CH 4

resources

any asset that a firm can draw in when formulating and implementing strategy, can be tangible or intangible

using SWOT

1. managers gather info for a swot analysis in order to link internal and external factors 2. managers use the swot matrix to develop strategic alternatives 3. strategist needs to carefully evaluate the pros/cons of each strategic alternative

SWOT quadrants

1. s-o: derive offensive alternatives by using internal strength to exploit external opportunity 2. w-t: derive defensive alternatives by eliminating or minimizing an internal weakness in order to mitigate an external threat 3. s-t: use an internal strength to minimize the effect of an external threat 4. w-o: focus here in shoring up an internal weakness to improve ability to take advantage of an external opportunity

value chain analysis

a firm's core competency is generally found in a network linking different but distinct activities, each contributing to the firm's strategic position as either a low-cost leader or differentiator

value chain: primary activities

firm activities that add value directly by transforming inputs into outputs as the firm moves a product or service horizontally along an internal value chain

value chain

internal activities a firm engages in when transforming inputs into outputs; each activity adds incremental value -primary activities directly add value -support activities add value indirectly

SWOT matrix

internal s and w concern resources, capabilities, and competencies external o and t can be captured with the five forces model and a PESTEL analysis s- internal, positive w- internal, negative o- external, positive t- external, negative

capabilities

organizational and managerial skills needed to orchestrate a diverse set of resources and deploy them strategically, intangible

how are core competencies, resources and activities, and competitive advantage linked

resources reinforce core competencies while capabilities allow managers to orchestrate core competencies. strategic choices are expressed in specific firm activities, which leverage core competencies for competitive advantage. core competencies that are not continuously nourished will eventually lose their ability to yield a competitive advantage

what are value chain supporting.primary activities

support: research and development, information systems, HR, accounting and finance, firm infrastructure, incl. processes, policies and procedures primary: supply chain management, operations, distribution, marketing and sales, after-sales services

VRIO framework

theoretical framework that explains and predicts firm-level competitive advantage identifies certain types of resources as key to superior firm performance for a resource to be the basis of competitive advantage it my be Valuable, Rare, costly to Imitate, and the firm must be Organized to capture the value of it resources are defined to include any assets and any capabilities and competencies that a firm can draw upon when formulating and implementing strategy

resource immobility

assumption in the rbv that a firm has resources that tend to be "sticky" and that do not move easily from firm to firm

resource heterogeneity

assumptions in the rbv that a firm is a bundle of resources and capabilities that differ across firms

how to sustain competitive advantage (isolating mechanisms)

barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy: better expectations of future resource value path dependency causal ambiguity social complexity intellectual property (IP) protection

dynamic capabilities: core rigidity

a former core competency that turned into a liability because the firm failed to hone, refine, and upgrade the competency as the environment changed

when is a resource costly to imitate

if, firms that do not possess the resource are unable to develop or buy the resource at a reasonable price if the resource is valuable, rare, and costly to imitate, then it is an internal strength and a core competency competitors will try direct imitation and or substitution which is often accomplished through strategic equivalence

when is a resource valuable

if, it enables the firm to exploit an external opportunity it enables the firm to offset and external threat it enables a firm to increase its economic value creation (V-C)

when is a resource rare

if, only one or a few firms possess it the number of firms that possess it is less than the number of firms it would require to reach a state of perfect competition

four questions of VRIO framework

is the resource... valuable? -no = competitive disadvantage -yes, rare? -no = competitive parity -yes, costly to imitate? -no = temporary competitive advantage -yes, organized to capture value? -no = temporary competitive advantage -yes = sustainable competitive advantage

what are the three core competencies

resources, capabilities, activities

isolating mechanisms: better expectations of future resource value

sometimes firms acquire a resource at a low cost which lays the foundation for competitive advantage and more a greater resource future value

core competencies

unique strengths, embedded deep within a firm, that are critical to gaining and sustaining competitive advantage

isolating mechanisms: intellectual property

a critical intangible resource that can provide a strong isolating mechanism, and thus help to sustain a competitive advantage can make direct imitation attempts difficult, if not outright illegal

dynamic capabilities

a firm's ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources over time in its quest for competitive advantage DCs are essential to move beyond a short lived advantage and create a sustainable competitive advantage for a firm to sustain its advantage, any fit between internal strengths and the external environment must be dynamic firm must be able to change its internal resource base as its external environment changes the goal should be to develop resources, capabilities, and competencies that create a strategic fit with the firm's environment rather than creating a static fit, the firm's internal strengths should change with its external environment in a dynamic fashion not only allow firms to adapt to changing market conditions, but they also enable firms to create market changes that can strengthen their strategic position the goal should be to develop resources

dynamic capabilities perspective

a model that emphasizes a firm's ability to modify and leverage its resource base in a way that enables it to gain and sustain competitive advantage inflows: investments in resources flow: intangible resource stocks outflows: leakage, forgetting

resource-based view (RBV)

a model that sees certain types of resources as key to superior firm performance tangible resources have physical attributes, they are visible (labor, capital, land, etc.) intangible resources do not have physical attributes, they are invisible (culture, knowledge, brand equity, etc.) RBV offers useful insights to managers about how to formulate a strategy that will enhance the chances of gaining competitive advantage

isolating mechanisms: social complexity

a situation in which different social and business systems interact with one another

isolating mechanisms: casual ambiguity

a situation in which the cause and effect of a phenomenon are not readily apparent

isolating mechanisms: path dependence

a situation in which the options one faces in the current situation are limited by decisions made in the past *trying to achieve the same outcome in less time, even with higher investments, tends to lead to inferior results, due to time compression diseconomies

activities

distinct and fine-grained business processes that enable the firm to add incremental value by transforming inputs into goods and services

value chain: support activities

firm activities that add value indirectly, but are necessary to sustain primary activities

dynamic capabilities: resource stocks

firm's current level of intangible resources intangible resource stocks are built through investments over time

dynamic capabilities: resource flows

firm's level of investments to maintain or build a resource

SWOT analysis

framework allows managers to synthesize insights obtained from an internal analysis of the company's S and W with those from analysis of external O and T to derive strategic implications

when is a resource organized to capture value

if an effective strategy/structure relation exists the characteristic of having in place an effective organizational structure, processes, and systems to fully exploit the competitive potential of the firm's resources, capabilities, and competencies