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Resources, Competitive Advantage And Internationalisation Strategies Of Global Firms

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Resources Audit of VolkswagenÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­.ÐŽ­ÐŽ­..ÐŽ­ÐŽ­..2

Strategy Analysis-Country SelectionÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­.ÐŽ­ÐŽ­ÐŽ­ÐŽ­ÐŽ­.7




The resource-based perspective regards the organisation as a heterogeneous bundle of resources and organisational capabilities that may enable the firms to deploy its resources more efficiently than rivals. In order to stand out in todayЎЇs fiercely competitive and globalised market, firms must dynamically manage their unique resources and capabilities to achieve competitive advantage. Therefore, the performances and the decision-making processes of firms are primarily driven by their unique resources and capabilities. In the intensely competitive automobile industry, there must be resources and capabilities specific to Volkswagen that permit them to product at lower cost in relation to other business with inferior resources and capabilities in the same industry.

In this essay, I will first examine the various resources of Volkswagen, including both tangible and intangible resources, to identify the core competences of the company. Following, I will identify VolkswagenЎЇs capabilities, as a resource of competitive advantage, that differ from the others to make themselves consistently outperform the industry average, and how sustainable is their competitive position. In the second part of this essay, I will discuss how managers in Volkswagen making decisions of selecting China to expand with their distinctive resources and capabilities.

Resources Audit of Volkswagen

Barney (1991, p101) define resources of organisations ÐŽoinclude all assets, capabilities, organisational processes, firm attributes, information, knowledge, etc. controlled by a firm that enable the firm to conceive of and implement strategies that improve its efficiency and effectivenessÐŽ±. A resource refers to an asset or input to production (tangible and intangible) that an organisation owns, controls, or has access to. An organisationЎЇs resources may be classified under a few categories, for example physical, technical, financial, human and intellectual resources (Johnson et al., 2005).

Volkswagen gains competitive advantage through its superior physical resources. According to VolkswagenЎЇs report, the Group operates 47 production plants in eleven European countries and a further seven countries in the America, Asia and Africa (Volkswagen, 2006). The nature of these plant and machines, such as the age, condition and location of each resource, will determine the usefulness of such resources. However, the value of the physical resources will depreciate over time, either through physical depreciation, obsolescence or changes in the demand for the resources in question.

Another source of competitive advantage of Volkswagen is financial resource. According to figure 1, as of September 30, 2006, the largest proportion of subscribed capital of Volkswagen was held by foreign institutional investors, and German institutions only held approximately 10% of the total shares. International capital markets are important for the funding strategy of Volkswagen as they provide liquidity at favourable conditions.

Figure 1. Proportion of subscribed capital

Furthermore, the technical resources in Volkswagen also play an important role in helping the organisation to achieve competitive advantage. Volkswagen has launched a diversified range of models with high quality standards and customer benefits form the vehicles, including Skoda, Bentley, Bugatti, Audi, SEAT, Lamborghini and commercial cars. The modular strategy implemented by Volkswagen enables it to manufacture diversified products at competitive costs, thereby allowing it to maintain the individuality of the models.

Moreover, employeesЎЇ knowledge and expertise are a key factor contributing to the development of Volkswagen. In the Volkswagen Group, more than 343,000 employees produce over 21,500 vehicles or are involved in vehicle-related services on every working day around the world. And most of them are highly educated, 64.8% of employees held vocational qualification in an area relevant to Volkswagen, while 11.2% were graduates (Volkswagen, 2006). In 2005, Volkswagen secured 1,340 patents, of which 1.024 were in Germany and 316 abroad. The large number of patent applications indicates the highly innovative nature of the employees. In the past 8 years, Volkswagen have progressed form the old classic training approach in the direction of integrated personnel development. This comprises, in addition to specialist training, in particular cross-functional and social skills, including interpersonal, teamwork and communication skills.

Additionally, the innovation projects of Volkswagen make it more competitive than the others in the industry. Volkswagen is taking various approaches to reducing fuel consumption and emission levels as response to the tough emission standards and rising oil prices. Volkswagen researchers are working on a new diesel Combined Combustion System, along with the low-consumption TSI generation of engines (Volkswagen, 2006). Volkswagen also uses high-strength steel to significantly reduce the vehicle weight. Finally, Volkswagen has a good reputation around the world. It has developed drive-assistance systems, which increase vehicle security and reduce accidents.

Among all these resources, innovation seems one of the core competences of Volkswagen. This is because innovation provides Volkswagen with potential access to wide variety of markets and makes a significant contribution to the benefits of the product, such as the driver-assistance systems developed by the Volkswagen researchers. And also,



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