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.