The resources of a firm are its distinctive capabilities and strengths. Resources are relative in nature and must always be measured with reference to the competition. Resources can be categorized as financial strength, human resources, raw material reserve, engineering and production, overall management, and marketing strength. The marketing strategist needs to consider not only marketing resources but also resources of the company across the board. For example, price setting is a part of marketing strategy, yet it must be considered in the context of the financial strength of the company if the firm is to grow as rapidly as it should. It is obvious that profit margins on sales, combined with dividend policy, determine the amount of funds that a firm can generate internally. It is less well understood, but equally true, that if a firm uses more debt than its competitors or pays lower dividends, it can generate more funds for growth by decreasing profit margins. Thus, it is important in strategy development that all of the firm’s resources are fully utilized in a truly integrated way. The firm that does not use its resources fully is a target for the firm that will - even if the latter has fewer resources. Full and skillful utilization of resources can give a firm a distinct competitive edge.

Resources and Marketing Strategy

Consider the following resources of a company:

1. Has ample cash on hand (financial strength).

2. Average age of key management personnel is 42 years (human resources).

3. Has a superior raw material ingredient in reserve (raw material reserve).

4. Manufactures parts and components that go into the final product using the company’s own facilities (plant and equipment).

5. The products of the company, if properly installed and serviced regularly, never stop while being used (technical competence).

6. Has knowledge of, a close relationship with, and expertise in doing business with grocery chains (marketing strength).

How do these resources affect marketing strategy? The cash-rich company, unlike the cash-tight company, is in a position to provide liberal credit accommodation to customers. General Electric, for example, established the General Electric Credit Corporation (now called GE Capital Corporation) to help its dealers and ultimate customers to obtain credit. In the case of a manufacturer of durable goods whose products are usually bought on credit, the availability of easy credit can itself be the difference between success and failure in the marketplace. If a company has a raw material reserve, it does not need to depend on outside suppliers when there are shortages. In the mid-1980s, there was a shortage of high-grade paper. A magazine publisher with its own forests and paper manufacturing facilities did not need to depend on paper companies to acquire paper. Thus, even when a shortage forced its competitors to reduce the sizes of their magazines, the company not dependent on outsiders was able to provide the same pre-shortage product to its customers. In the initial stages of the development of color television, RCA was the only company that manufactured color picture tubes. In addition to using these tubes in its own television sets, RCA also sold them to other manufacturers/competitors such as GE. When the market for color television began to grow, RCA was in a strong position to obtain a larger share of the growth partly because of its easy access to picture tubes. GE, on the other hand, was weaker in this respect. IBM’s technical capabilities, among other things, helped it to be an innovator in developing data processing equipment and in introducing it to the market. IBM’s excellent after-sale service facilities in themselves promoted the company’s products. After-sale servicing put a promotional tool in the hands of salespeople to push the company’s products.

Procter & Gamble is noted for its superior strength in dealing with grocery channels. The fact that this strength has served Procter & Gamble well hardly needs to be mentioned. More than anything else, marketing strength has helped Procter & Gamble to compete successfully with established companies in the introduction of new products. In brief, the resources of a company help it to establish and maintain itself in the marketplace. It is, of course, necessary for resources to be appraised objectively. It is the marketing power of big retailers like Wal-Mart that forces magazine publishers to share advance copies of forthcoming issues with them. They then decide if a particular issue will be sold in their stores. For example, Wal-Mart stores banned the April 1997 issue of Vibe, a magazine that focuses on rap music and urban culture, after viewing an early print of its cover and deeming it too risqué. Similarly, Winn-Dixie supermarkets (a 1,186-store chain) refused to carry the March 1997 issue of Cosmopolitan (the nation’s best-selling monthly magazine in terms of newsstand sales) because they judged it contained material that would be objectionable to many of their customers.

Measurement of Resources A firm is a conglomerate of different entities, each having a number of variables that affects performance. How far should a strategist probe into these variables to designate the resources of the firm? Not all of these factors are important for every business; attention should be focused on those that could play a critical role in the success or failure of the particular firm. Therefore, the first step in designating resources is to have executives in different areas of the business go through the list and identify those variables that they deem strategic for success. Then each strategic factor may be evaluated either qualitatively or quantitatively. One way of conducting the evaluation is to frame relevant questions around each strategic factor, which may be rated on either a dichotomous or a continuous scale. As an example, the paragraphs that follow discuss questions relevant to a men’s sportswear manufacturer.

Top Management. Which executives form the top management? Which manager can be held responsible for the firm’s performance during the past few years? Is each manager capable of undertaking future challenges as successfully as past challenges were undertaken? Is something needed to boost the morale of top management? What are the distinguishing characteristics of each top executive? Are there any conflicts, such as personality conflicts, among them? If so, between whom and for what reasons? What has been done and is being done for organizational development? What are the reasons for the company’s performance during the past few years? Are the old ways of managing obsolete? What more can be done to enhance the company’s capabilities?

Marketing. What are the company’s major products/services? What are the basic facts about each product (e.g., market share, profitability, position in the life cycle, major competitors and their strengths and weaknesses, etc.)? In which field can the firm be considered a leader? Why? What can be said about the firm’s pricing policies (i.e., compared with value and with the prices of competitors)? What is the nature of new product development efforts, the coordination between research and development and manufacturing? How does the market look in the future for the planning period? What steps are being taken or proposed to meet future challenges? What can be said about the company’s channel arrangements, physical distribution, and promotional efforts? What is the behavior of marketing costs? What new products are expected to be launched, when, and with what expectations? What has been done about consumer satisfaction?

Production. Are people capable of working on new machines, new processes, new designs, etc., which may be developed in the future? What new plant, equipment, and facilities are needed? What are the basic facts about each product (e.g., cost structure, quality control, work stoppages)? What is the nature of labor relations? Are any problems anticipated? What steps have been proposed or taken to avert strikes, work stoppages, and so forth? Does production perform its part effectively in the manufacturing of new products? How flexible are operations? Can they be made suitable for future competition and new products well on the way to being produced and marketed commercially? What steps have been proposed or taken to control pollution? What are the important raw materials being used or likely to be used? What are the important sources for each raw material? How reliable are these sources?

Finance. What is the financial standing of the company as a whole and of its different products/divisions in terms of earnings, sales, tangible net worth, working capital, earnings per share, liquidity, inventory, cash flow position, and capital structure? What is the cost of capital? Can money be used more productively? What is the reputation of the company in the financial community? How does the company’s performance compare with that of competitors and other similarly sized corporations? What steps have been proposed or taken to line up new sources of capital, to increase return on investment through more productive use of resources, and to lower break-even points? Has the company managed tax matters aggressively? What contingency steps are proposed to avert threats of capital shortage or a takeover?

Research and Development. What is the research and development reputation of the company? What percentage of sales and profits in the past can be directly attributed to research and development efforts? Are there any conflicts or personality clashes in the department? If so, what has been proposed and what is being done? What is the status of current major projects? When are they expected to be completed? In what way will they help the company’s performance? What kind of relationships does research and development have with marketing and manufacturing? What steps have been proposed and are being taken to cut overhead and improve quality? Are all scientists/researchers adequately used? If not, why not? Can we expect any breakthroughs from research and development? Are there any resentments? If so, what are they and for what reason do they exist?

Miscellaneous. What has been proposed or done to serve minorities, the community, the cause of education, and other such concerns? What is the nature of productivity gains for the company as a whole and for each part of the company? How does the company stand in comparison to industry trends and national goals? How well does the company compete in the world market? Which countries/ companies constitute tough competitors? What are their strengths and weaknesses? What is the nature and scope of the company’s public relations function? Is it adequate? How does it compare with that of competitors and other companies of similar size and character? Which government agencies - federal, state, or local - does the company deal with most often? Are the company’s relationships with various levels of government satisfactory? Who are the company’s stockholders? Do a few individuals/institutions hold majority stock? What are their corporate expectations? Do they prefer capital gains or dividend income? Ratings on these questions may be added up to compute the total resource score in each area. It must be understood that not all questions can be evaluated using the same scale. In many cases, quantitative measurement may be difficult and subjective evaluation must be accepted. Further, measurement of resources should be done for current effectiveness and for future perspectives. Strategic factors for success lie in different functional areas, the distribution network, for example, and they vary by industry. In the uranium industry, raw materials sourcing is the key to success because low-quality ore requires much more complicated and costly processing. Inasmuch as the price of uranium does not vary among producers, the choice of the source of uranium supply is the crucial determinant of profitability. In contrast, the critical factor in the soda industry is production technology. Because the mercury process is more than twice as efficient as the semipermeable membrane method of obtaining soda of similar quality, a company using the latter process is at a disadvantage no matter what else it might do to reduce extra cost. In other words, the use of mercury technology is a strategic resource for a soda company if its competitors have chosen not to go to the expense and difficulty of changing over from the semipermeable membrane method.