Essay Sample on Corporate Governance. Barney's Characteristics: Alkhabeer Capital

Alkhabeer Capital is an asset management firm that provides its clients with alternative investments. The company situated in Saudi Arabia focuses on high net worth individuals. The company enjoys competitive advantage targeting high net worth individuals. According to Grant & Jordan, (2012), competitive advantage is where a company earns more revenues than its competitors in the same industry and is dependent on cost leadership and product differentiation. VRIO describes a component of a firm's business strategy that defines its business analysis framework. It focuses on a competitive advantage of an already established firm while Porter's forces analysis is used by an upcoming organization to analyze the competition within the industry. Whereas VRIO establishes the competitive advantage from within the firm itself, the Porter's forces analyzes the state of the competition determined by factors such as threat of new entrants, buyers and suppliers bargaining power, substitute threats and existing industry.

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Taking the example of Alkhabeer Capital whose VRIO include corporate governance and compliance with the regulatory environment (Alkhabeer Capital, 2018). The organization of the leadership structure and abidance to the societal norms are crucial resources the company is using to achieve competitive advantage. Furthermore, they help in creating value and differentiation to the company's clients and other stakeholders. Furthermore, the utilization of robust institutional structures enables the firm to achieve growth while riding on a sustained high product quality. For instance, in 2010, they heavily invested in the real estate industry. The company realized 85 percent growth in revenue when it finally sold the land in 2014. This was attributed to solid investment, following due process, execution of their capabilities and well-understood market dynamics in Saudi Arabia. The firm also acquired a majority stake in the private sector in Higher Education by investing in the Adwa'a Al Riyadh National School. It is for this reason that the organization enjoys high levels of loyalty from clients in terms of effective management of their funds. Compliance refers to a situation where an individual or institutions uphold societal norms, keeping in mind that the country's legal system has close affiliations with the Islamic religious teachings. Compliance is an essential tool for boosting reputation, especially from an investor perspective.

The resource-based view theory of competitive advantage states that a firm's resource capability determines its ability to deliver value to its clients and stockholders (Madhani, 2010). In this case, availability of investment capital resulting from investor confidence and innovativeness of the employees can help the company achieve competitive advantage. Alkhabeer Capital should invest more in corporate governance as it has already laid the proper foundation. According to the International Finance Corporation (2018), good corporate governance enhances both access to capital and higher market valuation. For instance, in this case, it enhances the entrepreneurial spirit among the employees that in turn, improve shareholder value and boost client confidence (Alkhabeer Capital, 2018). Boosting competitive advantage calls for the company to raise its level of compliance since Saudi Arabia has a highly conservative society where organizations are required to uphold the prevailing norms (Ireiqat, 2015). One way the company is compliant is its incorporation of Sharia Law in its financial services.

References

Alkhabeer Capital. (2018). Corporate Governance. Retrieved from https://www.alkhabeer.com/corporate-governance

Grant, R. M., & Jordan, J. (2012). Foundations of strategy. Chichester: John Wiley & Sons, Ltd.

International Finance Corporation. (2018). Why Corporate Governance. Retrieved from https://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/ifc+cg/priorities/why+corporate+governance

Ireiqat, N. (2015). Ideologies in the Middle East: Is It Conservatism, Modernism, or Liberalism. Journal of Education and Human Development, 4(4), 1-4.

Madhani, P. M. (2010). Resource based view (RBV) of competitive advantage: an overview, pp3-17.