The resource theme can be perfectly understood from a Resource-based view perspective. The Resource-based view (RBV) focuses on the importance of owning rare, unique and valuable resources as the sources of sustainable competitive advantage (Kurtulus, 2014). There, however, is no consensus in management and entrepreneurship literature on what constitutes these resources because firms have the tendency to emulate the business strategy and practices of leading firms in particular industries. Kurtulus (2014) argues that there is agreement that resources such as technology, human resource processes and material resources can be exploited to the advantage of a firm’s rivals. The Resource-based view suggests that a firm’s strategic orientation and configurations, which are geared towards the development of the company’s competitive advantage and better performance, depends largely on the nature of the resources that this entity possesses (Roxas & Chadee, 2012). This view is not essentially about inimitable resources per se, but rather the choice and combination of resources adopted in the company’s strategy in an effort to maximise value for its shareholders and to dominate the market. The resource based-view focuses on firm performance is a key outcome variable (Mahasi, Awino, Pokhariyal & Ombaka, 2013) of an effective application and deployment of different resources and capabilities. SMMEs, such as hair salons, depend on financial, intellectual, informational and technological resources and capabilities for their competitive advantage. While these resources may be available to all firms, corporate value may probably lie on the depth of the complementarity of these
resources and through developing appropriate combinations of resource bundles(Morris, Snell & Wright, 2005; Garcia, Lessard & Singh; 2014). Overall, a firm's survival depends on its ability to create new resources, build on its capabilities platform, and make the capabilities more inimitable to achieve competitive advantage (Foon, 2011). The survival of small firms depends on their capacity to create new financial resources or explore new funding options to survive in a hostile competitive industry.
Flore (2003) points out that RBV highlights the firms’ resources as the most important factors for improved competitive advantage and better business performance. The resource based view has been used in marketing literature to understand the interaction between marketing and other functional capabilities and their effects on performance (Wantao, Ramakrishman & Prithwiraj, 2014). Since, marketing is a facet of the business operations, there is scope to assume that the RBV has some resonance with the financial resourcing and management aspects of the firm. This is because financial resources are the lifeblood and nerve centre of any functional businesses, and hair salon businesses are no exception.
2.2.1 The elements of RBV
2.2.1.1 Resources
Resources are defined as the tangible and intangible assets of a firm and these can be technological, human, physical or reputational (Hadjimanolis; 2000). Technological resources include the sophistication of hardware and software, technological processes and the technological competencies of the firm’s personnel. Human resources cover the human competencies (the stock of accumulated business knowledge, skills and abilities), expertise and experience of personnel, such as that, in the case of this study are hair salon employees, bring to bear on the business operations. Financial resources comprise personal savings, equity, loans and credit schemes that can be acquired from private or public institutions.
2.2.1.2 Capabilities
Capabilities refer to the firm’s structures and managerial skills that form a firm’s practices that will lead to its competitive advantage in the long run (Hadjimanolis; 2000). Hadijimanolis (2002) and Acosta, Palacios and Loukis (2011) define dynamic capabilities as the firm’s ability to build a resource base, take part in value creating activities and demonstrate an awareness of rapid changes that happen both in the internal and external environments. Hair salons can build their resource base through considering diverse sources of funding from the public and private sector, acquiring a highly competent staff that possesses multiple perspectives on the business environment and encourage their staff to undergo training to better their skills.
There is also innovation capabilities, which are defined as a set of the firm’s characteristics that support and assist the strategies in the enterprise and create a division of the dynamic organisational capabilities (Hadjimanolis, 2000; Acosta et al., 2011). A hair salon is considered innovative if it demonstrates the ability to introduce new business strategies and techniques that will provide new or radically transformed services and products, as well as provide improved services in the value chain to exceed its client base’ expectations.
Capabilities are “conceptualised and categorised as inter alia, organisational skills and collective learning, core competencies, resource development competences, organisational integration, strategic decision making and alliance building, product development, relationship building and informational and technological capabilities” (Ismail, Rose, Uli & Abdullah, 2012:154). Ismail et al (2012) postulate further that an enterprise that has good strategic manufacturing practices and integration, and a sound distribution of resources and capabilities, is considered as having attained a competitive advantage and likely to perform better than its competitors. Therefore, knowledge is a crucial factor that leads to improved job performance and ultimately result in a competitive advantage. In addition, organisational capabilities are considered as the most important
factor in the firm’s approach and their effective exploitation also dependent on the availability of funding.
Pergelova and Angulo-Ruiz (2014) state that acquiring and interpreting resources from an external organisation and coordinating them can enhance organisational capabilities and lead to improved financial and business performance. Thus, hair salons in the Free State, which are a “one man show” directed by the owner manager, have no formal organisational structures and such businesses tend not to keep records of their transactions. Yet, a formal organisational structure, evidence of record keeping and proper financial management are all integral to the acquisition and effective utilisation of financial resources by emerging businesses.
2.2.1.3 Knowledge-based resources
Knowledge-based resources are in the form of skills, such as technical skills. They allow enterprises to respond and adapt to changes and challenges that are connected to the ability to innovate (Hadjimanolis, 2000). The information society demands a current knowledge of knowledge-based resources in order to improve the skills of employees and those of emerging firms, such as hair salons (Acosta & Cerdan, 2008). For small businesses, such knowledge-based resources may not only reside in the competency and skills base of employees but also the owner/manager’s knowledge of cheaper sources of debt and equity financing.
2.2.1.4 Competencies
Competencies include resources that help the firm to differentiate themselves from their competitors and it is often argued that “resources and capabilities is assumed to lead to competences” (Hadjimanolis, 2000; Ferreira, Azevedo & Ortiz, 2010:6). In addition, Hadjimanolis (2000) outlines the principles of the RBV as: uniqueness; learning aspect; inimitability (or at least limited imitability); interaction of resource clusters;
complementarity of resources and the time dimension of resource accumulation (path dependency).