Resource-based View of the Firm
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Transcript of Resource-based View of the Firm
Resource-based View of the Firm
(Barney, 1986; S. Hunt, 1990)
1.1. Strategy dictated by Strategy dictated by unique resources and unique resources and capabilities of the firm capabilities of the firm (what can the firm do (what can the firm do best?)best?)
2.2. Find an environment in Find an environment in which to exploit these which to exploit these assets (where are the best assets (where are the best opportunities?)opportunities?)
Resource-based Model of Exemplar Returns
1. Firm’s Resources1. Firm’s Resources
1.1. Identify the firm’s Identify the firm’s resources-- strengths and resources-- strengths and weaknesses compared with weaknesses compared with competitorscompetitorsResources: inputs into a firm’s Resources: inputs into a firm’s production processproduction process
Resource-based Model of Exemplar Returns
Resource-based Resource-based ModelModel
ResourcesResources
- Brands- Brand equity- Products- People/Talent- Business processes- Innovation- Learning- Macro Structure- Vision Direction- Strategies- Core Values
-Market Orientation- Relationship Marketing- Market Segmentation, Positioning and Targeting- Marketing Mix- Marketing Research- Competitive Intelligence- Core Competencies-Increased Capabilities-Cross-Functional Teams
(permanent)
Resources: Examples (Tangible and Intangible)
2.2. Determine the firm’s Determine the firm’s capabilities--what it can do capabilities--what it can do better than its competitorsbetter than its competitors
Capability: capacity of an Capability: capacity of an integrated set of resources to integrated set of resources to integratively perform a task or integratively perform a task or activityactivity
Resource-based Model of Exemplar Returns
Resource-based Resource-based ModelModel
ResourcesResources
CapabilityCapability
ResourcesResources
Inputs to a firm’s production process.Inputs to a firm’s production process.
CapabilityCapability
Capacity for an integrated set of resources to integratively perform a task or activity.
Capacity for an integrated set of resources to integratively perform a task or activity.
Competitive Advantage
Ability of a firm to outperform its rivals
Action required:Determine how firm’s resources and capabilities may create competitive advantage.
Resource-Based Model of Exemplar Returns
ResourcesResources
Inputs to a firm’s production process.Inputs to a firm’s production process.
CapabilityCapability
Capacity for an integrated set of resources to integratively perform a task or activity.
Capacity for an integrated set of resources to integratively perform a task or activity.
Competitive AdvantageCompetitive Advantage
Ability of a firm to outperform its rivalsAbility of a firm to outperform its rivals
An AttractiveIndustryLocation of an industry with opportunities that can be exploited by the firm’s resources and capabilities
Action required:Locate an attractive industry.
Resource-Based Model of Exemplar Returns
ResourcesResources
Inputs to a firm’s production process.Inputs to a firm’s production process.
CapabilityCapability
Capacity for an integrated set of resources to integratively perform a task or activity.
Capacity for an integrated set of resources to integratively perform a task or activity.
Competitive AdvantageCompetitive Advantage
Ability of a firm to outperform its rivalsAbility of a firm to outperform its rivals
An AttractiveIndustryAn AttractiveIndustry
Location of an industry with opportunities that can be exploited by the firm’s resources and capabilities
Location of an industry with opportunities that can be exploited by the firm’s resources and capabilities
Action required:Select strategy that best exploits resources and capabilities relative to opportunities in environs.
Strategy Formulation and Implementation
Strategic actions taken to earn above-average returns
Resource-Based Model of Exemplar Returns
ResourcesResources
Inputs to a firm’s production process.Inputs to a firm’s production process.
CapabilityCapability
Capacity for an integrated set of resources to integratively perform a task or activity.
Capacity for an integrated set of resources to integratively perform a task or activity.
Competitive AdvantageCompetitive Advantage
Ability of a firm to outperform its rivalsAbility of a firm to outperform its rivals
An AttractiveIndustryAn AttractiveIndustry
Location of an industry with opportunities that can be exploited by the firm’s resources and capabilities
Location of an industry with opportunities that can be exploited by the firm’s resources and capabilities
Action required:Action required:Maintain selected strategy in order to outperform industry rivals.
Strategy Formulation and Implementation
Strategy Formulation and Implementation
Strategic actions taken to earn above-average returns
Strategic actions taken to earn above-average returns
Superior Returns
Earning of above-average returns
Resource-Based Model of Exemplar Returns
Nonsubstitutable the firm must be organized appropriately to obtain the full benefits of the resources in order to realize a competitive advantage
Valuable allow the firm to exploit opportunities or neutralize threats in its external environment
Rare possessed by few, if any, current and potential competitors
Costly to Imitate when other firms either cannot obtain them or must obtain them at a much higher cost
Resources and capabilities lead to Competitive Advantage when they are:
TEACHING STRATEGIC AND GLOBAL STRATEGY: EXAMPLES OF THE FIRM’S RESOURCES AS A RESOURCE –
BASED VIEW OF THE FIRM
•Firm resources
•Firm competences
•Competitive advantage
•Sustainable competitive advantage
•Dynamic competition
•Static-equilibrium competition
•Innovation
•Organizational learning
•Marketing research and competitive intelligence
•Competitor analysis
•Environmental scanning
•Market segmentation, targeting, and positioning
• Relationship Marketing
• Market orientation
• Brand equity
• Marketing mix strategy
• Product strategy
• Distribution strategy
• Pricing Strategy
• Promotion Strategy
• Sales force strategy
Dr. Shelby Hunt, Texas Tech University, 2000
Read: Competition is the disequilibrating, ongoing process that consists of the constant struggle among firms for a comparative advantage in resources that will yield a marketplace position of competitive advantage and, thereby, superior financial performance. Firms learn through competition as a result of feedback from relative financial performance “signaling” relative market position, which, in turn signals relative resources. Source: Hunt and Morgan (1997)
Societal Resources Societal Institutions
Competitors-Suppliers Consumers Public Policy
Resources Market Position Financial Performance
• Comparative Advantage • Parity • Comparative Disadvantage
• Competitive Advantage • Parity• Competitive Disadvantage
• Superior/Exemplar • Parity• Inferior
FIGURE 1
A Schematic of the Resource-Advantage Theory of Competition
Competitive Disadvantage
Parity Position
Competitive Advantage
Figure Effectiveness Competition
Relative Resource-Produced Value
Lower Parity Superior/ Exemplar
Dr. Shelby Hunt, Texas Tech University, 2000
Competitive Advantage
Competitive Disadvantage
Competitive Advantage
Competitive Disadvantage
Lower Parity Superior/ Exemplar
Higher
Relative Resource Costs
Parity
FigureEfficiency-Effectiveness Competition
Relative Resource-Produced Value
Lower
ParityPosition
Dr. Shelby Hunt, Texas Tech University, 2000
COMPETITIVE ADVANTAGE
1. Marketplace positions of competitive advantage lead to superior financial performance.2. It is a comparative advantage in resources that leads to marketplace positions of competitive advantage.
SUSTAINABLE COMPETITIVE ADVANTAGE
1. Factors internal to the firm Reinvest Know thyself (causal ambiguity) Adapt Proactively innovate
Dr. Shelby Hunt, Texas Tech University, 2000
SUSTAINABLE COMPETITIVE ADVANTAGE (CONTINUED)
2. Factors external to the firm Consumer activities Governmental actions Competitor actionsa. Acquisition of same resourcesb. Imitation of resourcesc. Substitution of resourcesd. Major innovation (reactive innovation) in resources
3. Characteristics of offering Offering → Consumers (Causal ambiguity) Resources → Offering (Causal ambiguity)
4. Characteristics of resources Mobility Complexity Interconnectedness Mass efficiencies Tacitness Time compression diseconomies
Dr. Shelby Hunt, Texas Tech University, 2000
FIRM COMPETENCES
Distinct “packages” or bundles of basic resources.
Definition: Socially complex, interconnected, packages of
tangible basic resources (e.g., specific machinery) and intangible basic resources (e.g., the skills and knowledge of specific employees and
specific organizational policies and procedures) that fit coherently
together in a synergistic manner and enable firms to produce valued
market offerings efficiently and/or effectively.
Dr. Shelby Hunt, Texas Tech University, 2000
DYNAMIC COMPETITION
Firm’s motivation is superior financial performance, i.e., more than, better than.
The constant struggle among firms for comparative advantages in resourcesthat will yield marketplace positions of competitive advantage and, thereby, superior
financial performance.
Renewal Competences: The firm’s ability to renew itself based on (1) reacting to changes in its environment and/or (2) proactively changing its
environment.
“Dynamic capabilities” (Teece and Pisano 1994)“Higher order learning” (Dickson 1996)“Industry foresight” (Hamel and Prahalad 1994)
STATIC-EQUILIBRIUM COMPETITION
Competition occurring in the “parity” cell of the competitive position matrix.
Requires homogeneous resources, homogeneous products, absence of endogenous innovation.
Dr. Shelby Hunt, Texas Tech University, 2000
INNOVATION
Proactive innovation: Innovations that are not prompted by marketplace positions of competitive disadvantage, i.e., “entrepreneurial innovations.”
Reactive innovation: Innovations that are prompted by marketplace positions of competitive disadvantage.
ORGANIZATIONAL LEARNING
Firms learn through competition as a result of feedback from relative financial performance “signaling” relative market position, which, in turn signals relative resources.
Dr. Shelby Hunt, Texas Tech University, 2000
MARKETING RESEARCH AND COMPETITIVE INTELLEGENCE
An organizational competence. Guides proactive innovation. Informs reactive innovation.
MARKET SEGMENTATION, POSITIONING, AND TARGETING
Competition is segment-by-segment.Proactive innovation
MARKETING MIX (PRODUCT, PRICING, PROMOTION, AND DISTRIBUTION) STRATEGIES
Firm competences
Dr. Shelby Hunt, Texas Tech University, 2000
RELATIONSHIP MARKETING
Relational resources
MARKET ORIENTATION
Firm competence Guides proactive innovationInforms reactive innovation
BRAND EQUITYIntangible, legal resource
Dr. Shelby Hunt, Texas Tech University, 2000
FIRM RESOURCES
Definition: The tangible and intangible entities available to the firm that enable it to produce efficiently and/or effectively a market offering that has
value for some market segment(s).
Characteristics: Significantly heterogeneous and imperfectly mobile.
Categories:
1. Financial (e.g., cash reserves and access to financial markets)2. Physical (e.g., plant, raw materials, and equipment)3. Legal (e.g., trademarks and licenses)4. Human (e.g., the skills and knowledge of individual employees)5. Organizational (e.g., controls, routines, cultures, and competences)6. Informational (e.g., knowledge about market segments, competitors, and technology)7. Relational (e.g., relationships with competitors, suppliers, and customers)
Dr. Shelby Hunt, Texas Tech University, 2000
ParityPosition
CompetitiveAdvantage
Competitive Advantage
Competitive Disadvantage
Lower
Parity
Higher
Relative Resource Costs
FigureEfficiency-Effectiveness Competition
CompetitiveAdvantage
Lower Parity Superior/ Exemplar
Dr. Shelby Hunt, Texas Tech University, 2000
Relative Resource-Produced Value
Figure 2Competitive Position Matrixa
1
Indeterminate Position
2
Competitive Advantage
3
Competitive Advantage
6
Competitive Advantage
5
Parity Position
4
Competitive Disadvantage
Lower Parity Superior/ Exemplar
Relative Resource-Produced Value
Lower
Parity
Higher
9
Indeterminate Position
8
Competitive Disadvantage
7
Competitive Disadvantage
RelativeResourceCosts
Source: Hunt and Morgan (1997).
aRead: The marketplace position of competitive advantage identified as Cell 3 results from the firm, relative to its competitors, having aResource assortment that enables it to produce an offering for some market segment(s) that (a) is perceived to be of superior value and (b)Is produced at lower costs.
Figure 2Competitive Position Matrix
1
Indeterminate Position
2
Competitive Advantage
3
Competitive Advantage
6
Competitive Advantage
5
Parity Position
4
Competitive Disadvantage
Lower Parity Superior/ Exemplar
Relative Resource-Produced Value
Lower
Parity
Higher
9
Indeterminate Position
8
Competitive Disadvantage
7
Competitive Disadvantage
RelativeResourceCosts
Dr. Shelby Hunt, Texas Tech University, 2000
Resources Market Position Financial Performance
• Comparative Advantage • Parity • Comparative Disadvantage
• Competitive Advantage • Parity• Competitive Disadvantage
• Superior/Exemplar • Parity• Inferior
FIGURE
Resources and Performance
Dr. Shelby Hunt, Texas Tech University, 2000
Market Position Financial Performance
• Competitive Advantage • Parity
• Competitive Disadvantage
• Superior/Exemplar • Parity
• Inferior
FIGURE
Competitive Advantage and Performance
Dr. Shelby Hunt, Texas Tech University, 2000
Perfect Competition vs. R-A
P1: Demand is Heterogeneous across industries, homogeneous within, static
Heterogeneous across industries and within, dynamic
P2: Consumer information is
Perfect and costless Imperfect and costly
P3: Human motivation is
Self-interest maximization Constrained self-interest seeking
P4: The firm’s objective is
Profit maximization Superior financial performance
P5: The firm’s information is
Perfect and costless Imperfect and costly
Perfect Competition Theory R-A Theory