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Resource-Based Approach

Internal strategic factors: Critical strengths and weaknesses that are likely to determine if the firm will be able to take advantage of opportunities while avoiding threats.

• A resource is an asset, competency, process, skill, or knowledge controlled by the corporation. Barney’s VRIO Framework to evaluate firm’s key resources: Value: Does it provide competitive advantage? Rareness: Do other competitors possess it? Imitability: Is it costly for others to imitate? Organization: Is the firm organized to exploit the resource?

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Grant’s resource-based approach to strategy analysis
1. Identify and classify the firm’s resources in terms of strengths and weaknesses. 2. Combine the firm’s strengths into specific capabilities. - Core Competencies - Distinctive Competencies

.3. Appraise the profit potential of these resources and capabilities in terms of their potential for sustainable competitive advantage and the ability to harvest the profits resulting from the use of these resources and capabilities.

5. . Select the strategy that best exploits the firm’s resources and capabilities relative to external opportunities.4. Identify resource gaps and invest in upgrading weaknesses.

Imitability: rate at which a firm’s underlying resources and capabilities can be duplicated.Determine The Sustainability of An Advantage Durability: rate at which a firm’s underlying resources and capabilities depreciate or become obsolete. .

• Transparency: speed with which other firms can understand the relationship of resources and capabilities supporting a successful firm’s strategy. Example: Gillette’s Sensor razor design was very difficult to copy. because the manufacturing equipment needed to produce it was very expensive and complicated. .

• Transferability: the ability of competitors to gather the resources and capabilities necessary to support a competitive challenge. Example: It may be very difficult for a wine maker to duplicate a French winery’s key resources of land and climate. . if the imitator is located in India.

. Example: Wal-Mart’s sophisticated cross-docking system. employee skills. While Wal-Mart has the same resources in terms of retail space. and equipment as many other discount chains. it has the unique capability to manage its resources for maximum productivity. which provides the company a substantial cost advantage by improving its ability to reduce shipping and handling costs.• Replicability: ability of competitors to use duplicated resources and capabilities to imitate the other firm’s success.

Wal-Mart was able to effectively leverage their logistical volume into a core strategic competency. .• Retail cross-dock example: Using the cross-dock technique.

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