resources and capabilities 1 Flashcards
explain the resource-based view of strategy
asserts that the competitive advantage and superior performance of an organisation are explained by the distinctiveness of its resources and capabilities
the notion that strategy should focus on customer needs is appealing, but runs into problems when…
- technology is changing = e.g. Kodak was a world leader in photography however with the advent of digital imaging, Kodak had difficulty adjusting
- a firm wants to diversify
what happens to internal resources and capabilities when the industry environment is volatile?
they offer a more secure and stable basis for strategy than a focus on industry or market/customer needs
- they have become primary resources of the competitive advantage and superior performance of an organisation
what do resources and capabilities contribute?
they contribute to its long-term survival and potentially to competitive advantage
what are resources?
they are the assets that organisations have or can call upon, that is, “what we have”
what are capabilities?
(sometimes referred to as competences)
they are the ways those assets are used or deployed, that is, “what we do”
examples of resources and capabilities
resource => capabilities
- machines, buildings, raw materials, computer systems => ways of achieving utilisation of plant, efficiency, productivity, flexibility, marketing
- balance sheets, cash flow, suppliers of funds => ability to raise funds and manage cash flows, debtors and creditors
- managers, employees, partners, suppliers, customers => how people gain and use experience, skills, knowledge, build relationships, motivate others and innovate
what are threshold resources and capabilities?
they are those needed for an organisation to meet the necessary requirements to compete in a given market and achieve parity (state of being equal) with competitors in that market - ‘qualifiers’
what are distinctive resources and capabilities?
they are those that are required to achieve competitive advantage
- distinctive or unique capabilities that are of value to customers and which competitors find difficult to imitate - ‘winners’
what is the VRIO framework?
the 4 criteria by which resources and capabilities can be assessed in terms of providing a basis for achieving sustainable competitive advantage are:
- Value
- Rarity
- Inimitability
- Organisational support
explain value as an aspect of the VRIO framework
resources and capabilities are of value when they:
- take advantage of opportunities and neutralise threats
- provide value to customers
- are provided at a cost that still allows an organisation to make an acceptable return
e.g. drugs for rare diseases - sick people are willing to pay for them at a high price as they can cure their rare disease
explain rarity as an aspect of the VRIO framework
rare capabilities are those possessed uniquely by one organisation or by a few others only !!
- e.g. patented products; powerful brands; locations -> British Museum has unique collections that are unavailable elsewhere
rarity could be temporary
- e.g. patents expire; key individuals can leave
explain inimitability as an aspect of the VRIO framework
inimitable capabilities are those that competitors find it difficult and costly to imitate, to obtain or to substitute
- competitive advantage can be built on unique resources, but these may not be sustainable
- sustainable competitive advantage is more often found in competences and they way competences are linked together and integrated that others cannot imitate or obtain
explain organisational knowledge in the context of the VRIO framework
refers to the collective intelligence unique to an organisation, built through formal systems and shared experiences. it includes:
- explicit knowledge: easily documented and shared, such as manuals, files, and data
- tacit knowledge: personal, context-specific, and difficult to formalise or imitate, like the expertise of a top R&D team or the relationships of a high-performing sales team
explain organisational support as an aspect of the VRIO framework
the organisation must be suitably organised to support the valuable, rare and inimitable resources and capabilities that it has
- appropriate management systems, processes, policies
- organisational structure and culture
criteria for inimitability of resources and capabilities
- complexity = based on an organisation’s internal and external complicated linkages
- casual ambiguity = competitors can’t identify the particular resources and capabilities that are the cause of competitive advantage
- culture and history = resources that were developed due to historical events o over a long period are usually difficult and costly to imitate
