Framework of Resource Based View

and Competitive Advantage

 Olivetti and Remington
What happens
when the Eastman Kodak
company’s core
product faces Sony Walkman
obsolescence?
VCR

Did the abovementioned companies serve fundamental customer

needs or deploy resources and capabilities in other markets?
Internal Analysis – Resources and
Capabilities
• Secure base
• Competitive
advantage

The firm The strategy

• Goals and values environment
Strategy
• Resources and • Competitors
capabilities • Customers
• Structure and • suppliers
systems

The
The firm-
environment-
strategy
strategy
interface
interface
 Mission statement

Is it right to base
strategy on Market-focused strategy
resources and
capabilities?
(resource-based
Instability- customers & technology
view of the
firm/RBV)
Stability-resources and capabilities
 Few examples of focus
on RBV framework
• Honda, 1948- bicycle, cars, hybrid, Formula 1,
portable generator, motorcycle
• Canon-35 mm camera, calculator, fax
machines, copy machines, printers, video
camera, camcorders, semiconductor
manufacturing equipment.
• Precision mechanics, microelectronics, fine
optics
• 3M-sandpaper, adhesive tapes, audiotapes,
videotapes, road signs, medical products and
floppy disks, etc….30,000 products
• Motorola-wireless electronics; TVs and car
radios to telecom equipment
 Resources of the
firm
Resources – productive assets owned by the company
Capabilities – what the firm can do

Do resources alone create a competitive advantage?

 Competitive Industry key
Strategy
advantage success factors

Organizational
capabilities

Resources
Tangible: physical, financial
Intangible: technology, reputation, culture
Human: skills, motivation, capacity for communication and collaboration
Tangible Resources
Financial resources and physical assets that are identified and valued in the firm’s financial
statements

Under or over valued

Understand potential for creating competitive advantage

What opportunities exist for economizing on their use?- few resources to maintain same
level of business or large volume of business, consolidating activities, cost controls

What are the possibilities for employing existing assets more profitably?
Intangible resources
More valuable

R&D and brand name

Brand names- market scope, price premium, licensing

High reputation quotients-stakeholders

Technology, patents, copyrights, trade secrets and trademarks

Human resources
Expertise and effort

Formal qualification and experience

Attitude, motivation, learning capacity and potential for collaboration

Interpersonal skills, EI

Culture- strategic importance

 2001-Glitter,
soundtrack –worst in the decade
EMI drops $80 m contract
Nervous breakdown

Lyor Cohen-CEO, Island Def Jam records

Mariah’s competitive advantage- great voice, song writer

Signed with Cohen in 2002

The emancipation of Mimi
Biggest selling album – 2005
2006- Grammy

Revival at Disney begins in 1984

28,000 acres in Florida, film library, Euro Disney, Disney stores, movie studio (Touchstone)
A resource must pass the test to qualify as the
basis for an effective strategy:
The test of inimitability: Is the resource hard to copy?
• Physical uniqueness
• Path dependency
• Causal ambiguity
• Economic deterrence

The test of durability: How quickly does this resource depreciate?

The test of appropriability: Who captures the value that the resource creates?

The test of substitutability: Can a unique resource be trumped by a different resource?

The test of competitive superiority: Whose resource is really better?

 Firm’s capacity to deploy resources for a
desired end result

Those capabilities that helps in gaining a

competitive advantage
Organizationa
l capabilities Selznick, distinctive competence: those
things that an organization does particularly
well in relation to its competitors

Prahalad and Hammel, core competence:

capabilities that are fundamental to a firm’s
strategy and performance
Core
competence…..
• Make a disproportionate
contribution to ultimate customer
value, or to the efficiency with
which that value is delivered
• Provide a basis for entering new
markets
• Sony and RCA –product
management over competence
management??
Classification of
capabilities
• Functional Analysis
• Value Chain Analysis
Functional classification of organizational capabilities
Functional area Capability

Corporate functions •Financial control

•Strategic innovation
•Strategic management of multiple businesses
•Multidivisional coordination
•Acquisition management
•International management

Management information Comprehensive, integrated MIS network linked to managerial decision making
R&D •Research
•Innovative NPD
•Fast-cycle NPD
Operations •Efficiency in volumes manufacturing
•Continuous improvements in operations
•Flexibility and speed of response
Product design Design capability
Marketing •Brand management
•Promoting reputation for quality
•Responsiveness to market trends
Sales and Distribution •Effective sales promotion and execution
•Efficiency and speed of order processing
•Speed of distribution
•Quality and effectiveness of customer service
Value chain
Resource and Capability in practice
Identify key resources and
capabilities

Appraise resources and • Use of benchmarking

capabilities: importance, • The process of identifying, understanding and adapting outstanding
strengths and weaknesses practices from organizations anywhere in the world to help
organization improve its performance
relative to rivals’

Bring together important

and relative strengths
Establish and sustain competitive advantage;
appropriate the returns to that competitive advantage

Extent of
competitive • Scarcity
advantage
established
• relevance
profit-
earning
Sustainability
• durability
potential
of a
of the
competitive
• Transferability
resource advantage • replicability
or
capability
• Property rights
• Relative
appropriability
bargaining power
• embeddedness
Managing strengths and weaknesses

Exploiting key strengths

• Key strength is engineering- technical sophistication, safety

• Managing government relations-potential growth markets

Managing key weaknesses

• Outsource
• Fatboy

Superfluous strengths-those that are not significant for competitive advantage

• Lower the level of investment

Developing resources
and capabilities
• Replicating capabilities
• Developing new capabilities-M&As, strategic
alliances, organisation culture
• Capability as a result of early experience
The emergence of competitive advantage
Resource
heterogeneity among
firms means
External resources of differential impact
change-customer
demand, prices,
technology Some firms faster and
more effective in
How does competitive exploiting change
advantage emerge?

Some firms have

Internal sources of
greater creative and
change
innovative capability
 How agile and fast are you to
respond?

Competitive
advantage from Nokia, Dell, Zara
responsiveness
to change
Time-based competition by BCG
Competitive advantage
from
innovation
• New products, processes,
ideas, new knowledge,
approaches
• Strategic innovation- creating
value for customers from novel
experiences, products, or
product delivery or bundling
• Sephora, Nucor, SW Airlines,
Nike, Apple
 Reconfigure the value chain for new game strategies

Value Technology & Manufacture Product Marketing Distribution Service

chain design range
activity

Xerox Dry Mostly in- Wide Machines Direct sales Directly

xerography; house leased to force operated
high copy customers service
speed; many organization
features

Savin Liquid toner; Sourced from Narrow Sold to Through Service

low copy Ricoh in Japan range for customers dealers through
speed; few different dealers and
features and volumes independent
options and uses service
engineers
 Threats- imitation or innovation

Sustaining Create isolating mechanisms

competitive
advantage Process of competitive imitation:
identification, incentive, diagnosis,
resource acquisition

First mover advantage

 identification

• Obscure superior performance

incentive

• Deterrence-signal aggressive intentions to imitators

• Preemption-exploit all available investment
opportunities
Types of isolating
diagnosis
mechanisms • Rely on multiple sources of competitive advantage
to create causal ambiguity

Resource acquisition

• Base competitive advantage on resources and

capabilities that are immobile and difficult to
replicate