Session 4 Flashcards
What does Barney’s theory focus on?
Strategy, resources, and capabilities
What is SWOT? (not Barney’s theory)
It is the traditional tool for strategic analysis
What does SWOT stand for?
Strength, Weaknesses, Opportunities, Threats
What are the two components of SWOT?
Internal and External Environment analysis
What is the Internal Environment?
Internal resources and capabilities of the firm
What parts of SWOT are part of the Internal Environment?
Strengths and Weaknesses
What is the External Environment?
Business and societal trends, industry conditions and competitive environment
What parts of SWOT are part of the External Environment?
Opportunities and Threats
What does Barney’s theory look into?
The competitive advantage
What does Barney’s theory provide to organizations?
It provides a tool to assess the organization’s internal resources and capabilties
What are Barney’s major claims?
The most careful and complete analysis of firms’ external (competitive) environments cannot, by itself, explain their success
Strategists also need to analyze the competitive implications of firms’ internal strengths and weaknesses
A firm will be successful if it has resources with the right attributes and characteristics
A firm will have a sustained competitive advantage if its resources and capabilities are valuable, rare, inimitable and organized in a way that allows it to exploit potential opportunities
What are the Firm’s Resources and Capabilties?
Financial (Debt, equity, retained earnings, etc.), Physical (Machines, manufacturing facilities, buildings), Human (Experience, knowledge, judgment, wisdom, etc.), and Organizational (History, relationships, trust, culture, formal reporting structure, patents, etc.)
What are the Resources and Capabilities of the firm used for?
They are used to develop, manufacture and deliver products and services to its customers
What are the 4 important questions about Resources and Capabilities?
The Question of Value (Does a firm’s resources and capabilities enable it to exploit an opportunity, and/or neutralize a threat?)
The Question of Rareness (How many competing firms already possess these valuables resources and capabilities?)
The Question of Imitability (Do firms without a resource or capability face a cost disadvantage in obtaining it compared to firms that already possess it?)
The Question of Organization (Is a firm organized to exploit the full competitive potential of its resources and capabilities?)
What is the importance of history?
Valuable and rare resources acquired or developed through unique historical circumstances can be a source of sustained competitive advantage
What is the importance of numerous small decisions?
A firm’s competitive advantage seems to be dependent on numerous “small decisions” (rather than big ones) through which a firm’s resources and capabilities are developed and exploited.
What is the importance of socially complex resources?
Reputation, trust, friendship teamwork and complex culture, while not patentable, are difficult to imitate.
What is the formal reporting structure?
Signing in, having meetings, handing in progression reports. It is a way of reporting that has formal rules and standards
What is the explicit management control system?
It is the ways in which companies manage and organize formal reporting structures in order to answer the question of organization
What are compensation policies?
They are policies that companies use to compensate their employees, their workers, etc.
If the firm’s resources are not valuable then the firm can expect:
Competitive disadvantage
If the firm’s resources are valuable, but not rare then the firm can expect:
Competitive Parity (equality)
If the firm’s resources are valuable and rare then the firm can expect:
Competitive advantage (at least temporarily)
What is competitive parity?
Everyone has the same advantages when they have these resources
