Strategic Management: Value Creation, Sustainability, and Performance, 3e, 2014

Resource-Based Competitive Advantage

Chapter 6

1. Compare types of resources, relationship to competitive advantage.

2. Difference between resources and capabilities.

3. Categories of resources.

4. How to analyze resources and capabilities.

Learning Objectives

Tangible Hard assets; on balance sheet

Intangible Soft assets; not usually on balance

sheet

Ordinary Necessary to compete; not

sufficient for advantage

Extraordinary Basis for sustainable competitive

advantage

Types of Resources

KnowledgeSocialHumanFinancial

OrganizationalTechnologyPhysical

Categories of Resources

Dimensions of Extraordinary ResourceValuable It is ValuableRare It is RareImitation It is difficult to

ImitateSubstitution It cannot be

Substituted forTradable It cannot be Traded

for VRIST

Sustainable Competitive Advantage

Historical conditions Often based on original opportunity

recognition e.g. locking up tangible resources

Causal ambiguity Causes of advantage poorly understood Often based on tacit components

Social complexity Many "moving parts" that interact Impossible to tell what each part does

Sources of Durable Advantage

Capabilities

"Sets of tightly integrated activities, skills, routines that rely on coordinated resources, creating value in a superior fashion."

Note connections with Value Chain.

Capabilities are Built from Extraordinary Resources

Capabilities and Resources

Improve new product development capability

Embed researchers in emerging nation communities to observe use & practices

Create more vital contacts upstream with suppliers and scientists

Results Enhanced opportunity recognition

and value creation capabilities

P&G's "Connect & Develop"

Finance, MIS, Legal Services

Human Resource Management

Research & Development

Procurement

Inp

uts

Op

era

tio

ns

Dis

trib

uti

on

Ma

rket

ing

&

Sal

es

Se

rvic

e

Raw Materials

Suppliers

Distribution

Customers

50,000 R&D workersin 300 suppliers

70 technologyentrepreneurs

Connections are valuable, rare, inimitable, non-substitutable, non-tradable

V R I S T

P&G's "Connect & Develop"

Develop list of resources and capabilities Tough to identify intangibles at the core Probe deeper: "What is the cause of this

outcome?"

Use VRIST framework to assess truly extraordinary resources & capabilities

Develop plans to leverage extraordinary resources & capabilities

Evaluate the relevance of extraordinary resources to industry Key Success Factors

Conducting a Resource Analysis