ResourceBased Competitive Advantage Chapter 6 Strategic Management Value

Resource-Based Competitive Advantage Chapter 6 Strategic Management: Value Creation, Sustainability, and Performance,

Learning Objectives 1. Compare types of resources, relationship to competitive advantage. 2. Difference between resources and capabilities. 3. Categories of resources. 4. How to analyze resources and capabilities.

Types of Resources �Tangible § Hard assets; on balance sheet Intangible § Soft assets; not usually on balance sheet �Ordinary § Necessary to compete; not sufficient for advantage Extraordinary § Basis for sustainable competitive

Categories of Resources �Knowledge �Organizational �Social �Technology �Human �Physical �Financial

Dimensions of Extraordinary Resource �Valuable �Substitution It is Valuable It is Rare It is difficult to Imitate It cannot be Substituted for �Tradable It cannot be Traded for �Rare �Imitation VRIST

Sustainable Competitive Advantage

Sources of Durable Advantage �Historical conditions § Often based on original opportunity recognition § e. g. locking up tangible resources �Causal ambiguity § Causes of advantage poorly understood § Often based on tacit components �Social complexity § Many "moving parts" that interact § Impossible to tell what each part does

Capabilities are Built from Extraordinary Resources �Capabilities § "Sets of tightly integrated activities, skills, routines that rely on coordinated resources, creating value in a superior fashion. " § Note connections with Value Chain.

Capabilities and Resources

P&G's "Connect & Develop" �Improve new product development capability § Embed researchers in emerging nation communities to observe use & practices § Create more vital contacts upstream with suppliers and scientists �Results § Enhanced opportunity recognition and value creation capabilities

P&G's "Connect & Develop" Raw Materials Suppliers Distribution Customers 70 technology entrepreneurs 50, 000 R&D workers in 300 suppliers Connections are valuable, rare, inimitable, non-substitutable, non-tradable V R I S T

Conducting a Resource Analysis �Develop list of resources and capabilities § Tough to identify intangibles at the core § Probe deeper: "What is the cause of this outcome? " �Use VRIST framework to assess truly extraordinary resources & capabilities �Develop plans to leverage extraordinary resources & capabilities �Evaluate the relevance of extraordinary resources to industry Key Success Factors