Critical Analysis: How the resource-based strategic approach can assist organizations to meet the needs and wants of their customers?
Executive Summary
Different organisation is trying to use various approaches and strategies to enable them to meet organisational objective and to ensure that they will be able to meet the needs and wants of their target market. One of the strategies that organisation used is the resource based strategic approach. It can be said that the resource-based strategic approach deals with two assumptions. First, resources are heterogeneously distributed on different firms and secondly, these resources cannot be transferred nor used by other firms without particular cost. According to Barney (1991), resources which continuously enhance an industry’s market effectiveness are called valuable resources. On one hand, resources are called rare if it is note widely dispersed but can generate competitive advantage, it is inimitable if such resources are simultaneously expensive to imitate by others and nonsubstitutable if it is costly to be substituted and provide sustainable competitive advantage. It has been noted that the value and rarity of the resources are very important before its nonsubstitutability and inimitability (Priem & Butler, 2001). Primarily, the goal of this paper is to assess how the resource-based strategic approach can assist organizations to meet the needs and wants of their customers. Specifically, this analysis will use the resource based view.
Overview of the Company
Toyota Motor Corporation is a famous Japanese multinational corporation, and is considered the world’s second largest automaker of automobiles, trucks, buses, robots, and providing financial services (“Toyota”, 2008). Its founder is Kiichiro Toyoda, born in 1894, and the son of Sakichi Toyoda, who became popular as the inventor of the automatic loom. Kiichiro inherited the spirit of research and creation from his father, and devoted his entire life to the manufacture of cars. After many years of hard work, Kiichiro finally succeeded in his completion of the A1 prototype vehicle in 1935, which marked the beginning of the history of the Toyota Motor Corporation (“History of Toyota”, 2008).
Resource Based Strategy by Toyota
Like any other firm, Toyota has been able to use resource-based strategic approach to ensure competitive advantage. Accordingly, the essence of this approach is that competitive advantage is generated when the company capabilities and resources which are owned exclusively by the firm are being practiced and applied to develop distinctive competencies (Porter, 1998)
Toyota tries to preserve its competitive advantage by utilising their resources to ensure that they will be able to meet the needs and wants of their customers Indeed, it is a hard task for the company to preserve its locally conceptualized model while maintaining linkages with the global economy (Liker, 2003, 2004). However, because Toyota’s resources are established as key aspects needed by a company, this has become easier in dealing with the issue of globalization. The latest developments in the company proved that it is stronger than ever, emerging victorious from otherwise discouraging situations. Toyota has been able to initiate their unique capabilities and resource in through their Toyota Production System (Cho, 2004). It is noted that the company is establishing both tangible (referred to new learning facilities) and intangible (content of the course) structures relevant to the development of each team member which ensures a secure and stable flow of qualified and competent human resources to be part of the Toyota’s global and international operations which leads in enabling them to provide quality products with their respective clients.
In order for the said system to work at Toyota’s advantage, the company follows their unique capabilities which are the so-called “14 Toyota Way Principles” (See Figure 1). This operating philosophy serves as a guide for its management. The first principle of Toyota based on their management decisions on a long-term philosophy, even at the expense of their short-term financial goals. Second, Toyota creates a continuous flow of processes to bring out any possible problems. Third, to be able to avoid overproduction problems, the management of Toyota use the pull systems. Fourth, level outing of workload is also important. As they say, work like a tortoise, not like the hare.
Figure 1
Through this, it can be said that resource based view give emphasis on the internal capabilities of the company in formulating approach in achieving sustainable competitive advantage in the marketplace. The most admired production system of Toyota also ensures that they are able to manage their core competencies to meet the needs of the clients for innovative and new vehicles.
This is the very core reason why Toyota, despite the competitors’ effort of imitation, continues to gain market share and huge profits continues on building new plants, retains a harmonious relation with its supplier and enthusiastic workforce, with its labour costs retained at a lower amount compared to others. They are also described as “the fastest runner in the race” in auto industry. Production efficiency helps them reach that point. Their record (most productive) of 27.9 hours per-vehicle time surpasses the record of their competitors like Ford and Chrysler. The tools of the TPS seem to work smoothly for them. These tools are lean, agile, TQM, TPM, re-engineering, just in time, cellular/continuous workflow, etc. TPS should not only be a cost-based strategy, it should also be a value-based one. The full potential of the TPS is as an operational solution ready to remake entire organizations – both at the process and management levels.
Hence, through the resource based strategy of Toyota, the company has been able to makes sure that their clients and customers in all aspects will be satisfied for the quality cars and products they provide. Specifically, the company has focused their marketing approach on the demands and needs of the buyer for a quality and innovative cars and automotives source that satisfies the and heavily positioned their products in this segment. The competitive aim of each industry is to provide what the buyers or consumers are looking and satisfy these needs to gain competitive advantage and outgrow rivals within the marketplace (Thompson & Strickland, 2003).
Aside from its manufacturing system, Toyota’s resource based strategy is also attributed with their marketing strategy (Meek and Meek 2003). Toyota has been able to use their established brand which is inimitable. Accordingly, branding involves the building, maintenance, enhancement, and exploitation of brand equity, which has been defined as the “value a brand name adds to a product” (Broniarczyk & Alba, 1994, p. 214). The fundamental concept is that a recognizable brand will more easily attract and retain customers than an unrecognizable one. A strong brand of Toyota is said to enhance the value of a product beyond its functional value (Cobb-Walgren, Ruble, & Donthu, 1995,), and serve as a powerful heuristic cue for evaluation and choice decisions (Park, Jun, & Shocker, 1996. That value accrues both to existing products or services and to brand extensions, whereby a strong brand is leveraged to introduce new products. Herein, Toyota has been able to develop a strong brand value to ensure that they will be able to gain customer and satisfy their specific needs.
According to Kapferer (1992), the value of brands is something invisible, intangible and unwritten and, yet, brands are the real capital of business. Aaker (1991) elaborated on the corporate value of brands by arguing that for many businesses the brand name and what it represents is its most important asset — the basis of competitive advantage and of future earnings streams. He justifies this by discussing how the selling price of many firms is much more than ear would justify because of the value of the brand assets.
In addition, another strategy used by the company is the enhancement of their brand image by adding up some other brands likes Lexus. According to Houk (2001), branding is more than advertising; it is a conglomeration of messages, images, and experiences that consumers associate with a product or service. The sum of those items allows the consumer to associate product expectations with a brand image.
According to Kim and Weaver (2000), the administration and management of a particular business organization entails full utilization of the resources of the company in order to lead, direct, and control operations to meet the set objectives. Based on the given case study, it can be said that Toyota has been able to use strategic approach to sustain their competitive advantage. One of the capabilities Toyota is how the leaders of the company do their business. Guided by their vision and mission, the leader and management of the industry clearly illustrate integrity in all their actions. The management has also strong commitment in promoting the company values and the value of diversity among the employees and staffs. In addition, the management of the company has been able to understand the priorities of the business and make every decision in line with the strategic direction by giving consideration to the effect on all aspects of the business and on other stakeholders.
Another sustainable capability of the company is its continuous focus on the importance of both internal and external customers to ensure that these customers remain loyal to them. The company also makes it sure that they motivate, inspire, coach, guide and support their staffs to realise the mission of the Toyota. Furthermore, the company’s ability to identify and recognise contributors is another factor that sustains the company’s competitive advantages. The ability of the management to diversify and differentiate their business strategy to dominate the global market can also be considered as the major capabilities of the Toyota.
Conclusion
It can be said that resource based strategy is considered as an important aspect of the company to ensure that the company sustain their competitive advantage. Drawing on the identified resource based strategic approach present to Toyota; we are in a position to consolidate our findings with a view to arrive at recommendations which would take the company into the next decade. The manufacturing system or production system of Toyota has been considered to implement their resource based strategic approach by enhancing the capabilities of their human resources. Car industry is Toyota’s stronghold where it continues to yield strong sales revenue by leveraging off its excellent shop locations, strong brand name and excellent reputation among customers. Since, there are many competing automobile companies in, firms like Toyota are said to implement strategy in which the employees and management are the only ones who have enough and skilful knowledge. The company is focused on meeting the needs of the customers since its establishment; this objective will then be integrated into its international business activities.
In summary, the resource based strategic approaches of Toyota cited in this discussion had been selected based on the company’s strategies, business analyses and objectives. Generally, these strategic moves can be of benefit to Toyota not only in gaining profit and market growth but also in providing the needs and demands of the customers. Most importantly, these possible strategic moves support Toyota’s view to integrate customer satisfaction and profitability in its future strategies.
Recommendation
It can be said that automobile industry has a strong competition; hence, it is recommended that companies like Toyota should be able to gain competitive advantage and position in the global market. In doing so, the company must be able to adhere to the needs of their customers for them to remain loyal to avail the services and products offered by the company. It is recommended that Toyota must be able to apply prioritized quality in customer services. The assurance of quality service and products may yield to customer satisfaction, loyalty, employee satisfaction and more importantly profit growth. In order to cope with the challenges of the market environment today and for the next ten years businesses like coffee industries must be able to implement different strategies which will enhance their competitive advantage and customer services.
Reference
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Cho, F 2004, ‘Toyota Motor Corporation: Information meeting in New York’, Toyota, Available at [www.irwebcasting.com]. Accessed on July 11, 2008.
Porter, M 1998, Competitive Strategy: Techniques for Analysing Industries and Competitors. Free Press.
Priem, RL and Butler, JE 2001. Is the resource-based view a useful perspective for strategic management research? Academy of Management, review, 26(1)
Thompson, AA Strickland AJ & Gamble J 2005, “Toyota in 2004: Driving for Global Dominance”. Crafting and Executing Strategy (Fourteenth Edition), McGraw-Hill, New York, pp. C2-C32.
Toyota (2008), Toyota in the World Databook. Available at [www.toyota.co.jp/en/pdf/toyota_world/2005/chap5.pdf]. Accessed on July 11,2008.
Williams, J.R. (1992). How Sustainable Is Your Competitive Advantage? California Management Review, Spring, pp. 29-51.
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