Lecture 9 Flashcards
What is strategic fit
External analysis of industry and rivalry tell little about what our opportunities and threats are
Doesn’t provide a focus on what needs to change in your firm in order to pursue a strategy that increases CA
How is competitive advantage created
Better linking the organisation to consumers and suppliers
Effectively integrating the organisations primary value adding activities
Defining strategic capabilities require an understanding of these unique resources
What does penrose argue
We an think of the firm as a bundle of resources
Explains heterogeneity
What is resource immobility
Some resources are extremely costly to copy or inelastic in supply
What are the different resource groups
Financial
Physical
Human
Organisational
What is the value component of Barneys VRIO
Does the resource enable the firm to exploit environmental opportunities or defend itself against threats?
Can help increase customer perceived value
Can increase product differentiation or decrease price
Value could also be changing because of rival activity e.g Microsoft and Netscape
Important to review the value of the resources because they are constantly changing
What is rarity
Rare if it can only be acquired by one of very few firms
If it’s absolutely unique then CA
How rare is rare enough
When a few companies hold the same resource we have competitive parity
Are there alternate ways that lead to the same product?
If competitive parity is present what should a firm not do
Neglect resources that are valuable but common. These may be essential for staying in the market
What are costly to imitate
If other orgs don’t have it, can imitate it, buy or substitute it at a reasonable price
In general imitation occurs either directly duplicating the resource or providing a compatible product or service
Consider reverse engineering
Sony worked around RCA TV patent
What are the three reasons resources are costly to imitate
Historical conditions and path dependency
Casual ambiguity - can’t identify the resource and second guess why they did it
Social complexity- resources and capabilities are based on companies culture and interpersonal relationships
E.g Google
Can patents protect against imitation
No firms can still work around
Sony triniton worked around and improved the RCA patent
What is organised to capture value
A firm must organise management systems, policies, processes, org structures and culture to fully realise the resource potential
Complementary resource capabilities- limited ability to creat a CA in isolation but can when combined with other resources and capabilities
What are core competencies
Skills and abilities by which resources are deployed through an organisations activities and processes to achieve CA in ways other cannot imitate
What are the three tests for core competencies
Makes a significant contribution to customer perceived value ( or significant process and manufacturing cost advantage)
Provides access to a wide variety of existing and new markets
Is difficult for the competitors to imitate (complex harmonisation of production technologies and skills)
What are the strengths of the RBV
Recognised the importance of internal attributes
Brings focus on the sources of SCA
Brings insight to the characteristics of SCA
Offers some insight into the means of creating SCA
RBV may help decide whether to license or produce internally
Explains long lived differences in form profitability
Pataraf
What are the limitations of RBV
Managers have real problems identifying VRIO resources in practice
Tauntological
- a resource that creates SCA is valuable
- resources that are by definition rare of valuable
Black box- no insight as to how to create SCA
Static- a resource that was valuable in the past may have become deadweight - ccs can become core ridgidities -mitzberg test
IBM
What are dynamic capabilities
Help a firm change over time
Focus on the issue of competitive survival in response to rapidly changing market conditions
What are the 3 dynamic capabilities that are necessary for an organisation to meet new challenges
The ability of employees to learn quickly and build new strategic assets
The integration of these new strategic assets into company processes
The transformation of reuse of existing assets that have depreciated
What is Barneys definition of firm resources
Includes all assets, capabilities, organisational processes, firm attributes, info, knowledge etc controlled by a firm that enables the firm to conceive of and implement strategies that improve its efficiency and effectiveness
What is Barneys definition of a competitive advantage
Implementing a value creating strategy not simultaneously being implemented by another competitor
What is Barney definition of a sustainable competitive advantage
Implementing a value creating strategy not simultaneously being implemented by any other competitor but other firms are unable to duplicate the benefits of this strategy
What does barney say about resource homogeneity and mobile
In these industries it is not possible to sustain a competitive advantage
For there to be SCA firms must be heterogeneous in the resources they control
What does Leonard Barton say about core competencies
Considered core if they differentiate a company strategically
Core capabilities are this constantly evolving and corporate survival depends on successfully managing their evolution
Can simultaneously enhance or prohibit development (incumbent inertia)
How does Leonard Barton define CC and what are the 4 dimensions
Knowledge set that distinguishes and provides CA
Content embodied in Employees Technical systems Managerial systems Values and norms
What is the heterogeneity element of prataraf
Resource bundles underlying production are heterogeneous across firms
Firms with marginal resources can only expect to break even
Firms with superior resources will earn rents
What does pataraf say about ex post limits
There must be post limits to competition- subsequent to a firm gaining a competitive advantage there must be forces that limit competiton for those rents
Substitutes reduce rents by making demand curves more elastic
Imperfect imitability and imperfect substituiinability
Isolating mechanisms refer to phenomena that protect individual firms from imitation and preserve their rent streams e.g property right
Casual ambiguity can protect firm heterogeneity
What does pataraf say about imperfect mobility
Perfectly immobile if they cannot he traded
Conceptualised assets
Sunk costs
What are ex ante limits to competition
Prior to any firms establishing a superior resource advantage there must be limited competition for that position
Profits come from ex ante uncertainty
What does Leonard Barton say about capabilities enhancing development?
The closer the alignment of a new project to a core knowledge set the stronger the enabling influence
How does Leonard Barton say the 4 categories link to enhancing capabilities
Skills
- excellence in dominant discipline
- pervasive technical literacy
Technical systems
- project managers tap into this embedded knowledge
Management system
Blend of skills and and beneficial behaviours
Values dimension
- empowerment of project members
- high status for the dominant discipline
How does Leonard Barton say core rigididites get established
Skills - less strength in non dominant disciplines - knowledge sets may be missing Technical system - can become easily outdated
Management system
- highly skills managers are reluctant to apply their skills to an undervalued project
Values
Lower status for non dominant discipline
What does Leonard bartonnidentify as the effects of the paradox
Abandonment
Recidivism- return to CC
Reorientation
Isolation
What do Pragalad and Hamelnidentify as the roots of CA
In the long run competitiveness derives from the ability to build at lower cost and more speedily, the core competiencies that spawn unanticipated products
The real source of advantage is managements ability to consolidate corporate wide technologies and production skills into competencies that empower business to adapt to changing environments
E.g Sony’s capcity to minimise
Phillips optimal media expertise
What do Prahalad and Hamel say about CC’s
Unlike physical assets competencies do not deteriorate as they are applied and shared they grow
Cc involves many levels of people and functions
Need to be nurtured and protected
What do prahalad and games say about how not to think of CC
Does not mean outspending rivals on R+D
What do prahalad and hamel say about losing CCs
Too many companies lose CCs through outsourcing e.g Chrysler
Japanese have learnt from western partners who have not been committed to protecting their own competencies
Can forgo opportunities to establish competencies that are evolving e.g GTE exiting colour TV thinking it was mature - closed. The door on future opportunities that were reliant on video based competencies
What are the two key lessons prahalad and hamel identify
The costs of losing Cc can only be partially calculated in advance
A company that fails to invest in CC building may find it difficult to expand into emerging markets
What do prahalad and hamel say about core products
Components of sub assemblies that contribute to the value of the end products
Maintain world manufacturing dominance in core products and you reserve the power to shape the evolution of end products
E.g cannon 84% market share in desktop laser printing but brand share in minuscule
What do prahalad and hamel say about developing strategic architecture
Should build architecture for CC building
Competence carriers should be regularly brought together from across the corporation to trade notes on idea
The task of creating strategic architectures will force the organisation to identify and commit technical and production linkages across SBUs that provide a distinct CA
Provides a logic for diversification
What does Barney say about resources being imperfectly imitable?
Historical conditions
Some firms ability to exploit resources depends upon their place time and space
Firms with a unique and valuable culture to that emerged in early stages of a firms history
Casual ambiguity
All competing firms must have an imperfect understanding
Social complexity
Interpersonal relations
Reputation
What do prahalad and hamel identify got the 3 cc tests
A cc should provide access to a wide variety of markets e.g Casio’s expansion into hand held TV market was predictable because of their competence in display systems
Cc should make a significant contribution to perceived customer benefits e.g Honda
Cc should be difficult for a competitor to imitate
Difficult if it’s a complex harmonisation of individual technology’
What are core products
The components or sub assemblies that actually contribute to the value of end products
Tell me about GTE v NEC
1980s GTE well positioned to become a major player in the evolving IT industry
Activities spanned multiple industries
9.8 b sales v 3.8 NEC
1988 NEC bigger
NEC world leader in semiconductors
NEC conceived itself in terms of CC
Entered SAS focused on competence building
GTE did not have this clarity
Deventralisation made ot difficult for GTE to define CC
What are some examples of ccs that grant identifies
Honda - expertise in the development and manufacture of engines
Cannon- precision mechanics, micro electronics and fine optics (operate on fax, calculators, copy machines, printers)
3M - 30,000 products
Outstanding capacity in the development and launch of new products
What is a monopoly rent
Profit arising from market power
What is Ricardian rent
Profit arising from superior resources
What does grant say about resources
Productive assets owned by the firm
Tangible
Intangible
Human
What does grant say about capabilities
Firms capacity to deploy resources for a desired end result
Prahalad and hamel criticise US companies for emphasising product management over competence management
Classify capabilities through functional analysis or value chain analysis
What does grant say about putting resource and capability analysis to work
Identify resource and capabilities
Appraise resources and capabilities
Assess importance
Assess relative strength
Bring together importance and relative strength
Develop strat implication
Exploit strength
Tell me about Kodak v fujifilm
Kodak field for bankruptcy in 2012
Failed to adapt its purpose according to changes in its external environment
Lack of adaptability
Didn’t stick to knowledge in chemical imaging, could this competence have been used elsewhere?
Fujifilm recognises chnage and went for JV with xerox and sold high quality cameras
What do prahalad and hamel say about redeploying to exploit competencies
Once top management has indentified overarching competencies, it must ask businesses to identify the projects and people closely connected with them
E.g when cannon went into digital laser printers it gave SBU mangers the right to raid other SBUs to pull together the required pool of talent
What is the example of Google
Said it’s culture is a CC
Workspace is all about interaction
What are the implications of VRIO
None- disadvantage
V- parity
VR- temp
VRIO - sustained
What is Dr Pepper and example of
Dr Pepper wanted to create a strategic alliance with Pepsi
Rivals agreed would cause monopoly - so couldn’t do it
Dr Pepper doesn’t have global distribution aspect - so not unique and valuable
So then acquired Schweppes - so they had global distribution - so could compete with Pepsi and Coca Cola
What does prahalad and hamel define CCs as
Bundle of skills and technologies that enables a company to provide a particular benefit
Collective learning in the org, especially how to coordinate diverse production skills and integrate multiple streams of technology
What is a resource audit
Identifies and classifies the resources that an org owns or can access to support strategies
Physical
Human
Financial
Intangible
What are the effects of the paradox on core capabilities
Pages way for org change by highlighting core rigidities and introducing new capabilities
E.g chaparral steel made use of development projects as agents of renewal and org learning
How do we assess a core competence
Need to assess assets including People R+D Business systems and IT Monitoring KPIs is crucial
Why is Microsoft and example of dynamic capabilities.
Had to maintain capability on office and windows operating system while simultaneously developing new capabilities in new internet based hardware and software technologies
What are the cornerstones of CA pataraf
Heterogeneity- creates Ricardian and monopoly rents
Ex post limits competition and the rents being competed away
Imperfect mobility- ensures valuable factors stay in the firm
Ex ante - keeps the cost from offsetting the rent
