Chapter 4

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Valuable Resource

a resource if valuable if it helps a firm exploit an external opportunity or offset an external threat

VRIO Framework

a theoretical framework that explains and predicts firm-level competitive advantage Valuable Rare, and costly to Imitate. And finally, the firm itself must be Organized to capture the value of the resources

Resources

any assets that a firm can draw on when formulating and implementing a strategy tangible or intangible

Rare Resource

are 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

Costly to imitate resource

if the firms that do not possess the resource are unable to develop or buy the resource at the comparable cost

Value chain

internal activities a firm engages in when transforming inputs into outputs; each activity adds incremental value

Capabilities

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

decisions under certainty

Probability (P) = 1 Many critical decisions we make are NOT certain

decisions under uncertainty

Probability (P) = ?

decisions under risk

Probability 0 < P < 1 Spectrum of probability; low high or in between

if the firm IS organized to capture value, costly to imitate, rate, and valuable.

sustainable competitive advantage

If the resource is valuable, rare, BUT NOT costly to imitate

temporary competitive advantage

If the resource is valuable, rare, costly to imitate, but firm is not organized to capture value

temporary competitive advantage 2

Organized to capture value

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.

Core Competencies

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

If the resource, capability, or competency is not valuable resource...

competitive disadvantage

If the resource, capability, or competency is not rare resource...

competitive parity

intangible resources

have no psychical attributes and thus are invisible

tangible resources

have physical attributes and are visible


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