Analysing Resources & Capabilities

Question 1

In what circumstance would a company look to a Resource based view to determine their strategy?

Answer 1

When the industry environment is volatile, internal resources and capabilities offer a more stable basis for strategy than a focus on industry or market.

Question 2

What are the main sources of competitive advantage and superior performance of a company?

Answer 2

Resources and capabilities.

e.g. nanotechnology, microreplication, sensors.

Question 3

What are the three types of resources and capabilities?

Answer 3

Physical - assets etc.
Financial - cashflow, balance sheet
Human - people (suppliers, customers) etc.

Question 4

What is the key criteria to assess a companies resources and capabilities?

Answer 4

• value
• rarity
• inimitability
• organisational support

Question 5

When are resources and capabilities valuable?

Answer 5

• explore opportunities and neutralise threats;
• provide value to customers;
• allow an organisation to realise acceptable levels of return

Question 6

When are resources and capabilities rare?

Answer 6

• Rare capabilities are those possessed uniquely by one organisation or by a few others only.

E.g. patented products; supremely talented people; a powerful brand; prime location

• Rarity could be temporary.

E.g. patents expire; key individuals can leave; brands can be de-valued by adverse publicity

Question 7

When are resources and capabilities inimitability?

Answer 7

• Inimitable capabilities are those that competitors find it difficult to imitate, to obtain or to substitute
• Sustainable competitive advantage is more often found in competences (the way resources are managed, developed and deployed), which are difficult for competitors to imitate

Question 8

Why can resources be hard to imitate?

Answer 8

• Causal ambiguity - competitors can’t identify the particular resources that are the cause of competitive advantage.
• Social Complexity - organization’s culture or interpersonal relationships.
• Historical conditions and path dependency.
  Resources that were developed due to historical events or over a long period are usually costly to imitate.

Question 9

What does organisational support mean when it comes to resources and capabilities? and examples.

Answer 9

The organisation must be suitably organised to support the valuable, rare and inimitable resources and capabilities that it has.

e.g. appropriate management systems, processes policies and organizational structure.

Question 10

State the VRIO Analysis requirements

Answer 10

Valueable: Do resources and capabilities exist that are valued by customers and enable the company to adapt to environmental opportunities/threats?

Rare: Do resources and capabilities exist that few or no competitiors have?

Inimitability: Are Resources and capabilities hard for competitors to obtain and imitate?

Organisational support: Is the organisation organised so that it can exploit resources and capabilities?

Question 11

What are the competitive and economic implications if all or none of the VRIO is met by a company?

Answer 11

0 met = Competitive Disadvantage & Below Normal Profit

1 met V = Parity competitively & Normal profit

2 met (VR) = Temporary advantage & Above Normal Profits

3 met (VRI) = Unused competitive advantage & Above normal profits

4 met (VRIO) = Sustained advantage & Above Normal profits

Question 12

What are the options for diagnosing resources and capabilities?

Answer 12

• Benchmarking
• SWOT analysis
• VRIO analysis
• Value chain analysis
• Activity systems mapping

Question 13

What is benchmarking and what approaches can you take?

Answer 13

Benchmarking is a means of understanding how an organisation compares with its competitors.

Two approaches to benchmarking:

*Industry/sector benchmarking - compare against similiar against set of KPI’s

*Best-in-class benchmarking - best performance in any industry e.g. F1 pit stop & BA fuelling operations

Question 14

What is a value chain and what does it consist of?

Answer 14

Value chain describes the categories of activities within an organisation, which, together, create a product or service.

Five primary activities - creation of prod/service
Four Support activities - ^ efficiency of primary activities

Question 15

State the primary and support activities in Value chain analysis? (any can be analysed for Competitive Adv)

Answer 15

P - Inbound Logisitics, Operations, Outbound Logistics, Marketing and Sales, Service.

S - Firm Infrastructure, HR management, Technology development, Procurement

Question 16

What information can a value chain analysis provide?

Answer 16

1) an overview of how activities contribute for consumer benefit

2) Spot which activities to outsource and which to do themselves, for cost.

3) Analyse the companies position by using VRIO criteria against all activities and identifiying sustainable advantage

Question 17

What does mapping activities help a business do?

Answer 17

1) Identify ‘higher order strategic themes’ = how the organisation meets the critical success factors in the market.

2) Identify the clusters of activities that underpin these themes and how they fit together.

Question 18

What are dynamic capabilities?

Answer 18

the means by which an organisation has the ability to renew and recreate its strategic capabilities to meet the needs of changing environments.

Such capabilities are distinct from ordinary capabilities that may be necessary to operate efficiently now, but that may not be sufficient to sustain superior performance of organizations in the future.

Question 19

What are the main dynamic capabilities?

Answer 19

• Sensing capabilities – constantly scanning and exploring new opportunities across markets and technologies (e.g. R&D and market research).
• Seizing capabilities – addressing opportunities through new products, processes and activities.
• Re-configuring capabilities – new products and processes may require renewal and re-configuration of capabilities and investment in new technologies.