Competing On Resources
Fundamental market forces
1. Demand, does it meet our customers' needs, and is it competitively superior? 2. Scarcity, Is it imitable or substitutable? Is it durable? 3. Appropriability, Who owns the profits?
Test for RBV
1. Inimitability 2. Substitutability 3. Durability 4. Appropriability 5. Competitive Superiority
Strategic Implementation
1. Invest smartly in resources 2. Upgrade your resources to hold off their decay 3. leverage resources, don't underutilize resources 4. Add new competencies sequentially
3 types of resource
1. Physical (tangible) 2. Intangible 3. Organizational Capability
4 Potential Sources of Inimitability
1. Physical Uniqueness 2. Path Dependency 3. Causal Ambiguity 4. Economic Deterence
2 Absolute Sources of Competitive Superiority
1. We can sell the same quality (or value) good or service for less money than our competitor. (Wal-mart) 2. We can offer higher quality or greater value for the same price as our competitor. (Dell)
Competitive Resource
A source of enduring competitive advantage against economic rivals.
Resource Based View (RBV)
Acknowledges the importance of company specific resources and competencies, yet it does so within the context of the competitive environment.
Physical Uniqueness
Almost by definition cannot be copied. Example: mineral rights or a great location.
Economic Deterence
By investing in the resource first, the company makes it economically irrational for a competitor to copy the resource.
Substitutability
Can this resource be trumped by a different resource?
Durability
Can this resource sustain competitive advantage over time?
General history of strategy
Companies didn't think about external rivalry as a part of company strategy until the 1860's when Jay Gould forced railroad companies to consider competition.
Path Dependency
Copying this type of resource is dependent upon following the same path of creation (i.e. a company can't take any short-cuts like buying it).
Competitive Superiority
Does the resource contribute to competitive advantage over our important competitors?
Resource Based View problem
Focuses primarily on direct and indirect competitors. Should be supplemented with a good awareness of the company's broader strategic position.
RBV Analysis goal
Identify unique sources of true competitive advantage over our competitors. Identify competitors & resources
Inimitability
Is there anything that would prevent my competitor from copying this resource?
BCG Matrix problem
It did not address how value was being created across divisions and failed to compare the competitive advantage a business received from being owned by a particular company, with the costs of owning it.
SWOT Analysis problems
It gives few insights as to how managers should analyze each side of the equation.
Causal Ambiguity
It is impossible to disentangle either what a resource is or how to create it.
BCG Growth Share Matrix
Sustain the cash-generating cows, divest or harvest the dogs, take cash from the cows and invest in question marks in order to make them stars.
SWOT Analysis
The match between what a company can do (organizational strengths and weaknesses) within the universe of what it might do (environmental opportunities and threats).
Porter's 5-Forces
The structure of an industry determines the state of competition within it, and thus sets the context for company strategy.
Core Competencies problem
Too much emphasis on what goes on inside of the company.
Porter's 5-Force problem
Too much emphasis on what goes on outside of the company.
Valuable knowledge from RBV analysis
We learn what resources are valuable and what aren't.
Appropriability
Who captures the profits from this resource?
Core Competencies
assumes that the roots of competitive success are to be found inside the organization.
Disaggregation
dividing resources into subcategories to better understand whether it is competitively superior.
