Unit 8 Competing on Resources

8/8/2019 Unit 8 Competing on Resources

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UNIT 8


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It explains how a companys resources driveits performance in a dynamic competitiveenvironment.

The RBV combines the internal analysiswithin companies with the external analysisof the industry and competitiveenvironment.

It explains why some competitors are moreprofitable than others and how to put theidea of core competence into practice.


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RBV sees companies as different collections

of physical and intangible assets and

capabilities.

No two companies are alike because no twocompanies have had the same set of

experiences, acquired the same assets and

skills or built the same organisational

cultures. These assets and capabilities determine how

efficiently and effectively a company

performs its functional activities.


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What gives your company a competitive

edge? Your strategically valuable resources

the ones enabling your enterprise to performactivities better or more cheaply than rivals.

These can be physical assets, intangibleassets and capabilities.


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Resources Are a firms assets,

including people andthe value of its brand

name. Represent inputs into

a firms productionprocess, such as: Capital equipment

Skills of employees Brand names

Financial resources

Talented managers

Types of Resources

Tangible resources

Financial resources

Physical resources Technological

resources

Organizationalresources

Intangible resources Human resources

Innovation resources

Reputation resources


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Financial Resources The firms borrowing capacity

The firms ability to generate

internal funds

Organizational Resources The firms formal reporting

structure and its formal planning,

controlling, and coordinatingsystems

Physical Resources Sophistication and location of afirms plant and equipment

Access to raw materials

Technological Resources Stock of technology, such aspatents, trademarks, copyrights,

and trade secrets


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Human Resources Knowledge

Trust

Managerial capabilities

Innovation Resources Ideas

Scientific capabilities

Capacity to innovate

Reputational Resources Reputation with customers

Brand name

Perceptions of product quality,

durability, and reliability

Reputation with suppliers


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Organisational capabilityis embedded in acompanys routines, processes and culture.

(example) Japanese auto companies have

consistently excelled through their

capabilities-- first in low cost, lean

manufactuing; next in high-qualityproduction; and then in fast product

development.


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Competitive advantage, whatever its source,

ultimately can be attributed to the

ownership of a valuable resource that

enables the company to perform activitiesbetter or more cheaply than competitors.

Superior performance will therefore bebased on developing a competitivelydistinct set of resources and deploying themin a well--conceived strategy.


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STRATEGIC COMPETITIVENESS

COMPETITIVE ADVANTAGE

CORE COMPETENCIES

ORGANISATIONAL

CAPABILITIES

ORGANISATIONAL

RESOURCES


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Resources can not be evaluated in isolation,because their value is determined in theinterplay with market forces.

A resource that is valuable in a particularindustry or at a particular time might fail tohave the same value in a different industryor chronological context.

(example) a brand name was once veryimportant in the personal computer , but it isno longer.


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1. The test of inimitability: Is the resourcehard to copy?

Inimitability is at the heart of valuecreation because it limits competition.

If a resource is inimitable, then any profit

stream it generates is more likely to be

sustainable.

Possessing a resource that competitors

easily can copy generates only temporary

value.


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Inimitability doesnt last forever.

Competitors eventually will find ways to copy

most valuable resources.

But managers can forestall them and sustain

profits for a whileby building their

strategies around resources that have at

least one of the following four

characteristics:


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The first is physical uniqueness, whichalmost by definition can not be copied.

(example) a wonderful real estate location,mineral rights.

The second is path dependency.A greatnumber of resources can not be imitated

because of what economists call path

dependency.


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Simply put, these resources are unique and

therefore scarce because of all that has

happened along the path taken in their

accumulation.

As a result, competitors can not go out and

buy these resources instantaneously. Instead,

they must be built over time in ways that aredifficult to accelerate.

(example) brand loyalty, R&D programs.


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The third source of inimitability is causalambiguity.

Causally ambiguous resource are oftenorganisational capabilities.

These exist in a complex web of social

interactions and may even depend criticallyon particular individuals.

(example) Southwest Vs Continental andUnited Airlines.


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It will be difficult to reproduce Southwests

culture of fun, family, frugality and focus

because no one can quite specify exactlywhat it is or how it arose.

The final source of inimitability, economic

deterrence, occurs when a companypreempts a competitor by making a sizable

investment in an asset.


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2. The test of durability; How quicklydoesthis resource depreciate?

The longer lasting a resource is, the more

valuable it will be. Like inimitability, this test asks whether the

resource can sustain competitive advantage

over time.

(example) Disney brand name survivedalmost two decades of neglect between

Walt Disneys death and the installation of

Michael D.Eisner and his team.


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4. The test ofsubstitutability: Can a uniqueresource be trumped bya different

resource?

It is not easily substituted.

( example) because of easy substitution,

the steel industry lost a major market in

beer cans to aluminum-can makers.


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5. The test of competitive superiority:Whose resource is reallybetter?

They are superior to similar resources your

competitors own. Every company can identify one activity

that it does relatively better than otheractivities and claim that as its corecompetence.

Sometimes the valuable resource is acombination of skills, none of which issuperior by itself but which, whencombined, make a better package.


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Managers should build their strategies on

resources that meet the five tests outlined

above.

The best of these resources are oftenintangible,( the culture, the technology and

the transformational leader), not physical.

The tests capture how market forces

determine the value of resources.They force mangers to look inward and

outward at the same time.


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Strategy requires managers to look forward

as well.

Companies fortunate enough to have a trulydistinctive competence must also be wise

enough to realise that its value is eroded by

time and competition.

( example) in 1970s Xerox believed itsreprographic capability to be inimitable. And

while Xerox slept, Canon took over world

leadership in photocopiers.


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In world of continuous change, companies

need to maintain pressure constantly at thefrontiersbuilding for the next round of

competition.

Managers must therefore continually investin and upgrade their resources.


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Investing in resources:

Because all resources depreciate, an

effective corporate strategy requires

continual investment in order to maintainand build valuable resources.

At the same time, investing in core

competencies without examining thecompetitive dynamics that determine

industry attractiveness is dangerous.


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Upgrading resources:

Upgrading resources means moving beyondwhat the company is already good at, which

can be accomplished in a number of ways.

The first is by adding new resources, the wayIntel added a brand name, Intel Inside, to itstechnological resource base.

The second is by upgrading to alternativeresources that are threatening thecompanys current capabilities.


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Finally, a company can upgrade its resources

in order to move into structurally more

attractive industry.

Perhaps the most successful examples of

upgrading resources are in companies that

have added new competencies sequentially,

often over extended period of time.

(Example) Sharp Electronics


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In the late 1950s, assembler of T.V.s & radios.

In 1964, produced the worlds first digital

calculator.

Did backward integration into manufacturing

its own specialised semiconductors and

committed to new LCD technology.

Came out with the Wizard electronicorganiser.

It came with Viewcam in 1992.


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At each stage, Sharp took on a new

challenge, whether to develop or improve a

technology or to enter or attack a market.

It also opened new avenues for expansion.

Today, Sharp is the dominant player in the

LCD market and a force in consumer

electronics.


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Leveraging resources:

Corporate strategies must strive to leverage

resources into all the markets in which those

resources contribute to competitiveadvantage or to compete in new markets

that improve the corporate resources.

(example) Disney leveraged its resources intonew markets such as hotels, retailing and

publishing.


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Good corporate strategy requires continual

reassessment of the companys scope.

The question strategists must ask is, How far

can the companys valuable resource be

extended across markets?


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Unit 8 Competing on Resources

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