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Module-6 Notes

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Module-6 Notes

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sherrellpenney
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© © All Rights Reserved
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Module 6 – Article Notes

Paper: Competing on Resources

Resource-based view of the firm (RBV): combines the internal analysis of the company with
the external analysis of the industry.
● Resources cannot be evaluated in isolation, because their value is determined in the
interplay with market forces
Types of resources:
1. Physical assets (what’s on the balance sheet basically (e.g., prime location)
2. Intangible assets (a strong brand, secret formula)
3. Capabilities (process, people, culture)

A resource is strategically valuable if it passes five tests:


1. Test of inimitability: Is the resource hard to copy?
a. Physical uniqueness (cannot be copied)
b. Path dependency (unique because it happened over a long time)
c. Causal ambiguity (impossible to disentangle activities interconnectedness)
d. Economic deterrence (sizable investment that cannot be matched, limited market
potential)
2. Test of durability: how quickly does the resource depreciate?
a. The longer lasting a resource is, the more valuable it will be
b. Most resources have a limited life and will earn only temporary profits
3. Test of appropriability: Who captures the value that the resource creates
a. Not all profits from a resource automatically flow to the company owning it
b. Value subject to bargaining (customers, distributors, suppliers, employees)
4. Test of substitutability: can a resource be replaced by a different one?
5. Test of competitive superiority: Whose resource is better?
a. Resources must be assessed relative to competition
b. Instead of “core competencies” use “distinctive competency”
c. Who among the competitors has the better resource/skill?

Invest in your most valuable resources


● An effective corporate strategy requires continual investment in order to maintain and
build valuable resources
● Investment in core competencies must be accompanied by examining the industry
dynamics including competition

Upgrade your resources


● Upgrading mean moving beyond what the company is already good at
○ By adding new resources
○ Upgrading to alternative resources that are threatening the company’s current
capabilities
● Most successful companies have added new competencies sequentially over extended
periods of time (e.g., Sharp)
Module 6 – Article Notes

Leveraging resources
● Strive to leverage resources into all the markets in which those resources contribute to a
competitive advantage. Or compete in new markets that improve the resources

Paper: Look inside for competitive advantage

SWOT framework
● Porter five-forces model to evaluate external factors (opportunities, threats)
● Evaluate internal factors (strengths and weaknesses) to fill in the blanks created by
SWOT framework

To fill in the internal blanks created by SWOT analysis, you need to answer four questions
about resources and capabilities:

1. The question of Value


a. Do a firms’ resources and capabilities add value by enabling it to exploit
opportunities or neutralize threats?
b. A way to link the analysis of internal resources with environmental factors

2. The question of rareness


a. If resources are not rare, they will be sources of competitive parity
b. Do other competitors possess these valuable resources?
c. If resources are valuable but not rare, they may enable a temporary competitive
advantage

3. The question of imitability


a. First with resources that can’t be imitated will have a sustained competitive
advantage
b. Reasons why imitating internal resource attributes may be costly:
i. The importance of history (skills, abilities, picked up over time…)
ii. The importance of numerous small decisions
iii. The importance of socially complex resources: things like reputation,
trust, and culture are difficult to imitate (compared to reverse engineering
a product…)

4. The question of organization


a. Is a firm organized to exploit full potential of resources?
b. Combination of resources and capabilities lead to full competitive advantage
Module 6 – Article Notes

Sustainable competitive advantage cannot be created by evaluating environmental opportunities


and threats alone.

Creating sustainable competitive advantage depends on unique resources and


capabilities that a firm brings to competition in its environment

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