Week 4: Chapter 4 Discussion

Chapter 4 of Strategic Management: Creating Competitive Advantages outlines the concept of intellectual capital as the difference between a firm’s market and book values. By having a higher market value than book value, a firm possesses intellectual capital. Intellectual capital is the value of a firm’s intangible assets, such as its reputation, branding, values, and employee knowledge. Intellectual capital is generated by a firm effectively leveraging human and social capital to generate knowledge that creates products and services of value, where human capital is employee skill and social capital is working relationships. Grainger is extremely successful in this endeavor, as it attracts, retains, and develops human capital while being an industry leader in MRO procurement and services. Grainger offers mentoring programs, work shadowing, and career development framework for its employees. Grainger also continuously works to integrate social capital into its structure, by facilitating networking opportunities amongst its customers and vendors to drive innovations. Grainger frequently hosts workshops and conferences for its vendors, customers, and employees. As a result, Grainger is often at the front of its industry and offers a large array of products and services through its extensive distribution network. Grainger is well known for the technical expertise and process knowledge of its employees and network of vendors and customers. This is the intellectual capital of Grainger – Grainger’s successful investments in its human and social capital are leveraged to generate new products and services of value.

Machinist setting up a machine to run parts.