1 Sustainability of a Competitive Advantage • Sustainability of a competitive advantage is a function of: – the rate of core-competence obsolescence due to environmental changes, e.g., technological shifts – the availability of substitutes for the core competence – the imitability of the core competence, e.g., diffusion of an innovation – whether the firm is properly organized to capture value
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1 Sustainability of a Competitive Advantage Sustainability of a competitive advantage is a function of: –the rate of core-competence obsolescence due to.
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Sustainability of a Competitive Advantage
• Sustainability of a competitive advantage is a function of:– the rate of core-competence obsolescence
due to environmental changes, e.g., technological shifts
– the availability of substitutes for the core competence
– the imitability of the core competence, e.g., diffusion of an innovation
– whether the firm is properly organized to capture value
2
External and Internal Analyses
General
Environment
General
Environment
General
Environm
ent
Sociocultural
Global
Technological
Polit
ical
/Leg
al
Dem
ogra
phic Econom
ic
IndustryEnvironment
CompetitorEnvironment
By studying the external environment, firms identify what they might choose to do(Structure>Conduct>Performance)
Opportunities and threats
3
External and Internal Analyses
By studying the firm’s (internal) capabilities & resources, firms identify what they can do (over time)
Unique resources, capabilities, and competencies
(sustainable competitive advantage)
4
Internal Analysis (Resources, Capabilities)
• How do we effectively manage current core competencies while simultaneously developing new ones? (exploit/explore)
• How do we assemble bundles of resources, capabilities and core competencies to create value for customers?
• How do we learn to change rapidly?
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What affects decisions about Resources, Capabilities, and Core
Competencies
• Uncertainty regarding current/future characteristics of the general and industry environments
• Complexity - the interrelationship among factors that shape a firm’s environment(s), and top management perceptions of these environments
• Intraorganizational Conflicts among people making and affected by resource allocation decisions
Resources are what a firm draws upon to create value -- its assets– and valuable resources are embedded and difficult to trade in markets
Resources are inputs into a firm’s production process... IP, capital equipment, skills, brands, organizational routines, access to financial capital, talented managers, etc.
Capabilities describe the firm’s ability to create, deploy, modify, reconfigure, and leverage resources. Valuable capabilities permit resources to be combined in unique ways to create core competencies