Introduction
Family businesses have a novel arrangement of challenges concerning strategic management. These businesses frequently need to adjust family dynamics and objectives, which can prompt complex decision-making processes. This report will examine the strategic management theory of the Resource-Based View (RBV) of family businesses. Two family businesses, ABC Corp and XYZ Inc, will be compared and contrasted utilizing this theory. Future scenarios and recommendations will be given based on the analysis.
To more readily comprehend how ABC Corp and XYZ Inc should work strategically, it means a lot to check out the RBV structure. RBV is a management model that characterizes a business procedure as relying upon the recognizable proof and collection of a company’s internal resources. According to this theory, organizations must distinguish their internal capabilities and assets to foster a competitive advantage (Rozi, 2020, p.7). RBV frames that organizations should focus resources on specific tasks and activities that will present to them the highest value and return.
Review of academic literature
The Resource-Based View (RBV) theory asserts that a firm’s resources and capabilities are the primary determinants of its sustained competitive advantage. This theory focuses on the internal resources and capabilities of the firm rather than external factors. According to RBV, a firm must have unique resources that are difficult to imitate or substitute to gain a competitive advantage. Firms should assess their resources for these qualities to increase competitive advantage.
The RBV Theory was first proposed in the academic journal Strategic Management by Jay B. Barney in 1991. It was the aftereffect of several years of research by Barney, which he directed while concentrating on financial performance and competitive advantage in the US manufacturing industry (Widjaja, 2021, p.72). The RBV Theory argues that firms must have and exploit resources that competitors cannot easily imitate. Barney claims that the key to achieving predominant performance is based on a firm’s ownership of resources that are valuable, rare, costly-to-imitate, and non-substitutable.
In his theory, Barney characterized resources as tangible or intangible inputs like capital, technology, human resources, patents, and machines. However, he also clarified that more is needed for firms to have such resources. For resources to be genuinely valuable, Barney argued that firms must be able to deploy their resources actually and effectively. Moreover, Barney postulated that resources must be managed over the long term since competitors can easily imitate or duplicate temporary advantages.
Barney focused on more than just the actual resources creating long-term strategic competitiveness but rather on the combination of resources and how resources are managed. Thus, he argued that firms must have, use, and deploy resources that produce desirable results and are also difficult for competitors to replicate. To this end, firms must create an integrated system wherein resources are used to increase key activities’ effectiveness while deterring competitors. The RBV Theory assists managers with recognizing and exploiting resources to gain a sustained competitive advantage. By understanding which resources a firm can exploit and how it can differentiate itself from its competitors, managers can take the right moves toward gaining a competitive edge and success in the market.
The RBV Theory has become one of the main hypothetical structures for understanding and creating competitive advantage in business. In the first place, it has assisted firms with concentrating on their internal resources like processes, skills and knowledge, capabilities, and core competencies — all of which, when taken advantage of appropriately, can yield strategic advantages. The RBV Theory likewise advances a long-term perspective, as resources and capabilities are commonly moderately stable in contrast with external factors like markets and innovation (Maharani, 2021,p.707). At last, the RBV Theory gives a structure to understand how firms can make sustainable competitive advantage by zeroing in on their unique resources instead of just attempting to increment market share.
Regarding family businesses, RBV theory recommends that family firms can make a supported competitive advantage by utilizing their unique resources and capabilities, for example, their family brand, reputation, and family network. RBV theory likewise recommends that family businesses acquire a competitive advantage by putting resources into and fostering their family-specific resources, such as family values, trust, and shared vision. These unique family-specific capabilities can give family businesses an operational edge in the market and assist them with contending really with non-family businesses.
Family businesses’ unique resources and capabilities should be utilized for strategic advantages. For instance, family businesses can utilize their family brand and reputation to construct consumer trust and relationships. Also, family businesses could utilize their networks to get sufficiently close to insider knowledge and networks that can advance strategic partnerships and relationships and market valuable open doors. Family businesses can market and advance their family-specific values, trust, and shared vision to establish trust and loyalty with consumers and separate themselves from their rivals (Weinzierl, 2019).
Moreover, family businesses should effectively create and put resources into their family-specific resources and capabilities. They should develop a family-accommodating organizational culture based on sound principles, family values, and a shared vision. This culture should be utilized to construct relationships and establish a climate that invigorates innovation and creativity. By putting resources into their family-specific resources, family businesses will probably partake in an operational edge in the market, get close enough to profitable strategic partnerships, and fabricate a customer base that is profoundly faithful to their brand.
RBV theory recommends that family businesses can profit from utilizing their unique resources and capabilities to accomplish a sustainable competitive advantage. Family firms should effectively put resources into and foster their family-specific resources and capabilities, for example, family values, trust, and shared vision. Also, they should utilize their family brand and reputation to acquire customer loyalty and trust and lay out strategic partnerships and networks. By utilizing its unique capabilities, a family business can become a strong and fruitful undertaking that effectively addresses the market’s difficulties.
The key to ABC Corp’s and XYZ Inc’s success lies in the capacity to comprehend their internal strengths and track down ways of utilizing their resources to acquire a competitive advantage. To do this, the two organizations should conduct a careful resource audit to identify the resources and necessary capabilities to accomplish their desired outcomes. From this, they can foster clear goals and objectives and a strategy to accomplish them. Furthermore, ABC Corp and XYZ Inc should be aware of monitoring their performance and making reasonable adjustments to their techniques. By using the RBV model, ABC Corp, and XYZ Inc can identify their internal capabilities, foster a strategy to capitalize on those capabilities, and screen and change their techniques to accomplish the desired outcomes (Hestomo, 2019p.64). By combining the two approaches, ABC Corp and XYZ Inc can exploit their internal resources and be more strategic in their approach to acquire a competitive advantage.
Comparative Analysis
ABC Corp and XYZ Inc are two family businesses in the industry that deals with strategic management in various ways. ABC Corp is a small family business operating for three generations. The family members have serious areas of strength for loyalty to the organization and are profoundly engaged with the day-to-day operations. The family members go with a large portion of the strategic choices, and there is little contribution from non-family members. XYZ Inc, then again, is a lot larger family business that has been operating for two generations. While the family members are as yet engaged with the day-to-day operations, there is a more prominent spotlight on external stakeholders and customer feedback (Stuart, 2023,p.41). The family members work in a joint effort with a professional management team, ordinarily comprising members with long periods of involvement with their field, to devise the system and settle on key choices. ABC Corp and XYZ Inc have demonstrated successful businesses, each operating with an alternate strategic management style.
Then again, XYZ Inc is an enormous family business that has operating for five generations. The family members have an absolute separation between their family and business roles. Non-family members stand firm on many key footholds in the organization, including the CEO position. The organization has a formal decision-making process, and the family members do not have the last say in strategic decisions.
XYZ Inc centers around long-term planning and will not hesitate to face challenges, as exhibited in its aggressive expansion plans. All decisions are made through thorough research and analysis, considering current trends, industry dynamics, and customer preferences. The organization additionally puts vigorously into research and development and consistently updates its products to meet the changing needs of its customers.
XYZ Inc is resolved to its community and maintains high ethical standards. The family members have areas of strength for philanthropy, and the organization attempts to safeguard the environment and advance social welfare. Besides, the organization effectively looks to develop workplace conditions for its employees further and energizes diversity. As a feature of its obligation to corporate social responsibility, XYZ Inc vows to comply with neighborhood and worldwide laws and regulations. The organization likewise ensures that its employees, whether or not or not they are all family members, get fair wages, healthcare, and paid time off.
XYZ Inc endeavors to assemble strong relationships with its clients and providers. The objective is to give excellent customer service and reliable and quality products. The organization routinely reviews its clients to determine their satisfaction and utilizations this information to work on its products and services. With its commitment to greatness, XYZ Inc’s clients depend on the organization as a confided-in accomplice and wellspring of quality products and services (Zheng, 2019, p.3357). By and large, XYZ Inc is a strong and lively family business that has been working for five ages. With a commitment to ethical standards and business greatness, the organization is proceeding to develop and succeed. The organization centers around long-term strategies and puts resources into research and development, sustainable practices, and corporate social responsibility. Accordingly, XYZ Inc is regarded inside the business for its commitment to values and customer service.
Applying RBV theory to these two-family organizations, it is clear that ABC Corp has a strong family brand and reputation, which gives it a competitive advantage in the local market. In any case, the absence of contributions from non-family members in strategic decision-making might restrict the association’s potential for growth and innovation. Conversely, XYZ Inc has put resources into fostering its non-family resources and capabilities, for example, its formal decision-making process and non-family management group. This has assisted the firm with developing and expanding its business throughout the long term.
RBV theory proposes that resources and capabilities are key drivers of competitive advantage, and XYZ Inc has effectively utilized these to accomplish growth. The organization has put resources into organized recruitment processes and incentives for non-family members, fostering its human resource capabilities through preparation, mentorship, and vocation development. This has empowered the firm to draw in and hold the best talent, giving it an edge in the competitive market.
Moreover, putting resources into formal decision-making processes and non-family management has brought about a more significant degree of cohesion and collaboration between various divisions. This has allowed me to seek additional complex and imaginative strategies, bringing about a more powerful and productive business. The organization has embraced a more corporate approach to maintaining the business while keeping up with its family values and culture. This balance among corporate and familial elements has empowered XYZ Inc to push forward ABC Corp in terms of long-term profitability and growth.
Future Scenarios and Recommendations
In light of the examination, it is suggested that ABC Corp should zero in on fostering its non-family resources and capacities to accomplish sustained growth and competitiveness. The organization could consider including non-family individuals in essential direction or employing a non-family CEO to bring fresh perspectives and ideas. ABC Corp could likewise put resources into fostering its non-family resources, for example, its management team, to improve its capacities and competitiveness. This should incorporate practices, for example, recruiting experienced non-family personnel or putting resources into educational opportunities for both family and non-family individuals.
ABC Corp should create and stick to specific HR policies and techniques to guarantee equitable treatment and reward for family and non-family individuals. The organization should ensure that all HR processes are checked and assessed for fairness and effectiveness to guarantee the ideal working environment. ABC Corp could likewise consider executing a succession-planning system to guarantee consistent leadership of the organization and the potential for non-family individuals to move into leadership jobs over the long run. At long last, ABC Corp should zero in on tending to any cultural biases inside the association and establish an inclusive work environment that values the diversity of thought, foundation, and skills among all employees.
To further foster its non-family resources, ABC Corp should put resources into working on its ongoing management and workforce development strategies. This could remember centering for regions, for example, further developing employee training, creating leaders for the future, and empowering employees to share their ideas and encounters. ABC Corp could likewise consider carrying out a job rotation program for family and non-family individuals, which would allow employees to enhance their skill sets and gain from various jobs. Moreover, ABC Corp should zero in on making a culture that values creativity and fresh reasoning and empowers learning and creativity through the association (Rixom, 2023, p.682). ABC could build its competitive advantage by cultivating an environment based on collaboration and mutual respect. At long last, ABC Corp should constantly gauge their prosperity. Consistently assessing key performance metrics, for example, customer satisfaction, employee engagement, and turnover, will assist the organization with pulling experiences and further developing results.
For XYZ Inc, it is prescribed that the organization keep on investing in its non-family resources and capacities while protecting its family-specific resources, such as its family values and shared vision. The organization could consider making a family council to guarantee that family values and vision are coordinated into strategic decision-making while guaranteeing that non-family individual have a voice in decision-making. This council could likewise give a platform to the family to team up, share information, and work together. Also, the organization should endeavor to create an organizational culture that energizes collaboration and participation by family and non-family individuals. This should be possible by creating projects and drives that teach family individuals the competencies to successfully lead in a professional environment, cultivate connections among family and non-family individuals, or set out open doors for career advancement for both family and non-family individuals.
The organization should endeavor to set out equal open doors for all representatives, regardless of their family history, to guarantee fairness and equality for all. This should be possible by making clear and straightforward recruiting processes, giving complete onboarding and preparing programs, and guaranteeing fair payment plans. In doing as such, XYZ Inc will want to overcome any issues between family-controlled businesses and non-family-owned companies while additionally reinforcing its culture of inclusion and collaboration.
To completely apply RBV to the two-family businesses ABC Corp and XYZ Inc, taking into account their unique business environment is significant. Both should consider factors, for example, industry characteristics, customer needs, regulatory environment, industry trends, and macroeconomic conditions that influence their capacity to benefit from their core competencies and foster new ones. The two companies should likewise perceive the requirements and opportunities from their family-specific elements. For instance, ABC Corp should consider how its family governance approach and values will either work with or ruin the turn of events and use of resources and abilities. XYZ Inc should consider how its set of experiences of family-centered tasks makes a strong shared vision of the organization’s future which can be utilized to drive innovation and growth.
Conclusion
RBV theory can be applied to family businesses to dissect their resources and capabilities and distinguish wellsprings of sustained competitive advantage. The comparative analysis of ABC Corp and XYZ Inc demonstrates how family businesses can adopt various strategies for strategic management while utilizing their novel family-specific resources. Future scenarios and recommendations for these two family businesses feature the significance of balancing family-specific and non-family resources and capabilities to accomplish sustained development and competitiveness. It is likewise fundamental that ABC Corp and XYZ Inc consistently survey their internal processes and external resources to guarantee they are in a situation to exploit open doors and relieve chances. Metrics and analysis can be utilized to quantify the performance of current resources, permitting the organization to zero in on regions where they are acquiring competitive advantage or need to make changes to advance their competitive position.
This report has exhibited the relevance of RBV theory about family businesses. The report has featured the significance of balancing family dynamics and business objectives in strategic decision-making by examining two family businesses utilizing this theory. The recommendations accommodated each firm’s rational thoughts for further developing their strategic management rehearses and achieving long-term competitiveness.
The principal discoveries of this report are that, first and foremost, family businesses should integrate the interests of family individuals and business activities while planning systems to guarantee that the two objectives are adjusted. Moreover, they should put resources into carrying out the right measures to guarantee continuity in leadership and ownership between generations, which are principal to the company’s performance and long-term viability. At last, methodologies should be adjusted to the company’s market environment and internal capabilities to guarantee that it stays competitive (Mishra, 2020, p.18).
Implementing RBV theory in the family business setting is significant for the success and the continued presence of family businesses. Executing RBV theory can assist family businesses with accomplishing long-term supportability by guaranteeing that their methodologies integrate the equilibrium of interests of family individuals and business activities. Moreover, it can give a significant manual for firms to integrate strategic change initiatives because of the company’s environment and resources. Through these actions, family businesses can proceed to successfully control their markets, endure generation transitions, and stay competitive in the long term.
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