Chapter 4-Internal Analysis: Resources, Capabilities, and Core Competencies

intellectual property 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 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.

SWOT analysis

A framework that allows managers to synthesize insights obtained from an internal analysis of the company's strengths and weaknesses (S and W) with those from an analysis of external opportunities and threats (O and T) to derive strategic implications.

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 in a constantly changing environment

resource-based view

A model that sees certain types of resources as key to superior firm performance.

Social Complexity

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

Path Dependence

A situation in which the options one faces in the current situation are limited by decisions made in the past.

VRIO framework

A theoretical framework that explains and predicts firm-level competitive advantage. Valuable R are I costly to Imitate. And finally, the firm itself must be Organized to capture the value of the resource.

resources

Any assets that a firm can draw on when formulating and implementing a strategy.

resource immobility

Assumption in the resource-based view 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 resource-based view 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 firms 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 the internal value chain.

capabilities

Organizational and managerial skills necessary to orchestrate a diverse set of resources and deploy them strategically.

intangible resources

Resources that do not have physical attributes and thus are invisible.

tangible resources

Resources that have physical attributes and thus are visible.

Conditions of Isolating Mechanisms

■ Better expectations of future resource value. ■ Path dependence. ■ Causal ambiguity. ■ Social complexity. ■ Intellectual property (IP) protection.

Causal Ambiguity

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

support activities

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

rare resource

One of the four key criteria in the VRIO framework. A resource is _______ if the number of firms that possess it is less than the number of firms it would require to reach a state of perfect competition.

organized to capture value

One of the four key criteria in the VRIO framework. 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.

costly to imitate resource

One of the four key criteria in the VRIO framework. A resource is ______ if firms that do not possess the resource are unable to develop or buy the resource at a comparable cost.

valuable resource

One of the four key criteria in the VRIO framework. A resource is __________ if it helps a firm exploit an external opportunity or offset an external threat.

BETTER EXPECTATIONS OF FUTURE RESOURCE VALUE

Sometimes firms can acquire resources at a low cost, which lays the foundation for a competitive advantage later when expectations about the future of the resource turn out to be more accurate. Real Estate Interstate example. If this developer can repeat such "___________" over time, she will have a sustainable competitive advantage. If she cannot, she was simply lucky. Although luck can play a role in gaining an initial competitive advantage, it is not a basis for a sustainable competitive advantage.

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.

core competencies

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