Chapter 4
Better expectations of future resource value. Path dependence. Causal ambiguity. Social complexity. Intellectual property (IP) protection
isolating mechanisms
Supply chain management. Operations. Distribution. Marketing and sales. After-sales service
primary activities
path dependence
A situation in which the options one faces in the current situation are limited by decisions made in the past.
Research and development (R&D). Information systems. Human resources. Accounting and finance. Firm infrastructure including processes, policies, and procedures.
support activities
Capabilities
Organizational and managerial skills needed to orchestrate a diverse set of resources and deploy them strategically.
casual ambiguity
A situation in which the cause and effect of a phenomenon are not readily apparent.
Intellectual Property (IP) Protection
A critical intangible resource that can provide a strong isolating mechanism, and thus help to sustain a competitive advantage.
dynamic capabilities
A firm's ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources over time in its quest for competitive advantage.
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.
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.
Resource-Based View (RBV)
A model that sees certain types of resources as key to superior firm performance.
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.
A resource is costly to imitate if:
An effective strategy/structure relation exists.
A resource is organized to capture value 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.
A resource is rare if:
It enables the firm to exploit an external opportunity. It enables the firm to offset an external threat. It enables a firm to increase its economic value creation (V - C).
A resource is valuable if:
social complexity
A situation in which different social and business systems interact with one another.
Resources
Any assets that a firm can draw in 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
Assumption in the RBV that a firm is a bundle of resources and capabilities that differ across firms.
isolating mechanisms
Barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy
Activities
Distinct and fine-grained business processes that enable the firm to add incremental value by transforming inputs into goods and services.
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.
support activities
Firm activities that add value indirectly, but are necessary to sustain primary activities.
resource stocks
The firm's current level of intangible resources.
resource flows
The firm's level of investments to maintain or build a resource.
value chain
The internal activities a firm engages in when transforming inputs into outputs; each activity adds incremental value.
VRIO Framework
Theoretical framework that explains and predicts firm-level competitive advantage.
Core Competencies
Unique strengths, embedded deep within a firm, that are critical to gaining and sustaining competitive advantage.
Valuable, Rare, costly to Imitate, firm must be Organized to capture the value of the resource
VRIO Framework
