RESOURCE,

RESOURCE, CAPABILITIES,
CAPABILITIES,
CORE
CORE COMPETENCIES,
COMPETENCIES, AND
AND
ACTIVITY
ACTIVITY ANALYSIS
ANALYSIS

The fundamental building

blocks for building
winning strategies
 Key
Key Elements
Elements of
of Business
Business Strategies:
Strategies:
Understanding
UnderstandingResources,
Resources,Capabilities,
Capabilities, and
and
Competencies
Competenciesis
isthe
thekey
key
 Selecting a business strategy that exploits valuable
resources and distinctive competencies (ie.
competitive advantages)
 Ensuring that all resources and capabilities are fully
employed and exploited
 Building and regenerating valuable resources and
distinctive competencies -- competitive advantages
Rationale
Rationale for
for the
the Resource-based
Resource-based
Approach
Approach to to Strategy
Strategy
 When the external environment is subject to
rapid change, internal resources and
capabilities offer a more secure basis for
strategy than market focus
 Resources and capabilities are the primary
source of profitability. Firm-specific strategic
differences account for 50-70 percent of
observed differences in firms’ profits
 Resources,
Resources, Capabilities,
Capabilities, and
and Competitive
Competitive
Advantage:
Advantage: The
The Basic
Basic Relationships
Relationships
INDUSTRY
KEY
COMPETITIVE SUCCESS
ADVANTAGE STRATEGY FACTORS

ORGANIZATIONAL
CAPABILITIES

RESOURCES

Tangible Intangible Human

Categories of Firm Resources

• Financial $ ¥ £

• Physical

• Human

• Technological

• Reputational
 Valuable
Valuable Resources
Resources and
and Competencies:
Competencies:
The
The “key”
“key” to
to Competitive
Competitive Advantages
Advantages

 Resources can be:

– Physical ie the wiring into your home (ramp for
the info highway)
– Human ie. skilled and creative employees
(Wal*Marts’ dedicated employees)
– Intangible ie. brand names and technological
know-how (Coca-Cola, Disney, Sharp LCDs)
– Organizational Capabilities embedded in the
business’ routines, processes, culture (Japanese
auto makers)
 Defining
Defining Organizational
Organizational Capabilities
Capabilities

Organizational Capabilities = firm’s capacity for

undertaking a particular activity. (Grant)

Distinctive Competence = things that an organization

does particularly well relative to competitors. (Selznick)

Core Competence = capabilities that are fundamental to a

firm’s strategy and performance. (Hamel and Prahalad)
 What
What Makes
Makes aa Resource
Resource Valuable?
Valuable?

Appropriability
Scarcity

Demand

Value creation zone

The dynamic interplay of three fundamental market forces

determines the value of a resource.

Source: Collis and Montgomery, Corporate Strategy (1996)

 Resource
Resource Imitability
Imitability
Cannot be imitated:
Patents
Unique location
Unique assets
(e.g. Mineral rights)

Difficult to Imitate:
Brand Loyalty
Favorable cost position
Employee Satisfaction
Reputation for Fairness

Can be Imitated (but may not be):

Capacity Pre-emption
Economies of Scale
Easy to Imitate:
Cash
Commodities

Source: Collis and Montgomery, Corporate Strategy: Resources and the Scope of the Firm (1996).
First-Mover
First-Mover Advantages
Advantages in
in Resource
Resource Acquisition
Acquisition

 Patents
 Brand Recognition
 Reputation
 Accumulated Learning
 Attractive Locations
 Installed Base
 Identifying
Identifying a
a Company’s
Company’s
Identifying a Company's Capabilities
Capabilities
Capabilities and and Value
Value Chain
Chain
Functional Area Capability Example

• Corporate head office

• Capability in basic e.g., IBM, AT&T,
• Management information
research Sony
• Research and development
• Ability to produce • 3M
• Manufacturing innovative products
• Canon
• Product design • Speed of new
product development
• Marketing

• Sales and distribution

Source: Robert M. Grant, Contemporary Strategy Analysis, Basil Blackwell, 1991.

 Summary:
Summary: Key
Key Elements
Elements of
of
Resource-Based
Resource-Based Strategy
Strategy

 Select a strategy that exploits principal

resources and competencies.
 Ensure that resources are fully
employed and exploited.
 Build a resource base.

Source : Hamel and Prahalad

 Strategic
Strategic Implications
Implications of
of
Competing
Competing on on Resources
Resources
 Investing in resources, continually
 Upgrading resources, creating or acquiring
new resources, finding alternatives resources
 Leveraging resources
 Rapid redeployment of resources