretion to acquire the assets and be at par (Bowman 2003). The resources that offer competitive advantage are the ones that are not easy to duplicate. Human resources have specialized skills or talents that are embedded in the routines of a particular firm. These resources are difficult to duplicate or export from one firm to another. Thus, most firms have used human labour as the strategy for improvement in their profits and competitive advantage. Barney and Porter illustrate how it is hard to duplicate human labour strategy by saying that even if one firm was to steal researchers from one company to theirs, they will not reap the maximum benefits from these scientists because the environment and business strategies differ. Labour as the Main Component of a Firm’s Profit Strategy In business organizations, both the undertakings and behaviours those of value to the firms’ routines, social structure, and cultures of the firm, and directing and using these resources in combination with other inputs, are all the activities done by employees in the firm. This means that firms profits comes from the activities of employees’ labour that transforms other inputs into goods and services. This leads the proponents of resource based view to conclude that resources that produce more profits are human resources than inert or physical resources. RBV also state that in order to get maximum output from the human resource, a strategy must be put forward to achieve this. They refer this as the creation of the resource. An example of this is a producer who uses a new invention before it is adopted by other firms, will sell more than his competitors and gets surplus profits. RBV argues that it is the manipulation or use of physical assets by the workers that are a source of profits. The assets as stated earlier, are available and each firm is free to acquire them. However, the main constraint is their price. They are not taken as a resource in resource based view because they are not unique. However, labour that is employed is unique and taken as the most crucial resource. If the prices of these assets necessary for production of commodities were to go down, then individuals or groups would take over scale production without requiring to be employed by the capitalists. An example is that if the prices of car parts were within the reach of the masses, then capitalists would abandon this industry (Bowman, 2003). The reasoning behind this is that the financial power is what enables capitalists to purchase physical assets and employ talented and skilled workers to produce commodities for them at a profit. The assets are not unique but the unique factor that enables them to get profits is the use of human resource or labour. In addition to labour, RBV also categorises inert inputs such as special equipments as resources. However, these resources are just used in some stage of production and moreover they are also produced by human labour. RBV supporters argue that if the workers are used to create resources for the firm, then the current deployment of the resource is greater than the price originally ...Download file to see next pagesRead More
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