UNIT 3

QUESTIONS BOOK REF ANSWER

Resource Based Strategy CHP 7 pg Summary
263 To be able to compete at all in a market an organisation needs threshold resources and capabilities, but to achieve
sustained competitive advantage they also need to be unique and distinctive.

To be distinctive and provide for sustainable competitive advantage, resources and capabilities need to fulfil the VRIO
criteria of being Valuable, Rare, Inimitable and supported by the Organisation.

_________________________

Ways of diagnosing organisational resources and capabilities include:

VRIO analysis of resources and capabilities to evaluate if they contribute to competitive advantage.
Analysing an organisation’s value chain and value system to understand how value to a customer is created and can be
developed.
(Activity systems mapping to identify more detailed activities which underpin resources and capabilities).
_________________________

SWOT analysis drawing together an understanding of the strengths, weaknesses, opportunities and threats an
organisation faces.

________________________

Managers need to adapt and change resources and capabilities if the environmental changes and this can be done based
on Dynamic capabilities

1. Demonstrate the role of 7.3.2 and In assessing the role of a firm’s resources and capabilities as a basis for formulating strategy.
a firm’s resources and 7.3.5 Pg
capabilities as a basis for 283 & 291  Firstly, the strategic importance of resources and capabilities requires one to distinguish between threshold
formulating strategy resources and capabilities vs distinctive resources and capabilities.
- Threshold resources and capabilities – needed for the firm to operate and compete in any market and
achieve competitive parity with rivals
- Distinctive resources and capabilities – required to achieve competitive advantage.
 Secondly, the firm’s resources and capabilities need to be crafted into a few strategically important core
 competencies. Using the framework for appraising resources and capabilities - the organisation will align
resources and capabilities they have and those they need in formulating a strategy

 Key Strengths – Resources and

Capabilities that represent the firm’s important strengths (core competencies) that are deployed to maximum
effect. They are important in formulating a diversification strategy and provide strategic advantage in diversified
products and market segments
 Key Weakness – present a dilemma for firms (difficult to acquire, complicated and costly). They need to be
inimitable to be strategically important.
 Superfluous Strengths – represents a set of opportunities for organisations. These need to be invested and
made strategically important through diversification.
 Zone of Irrelevance – viewed as necessary to participate in an industry but not strategically important.
Strategically, they should be terminated if they have no threshold utility or else, they will drain the organisation.
1. Apply the Value Chain The value chain model finds that there is significant value to be created or avoided by reconfiguring the firm’s boundaries
model to identify a of the inbound logistics, outbound logistics and other primary and secondary activities – relates to vertical and horizontal
firm’s sources of cost integration strategy. The value chain helps the firm understand where it can achieve cost or differentiation advantage.
advantage and
differentiation
advantage

 For Cost Advantage - The value chain model provides a structured way to help us understand the relative
importance of each activity with regards to the overall cost and each cost drivers, the inter-relationship between
costs in different activities, the relative efficiency of each activity and inform choices about which activities
should be don internally and which should be outsourced.
 Pg 268
 The value chain helps strategist to structure the analysis of the possible demand-side and supply-side of the the
differentiation advantage into manageable components (pg 227 , table 7.1) From the demand side perspective –
uniqueness has to deliver perceived value to customers. From a supply side perspective – differentiation
requires that the firm does things differently to its rivals.
Achieving Demand Side Differentiation (pg 274)

Achieving Supply Side Differentiation - Drivers of Uniqueness (pg 274)

• Product features and product performance
• Complementary services (such as credit, delivery, repair)
• Intensity of marketing activities (such as rate of advertising spending)
• Technology embodied in design and manufacture
• Quality of purchased inputs
• Procedures that influence the customer experience
such as the rigor of quality control, service procedures, frequency of sales visits
• Skill and experience of employees
• Location (e.g., proximity to the customer)
• Degree of vertical integration
(which influences a firm's ability to control inputs and intermediate processes)
 Pg 277 – Table 7.1 for a detailed
one

2. Identify the resources of Pg 280 table

a firm 7.3.
And explain the Pg. 282 table
difference between 7.4
tangible, intangible, and
human resources.

3. Compare resources 7.3.1 pg. 280 Resources are the productive assets owned by the organisation. They represent the potential for profit of the
versus capabilities. organisation: whether tangible (physical or financial), intangible or human. In isolation, resources cannot create value of
provide competitive advantage. Capabilities are what the organisation can do with the resources. They process, deploy,
and harness resources to deliver valuable outcomes for the organisation.
4. Evaluate the potential 7.3.3. pg 288 The firm’s resources enable them to carry out their activities, however value is created in the way they are used (tangible
for a firm’s resources -289 and intangible form). Capabilities deploy, process and harness resources to deliver valuable outcome for the
and capabilities to organisation. Then the coherent orchestration and integration of a set of complementary capabilities is the essence of a
confer sustainable core competence.
competitive advantage
A “Core Competence” is "a harmonized combination of multiple resources and skills that distinguish a firm in the
marketplace" and therefore are the foundation of companies' competitiveness. Core competencies fulfil three criteria1:

1. Provides potential access to a wide variety of markets.

2. Should make a significant contribution to the perceived customer benefits of the end product.
3. Difficult to imitate by competitors. (Applies to many products or services of the firm)
5. Evaluate a firm’s Grant proposes that the profit earning potential of strategic resources and capabilities can be assessed by
competitive advantage testing if;
using the models of (i)  strategic resources and capabilities help the firm establish competitive advantage - are they valuable
VRIO (Barney) and (ii) from a customer perspective and rare/scarce in the market)
Strategic Importance  Can they provide sustaining competitive advantage through durability, transferability, inimitable – are
Framework (Grant) they complex, carry casual ambiguity and reflect company’s culture and history.
 And whether the organisation can appropriate that advantage.
Pg 288 Table 7.5
6. Analyse the firm’s 7.5 pg 296
strategic position using and 297
SWOT framework

7. Describe the importance 7.4 Pg 295 Dynamic capabilities refer to how an organisation can renew and recreate its strategic capabilities to meet the
of dynamic capabilities and figure needs of changing environment. The importance dynamic capabilities are to enable the organisation the
in an organisation. 7.9 ability to scan and explore opportunities across markets and technologies (sensing) , respond to identified
opportunities and threats introduced by the changes and successfully exploit the identified opportunities
(seizing) and the ability to renew and reconfigure company processes and maintaining their relevance to
consumers (transforming )

8. Formulate strategies
that exploit the internal SWOT identifies the strategic posture and capability of the firm relative too the industry in both internal and
strengths while external factors of competitiveness with a view to developing and selecting strategic options. Then TOWS
defending against analysis takes SWOT and provides a framework for strategic response to the SWOT factors. By generating
internal weaknesses. option for

 how strengths can be used to take advantage of opportunities

 strengths used to avoid or overcome threats
 how firms can take advantage of opportunities by overcoming weaknesses
 how to avoid or minimize remaining threats and weaknesses.