Chapter 4 Flashcards
The AFI Strategy Framework
Part 1: Analysis (Getting Started)
Part 1: Analysis (External & Internal)
Part 2: Formulate (Business Strategy)
Part 2: Formulate (Corporate Strategy)
Part 3: Implementation
Goal: Gaining & sustaining competitive advantage
What’s Inside The Firm?
Core competencies, resources, and capabilities
Core Competencies
Unique strengths embedded within a firm allow the firm to differentiate from rivals. It is expressed through structures, processes, and routines.
Examples of Core Competencies
- Five Guys
- Telsa
- Netflix
Resources
Any assets that a firm can draw on
Examples: cash, buildings, machinery, or intellectual property
Capabilities
Organizational and managerial skills
Examples: structure, routines, and culture
Activities
Distinct and fine-grained business processes
Examples: Order-taking and invoicing
Tangible Resources
Resources have physical attributes and are visible
Intangible Resources
Resources do not have physical attributes and are invisible
The Resource-Based View
This model aids in identifying core competencies
Two Critical Assumptions of the RBV
Resource Based View (RBV)
- Resource Heterogeneity
- Resource Immobility
Resource Heterogeneity
A firm is a unique bundle of resources, capabilities
and competencies
Resource Immobility
Resources are “sticky,” and don’t move easily from firm to firm
VRIO Framework
- Value
- Rarity
- Imitability
- Organization
a tool for evaluating firm resource endowments
To be the basis of a competitive advantage, a resource must be
- Valuable
- Rare
- Costly to Imitate
- Organized to capture the value of the resource
Pioneer of the VIRO framework
Jay Barney
Isolating Mechanisms
Barriers to imitation
Isolating Mechanisms Examples
- Better expectations of future resource value
- Path dependence: past decisions limit current options
- Causal ambiguity: cause and effect are vague
- Social complexity: social and business systems interact
- Intellectual property (IP) protection
Core Rigidity
A former core competency turned into a liability causing a loss of competitive advantage.
Dynamic Capabilities
A firm’s ability to adapt resources over time
The Goal of Dynamic Capabilities
- Create a long-term competitive advantage
- Develop resources, capabilities, and competencies
- Create a strategic fit with the firm’s environment
- Change in a dynamic fashion
Dynamic markets are due to
Technological change, deregulation, globalization,
demographic shifts
Resource Stocks and Flows
A way to develop dynamic capabilities
Resource stocks
The firm’s current level of intangible resources
