Strategic Management: A Comparison of Resource-Based and Contingency

This report provides a comparative analysis of two strategic management theories: Resource-Based Theory and Contingency Theory, with a focus on their application to organizations like TESCO. The Resource-Based Theory emphasizes leveraging internal resources for competitive advantage, while the Contingency Theory highlights the importance of adapting strategies to specific situations and environmental factors. The report critiques each theory, discussing their strengths and weaknesses, and compares them to determine their relevance in today's dynamic business environment. It also explores how TESCO can utilize these theories to achieve its goals and objectives, considering the challenges and opportunities presented by the competitive market landscape.

Strategic Management

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
FINDINGS ......................................................................................................................................3
Overview & critique of Theory 1...........................................................................................3
Overview & critique of Theory 2...........................................................................................5
Compare and contrast of two theories....................................................................................7
CONCLUSION ...............................................................................................................................9
RECOMMENDATIONS...............................................................................................................10
REFERENCES:.............................................................................................................................11
Books and Journals:..............................................................................................................11

INTRODUCTION
In today's business environment, formulation of a strong strategy is becoming a need for
organisation as it assists in achievement of goals and objectives. Strategy formulation is not the
end of solving organisation problems or achievement of goals and objectives. In this case,
organisation need to understand the concept of strategic management. Strategic management is
defined as the process in which an organisation needs to set goals and objectives for the purpose
of making the organisation more competitive in the market (Velikorossov and et.al., 2020). It is a
complete process in which an organisation is using different models and theories in order to
achieve organisational goals and objectives. In this context, TESCO is undertaken which is the
UK based organisation which is the third largest retailer in the world in terms of groceries. Their
success is depend on the way of strategy management. That's why this report is analysing the
comparison of two different models of strategic management that how they will contribute in
achievement of goals and objectives.
MAIN BODY
FINDINGS
Today's modern business environment gets very competitive and complex as day by day
new organisations are entering in the market. Due to this, competition is increasing at a fast
speed. This becomes very necessary for an organisation to find the ways in order to overcome
with the upcoming challenges (Fuertes and et.al., 2020). New entrants are so smart and
technological upgraded. Due to this, they can easily capture the target market which becomes
very tough for existing companies. That's why it is necessary for existing large or small
organisations such as TESCO to focus on strategic management in an effective way that helps
them to achieve their target market and remain competitive. For that purpose, it is necessary for
an organisation to select an appropriate model or theory of strategic management so that they
will be able to overcome with the upcoming challenges (Makadok, Burton and Barney, 2018). In
this case, they need to compare and critically analyse the selected theories by discussing their
pros and cons and then take a decision.
Overview & critique of Theory 1
Resource based theory is defined as the theory which is focusing on taking competitive
advantage with the help of effective management of resources. This theory believes that an

organisation can achieve their goals and objectives only when they create their internal resources
in unique way (Nason and Wiklund, 2018). It create differentiation in front of the customers as
they are different from the competitors of organisation. In general term, it is found that
organisation is just focusing only the threats and opportunities that comes from external
environment. They are forgetting about their internal resources. It is necessary for an
organisation that they should focus on leveraging their internal resources in order to take
competitive advantage. It is not only assisting in taking competitive advantage but it is also very
helpful in improving the organisation performances. This is crucial for organisation that they
should understand the importance of their internal resource instead of exploiting them. Company
needs to make sure that their internal resources should be competitive so that no other
organisation can imitate them easily (Dubey and et.al., 2019). This theory is very effective in
strategic management as the main purpose or objective of strategic management is to make a
map for achieving goals and objectives. Competitive advantage is one of the important element
of success and growth of an organisation. With the help of resource based theory, an organisation
can easily achieve their goals and objectives as they will enjoy competitive advantage. In the
case of TESCO, it is found that their resources are the main source of their success and growth.
They are always focusing on leveraging their internal resources in order to take competitive
advantage. Their have many resources which are taking competitive advantage such as
employees which included in human resources, their products which becomes very healthy and
cost effective, etc. They believe that human resource is very important for every organisation and
that's why they give performance recognition to each and every employee.
According to resource based theory, it focuses on both tangible as well as intangible
assets. That means this theory is trying to leverage both assets which assist in improving for
achievement of organisational goals and objectives (Zhao and Fan, 2018). Some important
resources are human resource, information resources, physical resources and financial resources.
These resources can be effectively evaluate with the help of strategic management models such
as VRIO framework. It is the best framework to analyse the internal resources of organisation
which provides a detail evaluation of all resources. It is very helpful for organisation as they can
evaluate which resource is effective in order to take a competitive advantage. Resource based
theory has two assumptions that are mentioned below:
 Resource heterogeneity

 Resource immobility
It is very well known by every organisation that resource based theory is an important
part of strategic management. Resource based theory is very effective in order to achieve
sustainable competitive advantage. But in many studies it is criticized by other theorists on their
relevancy and validity for sustainable competitive advantage. It is also criticised due to
exhibiting circular reasoning. It is the longitudinal process in which an organisation can find out
the valuable resources in long term period. It is very important for an organisation that they
should understand the time constraint (Omondi-Ochieng, 2019). In resource based theory, it
becomes impossible for organisation to identify their valuable resources or assets which create
competitive advantage. They need time for the purpose of analysing the relationship between
resources and competitive advantage. That means this theory is time taking and in present
business environment there is not time for success and growth. Organisations get success and
growth very frequently in these days. That's why this theory is criticized by many theorists. But
at the same time, it is necessary for an organisation that they should leverage on their internal
resources because without strong and different internal resources they are not able to take
advantage. Today's business environment gets very dynamic as well as competitive. Competition
is increasing very fast and that time it is necessary for every organisation that they should
formulate strategy accordingly. After analysing this theory, it is analysed that it has some lack
pints but this theory is effective in order to run the business successfully. That's why company
needs to make sure that all the elements of this theory is critically analysed by them and they try
to give importance to their internal resource. In addition to this, they need to consider time
constraint which is very important in today's time period.
Overview & critique of Theory 2
Contingency Theory is the other important theory which is broadly applied in strategic
management. It is found that this theory has the most influence on strategy of organisation. This
theory states that every organisation is different from other one as their culture, way of working,
etc. are not same. That's why it is not compulsory that one theory is applicable to other
organisation also (Steinbach and et.al., 2017). There is no single organisation exist in the
business environment which is rely only on one strategy or theory. They need to change time by
time according to the situation. That means the manager of organisation needs to adopt strategies
on the basis of current situations. This is necessary for the managers of organisation in their

strategic management approach that they should used tools which applied for assisting managers
in order to develop, implement and evaluate strategy. This theory states that an organisation need
to accept the situation itself and then make strategies accordingly (Vidal and et.al., 2017).
Everyday the business environment is becoming very dynamic in term of technology, size of
organisations, etc. That's why company needs to analyse the environment in order to accept
changes. This can be done with the help of PESTEL analysis model. This model consists of 6
important factors that influence organisation performance as well as operations. All factors
should be critically analysed by organisation so that they will analyse the impact.
For the purpose of strategic management, it is necessary for an organisation that they
need to formulate strategy by considering this theory. Joan Woodward is the person who found
the effect of technology on organisation and after that he move from organisation to contingency
approach or theory (Lagstedt and Dahlberg, 2018). According to Woodward, there are many
variations that are found in organisation structure due to change in techniques in manufacturing.
It is founded that different technologies create different demand and all those different demands
can be met with the help of an appropriate organisation structure. According to the contingency
approach or theory, it has a very different view as compared to forma schools of management.
They assumed that there is universal approach which needs to be follow by organisations as they
believe that one theory is applicable to each situation. They are not aware that every situation is
different from each other. According to contingency theory, it is necessary for an organisation
that they should considered all the factors in the process of strategy formulation. This will helps
in overcoming with the upcoming challenge. Everyday the impact of macro environmental
factors is increasing and due to this, company needs to find these factors and their implication.
They need to analyse that how these factors affect the organisation operations. In this case, they
should use this approach which is focusing on the current situation. It does not depend only on
one situation.
After analysing the contingency theory, it is analysed that TESCO is the large
organisation and that's why they can be face challenges due to the dynamic nature of
organisation. With the help of this theory, they are able to motivate their employees in order to
accept the changes in an effective way. This is necessary for an organisation that they should
train their employees in such a way so that they can use effective leadership. But along with this,
it sis found that this theory is lack in flexibility. That means contingency theory can be apply

only when their leaders or managers are able to use effective leadership style. But it is not
possible to change their way of leading as it is fixed which create a problem in organisation. This
theory is also criticised due to rigidity towards accepting change. Generally it is found that
people are not ready for change and that's why practically in many situations this theory is not
applicable. This theory is leads to change in organisation which is not to accept by every
individual in the organisation. Due to this, it is not applicable in organisation. This becomes
necessary for organisation that they need to build their sanitisation culture accordingly in which
every person is ready for accepting changes. It is also found that day to day changes creates
ambiguity in the mind of people which will results in non achievement of goals and objectives.
This can be understand with the help of current example of pandemic, in which people are not
ready for accepting work from them as they have a habit to work from offices. There are many
consequences that bear by people due to pandemic. It is the situation which is not known. It
create problems not only for employees but also for organisations as they need to formulate
strategy accordingly so that their business get not failure.
Compare and contrast of two theories
After understanding of each theory, it is necessary for TESCO that they should compare
in order to select the best one. Theory is necessary for organisation in order to success and grow
in the market (Gehman and et.al., 2018). Due to many reasons, it is very necessary for a
company to select the best theory in order to manage their strategy. It leads in achievement of
goals and objectives with an effective strategy. There are certain basis are mentioned below for
the purpose of comparison between two theories that include Resource based theory and
Contingency theory:
Basis Resource based theory Contingency theory
Meaning Resource based theory is defined as the
theory in which an organisation is
focusing on identifying and evaluating
the internal resources in order to take
competitive advantage (Aguinis,
Edwards and Bradley, 2017). This is
necessary for an organisation that they
Contingency theory is focusing on
the situations that shows that there
is no single theory which is
appropriate for all situations. It is
depending on the circumstances
that which theory is appropriate. In
terms of TESVO, it is necessary

should leverage their internal resources
in order to make them unique. It is
identifying in the current scenario of
business environment that customers
wants differentiated products and this
need can be fulfil with the help of
applying this theory. TESCO is the large
organisation which has a great brand
recognition in the market and that's why
they need to critically evaluate the
resources in order to remain competitive
in the marketplace.
for them as they are trading at
international level and that's why
there are many situation that they
face. For that purpose, they need to
use this theory which inspire
organisation members to accept
changes.
Goals or
purpose
The main objective of this theory is to
leverage internal resources so that
organisation can take competitive
advantage.
The contingency theory aims to
accepting the changing behaviour
of business environment with the
help of explaining that there is no
single theory which is appropriate
for all situation.
Need It is identified that everyday the
competition is increasing and it becomes
very necessary for existing organisation
to create differentiate products and
services in order to remain competitive.
So this theory is appropriate in order to
leverage internal resources.
Everyday it is found that business
environment gets very complex
and that's why it becomes very
necessary for an organisation to
use a theory which is able to accept
current changes and analyse the
nature of environment.
Benefits It provide many benefits as it is the
main source of competitive advantage.
It also create unique products and
services which assists in attract and
retain consumers.
It helps in analysing the
environment which assisting
overcoming with the upcoming
challenges due to continuous
change in environment.

Framework In this theory, VRIO framework is
effective in order to evaluate the
resources that which of them is valuable
for organisation.
In this theory, PESTEL model is
effective as it provide the analysis
of current situations that which
factor influence organisation's
operation.
From the above comparison of two theories, it is analysed that the use of theory is depend
in the situations that means contingency is necessary for every organisation. TESCO is the large
and multinational organisation and because of that it is necessary for a company to make their
resources unique which are able to differentiate from other competitors. Due to globalisation, it
is found that competition is increasing and that's why company need to give more efforts so that
they can remain competitive in front of other competitors. It will helps in achievement of goals
and objectives. In the comparison of two theories, it is found that company should use resource
based theory in their organisation as it assists in evaluating of all resources. A company can
easily understand that which resource is necessary for their success and growth. It is also
analysed that resources based has a time constraint that means it take time for analysing the
relationship between resources and competitive advantage.
CONCLUSION
It can be concluded from the above discussion that strategic management is necessary for
organisation in order to achieve their goals and objectives. Today's business environment gets
very complex and competitive and that's why it becomes necessary for every organisation to find
the ways or formulate strategies accordingly in order to achieve their goals and objectives. The
ultimate objective of any organisation is to earn profit and take competitive advantage but it can
be possible only with the help of strategic management. It is the process where organisation
needs to set goals and objectives and then develop and implement strategy. But the process is not
end with the implementation of strategy as it will continue by monitoring them. In addition to
this, an organisation such as TESCO can effectively manage the strategy by using some
important theories and models. This report covered two important theories that are resource
based and contingency theory. Both theories are necessary for strategic management. Resource
based theory is concerned with the leveraging internal resources in order to make them unique
which create differentiation by comparing with the competitors. This is very helpful in order to

build an image in the market and also useful in taking competitive advantage. On the other hand,
contingency theory suggests that there is no single theory is available which is appropriate for
every situation. It is necessary for organisation to accept changes in the market as day by day the
business environment gets very dynamic and because of that they need to use this theory. After
comparing both theories, it is analysed that organisation should follow both one as contingency
is the reality based theory and resource based theory is useful in long term period.
RECOMMENDATIONS
 It is recommended to the organisation that they need to use both theories as contingency
is the need of current situation whereas resources based theory is necessary for long term
results.
 It is also recommended to the company that they need to make their employees efficient
with the help of providing training and development program as it is necessary for
performing best in short time which results in reducing the time taken in resource based
theory.

REFERENCES:
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review—descriptive. Journal of Engineering, 2020.
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approaches to theory building. Journal of Management Inquiry, 27(3), pp.284-300.
Lagstedt, A. and Dahlberg, T., 2018. A Contingency Theory Motivated Framework to Select
Information System Development Methods. In PACIS (p. 46).
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in strategic management.
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and suggestions for the future. Journal of management, 44(1), pp.32-60.
Omondi-Ochieng, P., 2019. Resource-based theory of college football team
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investment behavior, and performance: A contingency theory of incentive
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Velikorossov, V.V., and et.al., 2020. Strategic management.
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owner-managers at Santo Domingo, Ecuador. International Journal of Engineering
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Zhao, Y. and Fan, B., 2018. Exploring open government data capacity of government agency:
Based on the resource-based theory. Government Information Quarterly, 35(1), pp.1-12.