Kim Warren on Strategy
Strategy insights and living business models
Strategy Dynamics Briefing 10: Defining, Specifying and Measuring Tangible Resources
What would be a useful checklist of tangible resources?… customers, products, production capacity, staff and cash.
Since organizations exist to “supply” some form of “demand,” let’s look at demand-side resources first…
The most obvious resource on the demand side of the relationship is “customers” – or clients, users or other terms, depending on the industry. Two important issues to consider are, first, that customers may come in multiple varieties (think consumer/business for telecoms, or leisure/business customers for hotels). Secondly, a company may supply one set of customers, who then have further customers of their own, and these may in turn have further customers. Whilst only the first group is strictly the company’s set of “customers” the other parties downstream in the chain are critical to driving the company’s sales. For a consumer brand such as Coca-Cola or Proctor & Gamble, the direct customers are retailers, such as Wal-Mart or Tesco, who then sell to consumers. So a full explanation of business performance requires information on final customers as well as about the direct customers or intermediaries involved.
Demand-side architecture for a consumer brand company.
Other special cases include:
This table should provide a useful checklist for most situations.
Doing it right: give resources their proper names
To be useful for explaining performance and developing strategy, each resource will need to be used to calculate other items, so they must be properly defined. The most important guideline for this purpose is to specify a measurement for any resource in its own physical terms – do not use some proxy instead. “Staff” are people, “customers” are people or organizations, a “product range” consists of actual products or services. Using abstract terms makes it hard to quantify resources and to calculate or estimate their impact on other parts of the system.
The occasional exception to this rule concerns “capacity” which can arise from a complex mix of physical items and activities. This may mean that you have to define and measure “capacity” in terms of the potential output, e.g. a chemical plant’s physical capacity consists of its vessels and pipe-work, but it is more useful for strategy purposes to measure it in ‘tons per day’.
Until next time…
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SWOT analysis
If you have had any kind of general business course you have probably come across SWOT analysis—Strengths, Weaknesses, Opportunities and Threats. Whilst considered by many to be an outdated and simplistic approach, most managers still think of SWOT first when asked how they would go about assessing their strategy. So how can a resource appraisal clarify to a firm’s SWOT analysis?
The SWOT framework splits naturally into two halves:
Opportunities and Threats: features of the external environment, mostly competitors and other external pressures. Two formal methods in particular deal with these issues – analysis of the “five forces” of the competitive environment (competitors, customers, new entrants, substitutes, and suppliers) and analysis of “PEST” factors (political, economic, social, and technological forces).
Strengths and Weaknesses on the other hand are features of the firm itself, relative to competitors and success factors in the market, and have a closer connection with a resource-based approach. Strengths and weaknesses can be evaluated in terms of resources and capabilities that the firm has, or needs, for its system to work. These can then be compared to levels or qualities of resources available to actual or potential rivals.
We can therefore add to a SWOT analysis by carrying out a quantified, fact-based analysis of resources, including an evaluation of their relative strengths and weaknesses.
This briefing summarises discussion from chapter 2 of Strategic Management Dynamics, pp 95-110
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- not-for-profit organizations, where “demand” still comes from individuals or groups served by the organization
- organizations that must serve the needs of two distinct groups, e.g. newspapers serve readers and advertisers, or eBay who must satisfy both buyers and sellers
- commodity markets, such as oil or agricultural products – where there is sometimes no identifiable customer
- the organization is in financial difficulties
- the strategy requires costly initiatives
- the organization concerned is a new venture, which has access to only a limited pool of potential cash to fund its development
THE MOST COMMON TANGIBLE RESOURCES IN STRATEGY ANALYSIS | |||||
Tangible resource | Coffee shop chain | Law firm | Start-up airline | Consumer brand | |
Demand-side | Customers | Consumers | Clients | Customers | Consumers |
Intermediaries | Retailers | ||||
Supply-side | Capacity | Stores | Professional staff | Aircraft | |
Staff | People | Service staff | Sales force | ||
Product range | Products | Legal services | Routes offered | Brands offered | |
Suppliers | Airports | ||||
Cash | cash | ||||
(Italic indicates additional resources that may be important in some cases) |

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