Unit 3 - Inside the organisation - analysing resources and capabilities Flashcards
What is a resource?
A firm’s resources are the productive assets that it owns and controls; these include tangible resources (such as cash, equipment and land), intangible resources (such as patents, reputation and culture) and human resources (such as skills and motivation).
What is a capability?
A capability is an organisation’s capacity to deploy its resources. Organisations ‘bundle’ resources to build capabilities. Put simply, it is how the resource is used that represents the link between a resource and a capability.
What is competitive advantage?
A firm possesses competitive advantage when it is implementing a value-creating strategy that is not being implemented by its competitors. The firm should thereby achieve superior performance compared with its competitors.
What is the RBV?
The key concept behind the RBV, or resource-based view, of the firm is that the basis for competitive advantage lies in the application of the valuable resources at the firm’s disposal.
What is heterogeneity?
Organisations possess different portfolios of resources and capabilities (i.e., they are heterogeneous) and that may explain differences in organisational performance.
What is a core competence?
In this unit we shall follow the approach adopted by Robert Grant (2010) of using the terms ‘competence’ and ‘capability’ interchangeably. When you read Prahalad and Hamel’s article (1990) in the first activity, you will see that these authors use the term ‘core competence’ to distinguish those capabilities fundamental to a firm’s strategy and performance. However, we suggest (following authors such as Grant, 2010) that over the past 20 years, the debate has moved on to the point where we can say that a core capability is the same as a core competence.
Linking resources, capabilities and competitive advantage (Grant)?
What does Grant argue regarding choosing a strategy?
In this figure, Grant’s message is that an organisation’s strategy should be based on its capabilities (which are themselves based on their portfolio of resources). If the strategy being followed meets industry KSFs, it creates the possibility (but only the possibility) of competitive advantage. Grant’s approach seems to suggest that a strategy that is not based on capabilities, or a strategy that is based on capabilities but does not match industry KSFs, will fail to achieve competitive advantage.
Define 3 broad categories of resources (Grant)?
Grant (2010) suggests that there are three broad categories of resources:
- tangible resources (such as cash, land and equipment)
- intangible resources (such as brand, reputation, goodwill and culture)
- human resources (such as skills and motivation).
Examples of capabilities?
What does V mean in VRIO?
Valuable
A resource must be valuable, in the sense that it offers the firm the ability to exploit opportunities and/or neutralise threats in its competitive environment. Simply put, therefore, a resource is likely to be valuable if it is worth having. Barney notes that this aspect of the RBV closely ties it to and complements the external analysis we discussed in Unit 2. Environmental analysis typically identifies opportunities and threats in the environment; valuable resources offer the potential to capitalise on opportunities or to counter threats.
What does R mean in VRIO?
Rare
It must be rare– that is to say, uncommon or even unique – among a firm’s current and potential competitors. If many firms possess the same resource (even a valuable resource), then they also possess the opportunity to deploy it in pursuit of the same strategy, and this undermines the resource’s potential to help sustain firm-level competitive advantage.
As an example of valuable and rare resources, think of the possible reasons for the historic success of the French wine industry. Its superior performance can be attributed – at least in part – to a unique location, with the right climate and suitable soil for wine production. However, as viniculture (a technological factor) has improved, so many more wine regions have been able to undermine this advantage, diminishing the rarity and hence the value of some of the resources possessed by the French wine industry.
What does I mean in VRIO?
Inimitable
It must be inimitable or imperfectly imitable – that is to say, it cannot be copied by any potential competitor. Barney speculates that resource inimitability can develop in several ways. First, the development of the resource may have been a result of unique historical conditions that would be impossible to replicate. Second, there may be a degree of causal ambiguity – an idea we shall explore in Session 3.4 about the development of the resource. For instance, even the owner of a resource such as brand or reputation may be unsure how it was developed, making the conditions of its creation impossible to replicate. Finally, the process of creation is socially complex, meaning that the resource may be a product of internal characteristics such as personal interactions among managers, the organisation’s unique culture, or its reputation in its industry supply chain – all of which make replication of the resource extremely difficult, if not impossible.
What does O stand in VRIO?
where the ‘O’ stands for organisation. Under this heading, they believe we should consider, for example, the firm’s formal reporting structure and organisational chart, as well as its management controls (formal and informal) and its compensation policies. They refer to such things as ‘complementary resources and capabilities’ (Barney and Hesterly, 2010, p. 81).
Describe Grant’s resource gap analysis?
Describe Porter’s value chain?
Describe Porter’s configuration/coordination matrix?
Figure 4.7 shows Porter’s view (1986) of the relationship between configuration (where value chain activities are performed) and coordination of the organisation’s value chain configuration (how it is managed). Let us take a moment to expand on the two arrows and the words on the matrix. By ‘concentration less necessary or possible’, Porter means that many organisations tend to have disaggregated (less concentrated) value chains. Scale is no longer so important, is ‘less necessary’, to these organisations, because product technologies are undergoing modularisation, and variety at low cost is now a real possibility. ‘Less possible’ is often because organisations need to be closer to their, possibly global, markets, perhaps for market research or R&D. By ‘coordination more important and feasible’, Porter points out that, if an organisation disaggregates its value chain away from being geographically concentrated, then it must become very efficient at coordination. It is also ‘more feasible’ to achieve good coordination with modern ICT.
