Capital resources and organization are one of the major foundations of any good business and without them a business cannot succeed
Capital resources is an important resource (asset) at both the micro (firm) and macro (economy-wide) levels. It is arguably, the most important, value-contributing asset companies have — an asset that cannot be easily imitated by competitors, and therefore conferring sustained competitive advantage on its owners.
Capital resources include money to start a new business, tools, buildings, machinery, and any other goods people make to produce goods and provide services. The items the people in Community Ville produced are called capital resources. Capital goods include tools, buildings, vehicles, machinery, and equipment. Capital goods are also called durable goods, real capital, and economic capital.
Capital resources enables tangible and intangible resources, such as machines, patents, brands and human capital, to be productive.
It is of great importance to manage this capital in order for companies to enhance their productivity and long-term competitive advantage, as well as avoid pitfalls, i.e., downside risks associated with disruptive technologies and compliance.
Capital resources can be measured at a holistic level.
Capital Organization is defined as “the combination of explicit and implicit, formal and informal knowledge which in an effective and efficient way to structure and develop the organizational activity of the company, that includes culture — implicit and informal knowledge; structure — explicit and formal knowledge; and organizational learning — implicit and explicit, formal and informal renewal knowledge processes.”
Capital organizations is the prime intangible asset of businesses. Enterprise resources, such as equipment, labor, patents, etc. are inert by themselves. Organizational capital is the means through which the CEO and his or her management team makes them productive.
It is comprised of four elements:
1. Human capital
2. Values & norms
3. Knowledge &expertise
4. Business processes & practices
Even though organizational capital is essential to the operation and competitive positioning of an enterprise it is challenging to measure. Accountants generally adopt the approach of measuring the outlays or inputs as investments. For example, for tangible assets such as property, plant and equipment the measurement is based on the inputs, i.e., the amounts expended that leads to the formation of the asset.
Organizational capital is the codified knowledge, i.e., knowledge generated within the company through formal processes of knowledge integration, which then can be used by any other employee in the organization — examples are, marketing measurement systems that transform the salesperson’s experience into useful managerial information.
To summarize, organizational capital is a multi-faceted concept and encompasses the following traits:
a. Organizational capital is the information/knowledge embodied in employees. As such, business practices that facilitate/enhance the knowledge embodied in employees, such as employee training, empowerment and job design will enable companies to utilize resources more efficiently, and garner a competitive advantage.
b. Organizational capital is the companies’ values and norms that enable companies to utilize the physical resources more efficiently and help create and sustain competitive advantage.
c. Organizational capital is the company-specific codified and tacit knowledge that enables companies to combine resources to generate output.
d. Organizational capital is embodied in the set of unique business processes and practices that enable some companies to combine resources more efficiently than others to generate output.
In a dynamic business environment — with constant changes due to disruptive technologies in terms of ways of doing business — organizational capital provides the underpinning for companies to adapt and respond.