MJF7Strategy concepts overview (2):Resource based view of the firm

1. Limitation of the I/O based strategy theory

• Monopoly rent vs. efficiency rent

• Strategic group concept

2. Firm specific resources

• The source of sustainable competitive advantage lies in the unique firm resources, but not in the external environment.

3. Historical view of theories of distinctive competence

• General managers (Harvard school)– Decision makes and administrator

• Institutional leaders (Selznick)– Visionary and structure builder

• Ricardian economics– The economic consequences of owning land.

4. Endogenous environment analysis: VRIIO framework

• Tangible and intangible resources

• Capability = a combination of resources

• Value chain: a means to identify capabilities

R&D Mfg. SalesEng.

4-1. Resource analysis criteria:VRIIO

• Criteria to evaluate firm resources

Valuable

Rare

Inimitable

Imperfectly substitutable

Organizational arrangement to execute strategies

4-2. 　 The question of “Value”

• “Do a firm’s resources and capabilities enable the firm to respond to environmental threats and opportunities?”

• Neutralizing threats and exploiting opportunities.• Increasing revenues or decreasing costs.• Firm resources that make it difficult for a firm to do the

above are weaknesses of the firm.• The value of the same set of resources change.

4-3. 　“ Rareness”

• “How many competing firms already possess particular valuable resources and capabilities?”

• Valuable, but common resources will be sources of only competitive parity.

4-4. 　“ Inimitability”

• “Do firms without a resource or capability face a cost disadvantage in duplicating it compared to firms that already posses it?”

• Duplication cost

4-4. 　“ Inimitability” (continued)

• Unique historical conditions– time compression diseconomies– first mover’s advantage– path dependence

• Causal ambiguity

• Social complexity

• Patents

4-5. 　“ Imperfect substitutability”

• “ Do firms without a resource or capability face a cost disadvantage in creating a substitute compared to the firm that already possess it?”

• Different resources with the same effect