6: Competing on Resources

Which of the following is not a test of inimitability? A) Customer Satisfaction B) Physical Uniqueness C) Path Dependency D) Causal Ambiguity

A

Disney's brand name does not meet the test of durability. T/F.

B

Which of the following companies did not meet the mark in terms of the test of substitutability? A) Express Cleaners B) People Express C) IKEA D) Disney

B

Q7: What are the management implications for investing in and leveraging resources? (PG. 9-11)

Build strategies around resources that pass the tests. Identify resources that need further investment to be maintained or to be further developed in order to pass the tests. Resources must be joined with other resources and embedded into functional policies and activities that distinguish the company in the market. Disney's example of investing $50 Million in animation capability - then leveraging that as a platform. Don't let current profitability goals overshadow investment in resources. Understand the industry forces at play. Example is Masco. Price sensitive buyers and powerful suppliers - bad results due to lack of analysis.

Q5: What is the test of substitutability? (PG. 7)

Can a unique resource be trumped by a different resource? Steel makers lost beer market to aluminum. People Express built low cost no frills airline - but then was beaten by major airlines using "yield management" capability of computer reservation systems.

Q3: What is the test of durability? (PG. 6)

Durability leads to sustainability But difficult these days due to pace of change Schumpeter's competitive gale of creative destruction - new innovations overtake previous ones Disney brand name is durable Technological know-how is much less durable

When investing in and leveraging resources, management should pay little attention to the industry forces at play. T/F.

F

Q8: How does the RBV explain the poor track record in corporate diversification? (PG. 11-12)

Managers tend to overestimate the transferability of specific assets and capabilities. Managers overestimate their ability to compete in highly profitable industries. Managers assume that leveraging generic resources such as lean manufacturing will be major source of competitive advantage - despite the dynamics of that market.

Q6: What is the test of competitive superiority? (PG. 7-8)

Not a feel-good exercise! Problem for companies is that they view core competence as an internal only assessment of what they do best. It must instead be a harsh external assessment to identify "distinctive competence" or what they do better than competitors. Companies can disaggregate to identify distinctive capabilities with actionable insights. Example of medical-diagnostics test equipment manufacturer with "man-machine" interface distinctive capability. May also be the case that superiority comes from combination of non-distinct skills. Conclusions about critical resources should be based on objective data from the market.

Q2: What is the test of inimitability? (PG. 4-5)

Physical Uniqueness - (diamond mines) by definition are difficult to reproduce Path Dependency - (brand name) long term development of the resource Causal Ambiguity - (capabilities) when difficult to disentangle the key resource and how to recreate it Economic Deterrence - pre-empt competition by making sizable investment they will have to also build

Q1: How does the Resource Based View see companies? How do the elements of RBV relate to competitive advantage? (PG. 3)

RBV: companies are collections of physical and intangible assets and capabilities - unique to each company Assets and capabilities determine how well a company performs its functions Physical, intangible and/or organizational capability Implication: Superior performance based on a competitively distinct set of resources deployed in a well-conceived strategy

The Resourced Based View (RBV) sees companies as collections of physical and intangible assets and capabilities T/F.

T

Overview

Turbulent decade of the 90's Large companies experience set backs Required dramatic transformations and internal reorganizations Confidence in strategic planning called into question Smaller companies able to attack established firms Numerous new approaches offered by consultants New approaches: Tom Peters "In Search of Excellence" Re-engineering TQM Learning Organizations Competing on Capabilities All made a contribution... but... Confused managers even more Resource Based View Grounded in economics Combines internal and external perspectives Builds on, but does not replace, earlier approaches

Q4: What is the test of appropriability? (PG. 6-7)

Who captures the value that the resource creates? Leveraged buy out firms lost because network of contacts was owned by the individuals, not the companies. Resources must be inextricably bound to the company - they cannot walk out the door.