11. Internal Resources, Capabilities and Competencies

Question 1

Outline the resources-based approach to strategy.

Answer 1

Assumes competitive advantage and performance depend on an org’s capabilities. Strategic planning should focus on analysing the internal capabilities that will influence what types of strategy the organisation can and cannot succeed in.

Question 2

Define:
1. Resources
2. Competences
3. Strategic capabilities
- threshold capabilities
-distinctive capabilities
4. Position audit/analysis

Answer 2

1. Resources (what org has) - firm specific assets (physical, intangible and human).
2. Capabilities (what org does well) - firm’s ability to use resources effectively.
3. Strategic capabilities - combo of resources and competences which enable innovation and quality allowing for competitive advantage.
   - threshold - minimum level required to compete in a market at parity with existing players in the market. Business will fail without this.

• distinctive - give business competitive advantage due to unique resource or core competence.

4. Position audit/analysis - process of analysing and assessing a company’s resources and competencies.

Question 3

Resources are what the firm has. What are two ways they can be described?

Answer 3

1. Threshold resources - minimum required to be able to compete in the market.
2. Unique resources - those that create competitive advantage which other companies cannot obtain or imitate eg brand name or patents.

Question 4

A resource audit strategically evaluates the resources and competences of the org. What are the 5Ms in the 5M approach to resource audits.

Answer 4

1. Men and women (manpower)
   Staff expertise, numbers, morale, management style etc
2. Money
   Cash flow, profitability, credit rating
3. Machinery
   Operational capacity and efficiency, quality control, R&D
4. Materials
   Suppliers reliability and flexibility or inventory levels, costs, waste and distribution.
5. Markets - market status, position, share. Image, reputation, control and influence.
6. Make-up - types of structures and how they limit growth and culture of org will it stifle or fuel future developments.

Question 5

Differentiate between intangible assets and intangible resource.

Answer 5

Intangible assets belong to firm eg trademarks, patents, reputation etc

Intangible resources do not belong to the firm eg functional skills (employee know-how) and cultural capabilities (ability to innovate)