Week 2 - Competitive Strategy Flashcards
Schilke et al (2018)
RBV emphasizes the firm’s current resource base, whereas the dynamic capabilities perspective addresses purposeful modifications to these resources
Dynamic capabilities often incorporate the external environment and shape it
Two categories of capabilities:
- Operational: maintaining and leveraging the status quo
- Dynamic: provides systematic means to strategic change
Dynamic capabilities consist of coordinating, learning and reconfiguring processes (Teece et al, 1997)
Collis (2021)
Dynamic capabilities provide sustainable competitive advantage because they arise from embedded organisational routines
They allow the firm to continually reposition itself in the product market space
If a company moves to a new management system, it demonstrates the lack of D.C.s as they rely on the constant practice of an effective system
Positioning:
- Delivering a distinctive value proposition to customers
- Opening a wider wedge between customer WTP and supplier opportunity cost than competitors
First type of dynamic capability: moving the PPF outwards
- Enhancing efficiency constantly
- Operational effectiveness, contrasting Porter (1996)
Higher order D.C.: application of a routine to ensure that efficiency improvements are continuously pursued (e.g. value stream mapping)
“TPS” D.C.: ability to move along the PPF and reconfigure resources
E.g. GE acquiring the more profitable medical electronics business from Thomson in return for the consumer electronics business
- requires trade-off of current efficiency, but there are no adjustment costs then
Carson et al (2013)
Firm vs industry debate (regarding performance)
Systems theory: the elements of the system will change firm performance as the life cycle of the firm changes
Industry matters the least in the growth stage because of the heterogeneity between firms (their resources and capabilities differ)
In the maturity stage, change becomes less radical and more incremental, placing more emphasis on industry
Industry becomes even more important in the decline phase
Business unit level decisions are more important earlier in the life cycle, whereas corporate level decisions become more important (e.g. providing financial buffers, milking “cash cows”)
Barney (1991)
Source of sustained competitive advantage:
- Responding to environmental opportunities
- Neutralising external threats
- Avoiding internal weaknesses
Two assumptions of the RBV:
- Industry is heterogenous wrt strategic resources
- Heterogeneity can be long-lasting (resources are not perfectly mobile)
Firm resources: physical, human, organisational
Competitive advantage: when a firm is implementing a value creating strategy that is not being simultaneously implemented by any current or potential competitors (there are no substitutes)
Sustained competitive advantage: above + others are unable to duplicate the benefits of the strategy
So: valuable, rare, imperfectly imitable, not substitutable
A valuable and rare competitive advantage: first-mover advantage, but it is not sustainable
Inimitability: unique history, casual ambiguity (competitive advantage is hard to understand),social complexity (e.g. reputation)
Rumelt (1991)
There are significant business unit effects in the US manufacturing activities that strongly outweigh industry and corporate effects
The variance in the business unit effects is much larger
This shows large intra-industry heterogeneity, e.g. differences in product-specific reputation, team-specific learning, first-mover advantages, causal ambiguity that limits effective imitation – NOT size
Corporate effects are so small that they are negligible – there is no evidence of effective or less effective corporate strategies existing
Teece et al (1997)
Dynamic capabilities
Focusing too much on positioning leads firms to underinvest into their core competencies
Dynamic capabilities refer to a firm’s ability to integrate, build, and reconfigure internal and external competencies to address rapidly changing environments
importance of path dependency: the capabilities and routines a firm develops are influenced by its history and experiences and can be strong D.C.s
Firms with strong dynamic capabilities are able to sense opportunities, seize them through innovations, and reconfigure assets to capitalize on them
Krakowski et al (2023)
AI enables machines to learn and act autonomously, which in turn allows machines to interact with humans in decision-making
This gives AI the potential to substitute and complement humans’ capabilities
AI substitutes humans’ domain-related computational capabilities, which then can be enhanced by humans’ domain-unrelated cognitive capabilities
Peteraf (1993)
Resource-based view: concerned with internal accumulation of assets, asset specificity and transaction costs
Assumption: resource bundles and capabilities underlying production are heterogenous across firms
Inferior resources exist – superior production factors with limited supply, e.g. monopoly rents
ex post limits to competition: forces that limit competition so that heterogeneity is sustained
ex ante limits to competition: prior to any firm’s establishing a superior resource position, there must be limited competition for that position
Prahalad & Hamel (1990)
The roots of competitiveness is competencies, which lead to core products and the development of business units
Competencies grow as they are applied and shared- top management’s real responsibility
Core competence is communication, involvement, and a deep commitment to working across organisational boundaries – many levels of people and all functions
CC: provides access to several markets, difficult for competitors to replicate, makes significant contribution to end product/ customer benefits
Wernerfelt (1984)
resource-based view (RBV) of firm
resources: assets tied semi-permanently to the firm, e.g. in-house knowledge of tech, skilled employees, trade contracts, machinery, capital, efficient procedures
attractive resources: directly or indirectly makes it more difficult for others to catch up, e.g. economies of scale, customer loyalty, experience, leads
building on core competencies, then entering markets that the firm has fully developed resources for
optimal growth involves the exploitation of existing resources and the development of new ones (m&a)
Collis & Montgomery (1995)
how the resources of a company drive its performance in a dynamic competitive environment – the resource-based view of the firm
RBV combines the internal analysis of firms with the external analysis of the industry
core competencies: physical, intangible, organisational capability
superior performance derives from a competitively distinct set of resources
resources are valuable in the context of an industry only
inimitability is important when identifying resources
