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8/8/2019 Unit 8 Competing on Resources
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UNIT 8
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It explains how a companys resources driveits performance in a dynamic competitiveenvironment.
The RBV combines the internal analysiswithin companies with the external analysisof the industry and competitiveenvironment.
It explains why some competitors are moreprofitable than others and how to put theidea of core competence into practice.
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RBV sees companies as different collections
of physical and intangible assets and
capabilities.
No two companies are alike because no twocompanies have had the same set of
experiences, acquired the same assets and
skills or built the same organisational
cultures. These assets and capabilities determine how
efficiently and effectively a company
performs its functional activities.
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What gives your company a competitive
edge? Your strategically valuable resources
the ones enabling your enterprise to performactivities better or more cheaply than rivals.
These can be physical assets, intangibleassets and capabilities.
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Resources Are a firms assets,
including people andthe value of its brand
name. Represent inputs into
a firms productionprocess, such as: Capital equipment
Skills of employees Brand names
Financial resources
Talented managers
Types of Resources
Tangible resources
Financial resources
Physical resources Technological
resources
Organizationalresources
Intangible resources Human resources
Innovation resources
Reputation resources
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Financial Resources The firms borrowing capacity
The firms ability to generate
internal funds
Organizational Resources The firms formal reporting
structure and its formal planning,
controlling, and coordinatingsystems
Physical Resources Sophistication and location of afirms plant and equipment
Access to raw materials
Technological Resources Stock of technology, such aspatents, trademarks, copyrights,
and trade secrets
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Human Resources Knowledge
Trust
Managerial capabilities
Innovation Resources Ideas
Scientific capabilities
Capacity to innovate
Reputational Resources Reputation with customers
Brand name
Perceptions of product quality,
durability, and reliability
Reputation with suppliers
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Organisational capabilityis embedded in acompanys routines, processes and culture.
(example) Japanese auto companies have
consistently excelled through their
capabilities-- first in low cost, lean
manufactuing; next in high-qualityproduction; and then in fast product
development.
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Competitive advantage, whatever its source,
ultimately can be attributed to the
ownership of a valuable resource that
enables the company to perform activitiesbetter or more cheaply than competitors.
Superior performance will therefore bebased on developing a competitivelydistinct set of resources and deploying themin a well--conceived strategy.
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STRATEGIC COMPETITIVENESS
COMPETITIVE ADVANTAGE
CORE COMPETENCIES
ORGANISATIONAL
CAPABILITIES
ORGANISATIONAL
RESOURCES
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Resources can not be evaluated in isolation,because their value is determined in theinterplay with market forces.
A resource that is valuable in a particularindustry or at a particular time might fail tohave the same value in a different industryor chronological context.
(example) a brand name was once veryimportant in the personal computer , but it isno longer.
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1. The test of inimitability: Is the resourcehard to copy?
Inimitability is at the heart of valuecreation because it limits competition.
If a resource is inimitable, then any profit
stream it generates is more likely to be
sustainable.
Possessing a resource that competitors
easily can copy generates only temporary
value.
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Inimitability doesnt last forever.
Competitors eventually will find ways to copy
most valuable resources.
But managers can forestall them and sustain
profits for a whileby building their
strategies around resources that have at
least one of the following four
characteristics:
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The first is physical uniqueness, whichalmost by definition can not be copied.
(example) a wonderful real estate location,mineral rights.
The second is path dependency.A greatnumber of resources can not be imitated
because of what economists call path
dependency.
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Simply put, these resources are unique and
therefore scarce because of all that has
happened along the path taken in their
accumulation.
As a result, competitors can not go out and
buy these resources instantaneously. Instead,
they must be built over time in ways that aredifficult to accelerate.
(example) brand loyalty, R&D programs.
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The third source of inimitability is causalambiguity.
Causally ambiguous resource are oftenorganisational capabilities.
These exist in a complex web of social
interactions and may even depend criticallyon particular individuals.
(example) Southwest Vs Continental andUnited Airlines.
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It will be difficult to reproduce Southwests
culture of fun, family, frugality and focus
because no one can quite specify exactlywhat it is or how it arose.
The final source of inimitability, economic
deterrence, occurs when a companypreempts a competitor by making a sizable
investment in an asset.
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2. The test of durability; How quicklydoesthis resource depreciate?
The longer lasting a resource is, the more
valuable it will be. Like inimitability, this test asks whether the
resource can sustain competitive advantage
over time.
(example) Disney brand name survivedalmost two decades of neglect between
Walt Disneys death and the installation of
Michael D.Eisner and his team.
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4. The test ofsubstitutability: Can a uniqueresource be trumped bya different
resource?
It is not easily substituted.
( example) because of easy substitution,
the steel industry lost a major market in
beer cans to aluminum-can makers.
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5. The test of competitive superiority:Whose resource is reallybetter?
They are superior to similar resources your
competitors own. Every company can identify one activity
that it does relatively better than otheractivities and claim that as its corecompetence.
Sometimes the valuable resource is acombination of skills, none of which issuperior by itself but which, whencombined, make a better package.
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Managers should build their strategies on
resources that meet the five tests outlined
above.
The best of these resources are oftenintangible,( the culture, the technology and
the transformational leader), not physical.
The tests capture how market forces
determine the value of resources.They force mangers to look inward and
outward at the same time.
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Strategy requires managers to look forward
as well.
Companies fortunate enough to have a trulydistinctive competence must also be wise
enough to realise that its value is eroded by
time and competition.
( example) in 1970s Xerox believed itsreprographic capability to be inimitable. And
while Xerox slept, Canon took over world
leadership in photocopiers.
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In world of continuous change, companies
need to maintain pressure constantly at thefrontiersbuilding for the next round of
competition.
Managers must therefore continually investin and upgrade their resources.
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Investing in resources:
Because all resources depreciate, an
effective corporate strategy requires
continual investment in order to maintainand build valuable resources.
At the same time, investing in core
competencies without examining thecompetitive dynamics that determine
industry attractiveness is dangerous.
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Upgrading resources:
Upgrading resources means moving beyondwhat the company is already good at, which
can be accomplished in a number of ways.
The first is by adding new resources, the wayIntel added a brand name, Intel Inside, to itstechnological resource base.
The second is by upgrading to alternativeresources that are threatening thecompanys current capabilities.
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Finally, a company can upgrade its resources
in order to move into structurally more
attractive industry.
Perhaps the most successful examples of
upgrading resources are in companies that
have added new competencies sequentially,
often over extended period of time.
(Example) Sharp Electronics
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In the late 1950s, assembler of T.V.s & radios.
In 1964, produced the worlds first digital
calculator.
Did backward integration into manufacturing
its own specialised semiconductors and
committed to new LCD technology.
Came out with the Wizard electronicorganiser.
It came with Viewcam in 1992.
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At each stage, Sharp took on a new
challenge, whether to develop or improve a
technology or to enter or attack a market.
It also opened new avenues for expansion.
Today, Sharp is the dominant player in the
LCD market and a force in consumer
electronics.
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Leveraging resources:
Corporate strategies must strive to leverage
resources into all the markets in which those
resources contribute to competitiveadvantage or to compete in new markets
that improve the corporate resources.
(example) Disney leveraged its resources intonew markets such as hotels, retailing and
publishing.
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Good corporate strategy requires continual
reassessment of the companys scope.
The question strategists must ask is, How far
can the companys valuable resource be
extended across markets?
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