Firm`s resources

FIRM`S RESOURCES

And Sustained Competitive Advantage

Introduction

“Firms obtain sustained competitive advantages by implementing strategies that exploit their internal strengths, through responding to environmental opportunities, while neutralizing external threats and avoiding internal weaknesses. – Jay Barney”

Figure1. The relationship between traditional SWOT analysis, the resource based model, and models of industry attractiveness

strengths

weaknesses

Resourced Based ModelEnvironmental Models of Competitive AdvantageOpportunities

Threats

Internal Analysis External Analysis

Assumptions

These environmental models of competitive advantage have assumed that firms within an industry (or firms within a strategic group) are identical in terms of the strategically relevant resources they control and the strategies they pursue.

These models assume that should resource heterogeneity will be very short lived because the resources that firms use to implement their strategies are highly mobile.

THE FIRM

Firm include all assets, capabilities, organizational processes, form attributes, information, knowledge, etc.

Firm resources can be conveniently classified into three categories: Physical capital resources, Human capital resources, and Organizational capital resources.

Physical Capital Resources

Tangible Resources Organizational assets that are relatively

easy to identify, including physical assets, financial resources, organizational resources and technological resources.

Include the physical technology used in a firm. A firm`s plant and equipment Geographic location Access to raw materials

Human Capital Resources

Intangible resources Organizational assets that are difficult to

identify and account for and are typically embedded in unique routine and practices, including human resource, innovation resources and reputation resources.

Include the training, experience, judgment, intelligence, relationships, and insight of individual managers and workers in the a firm.

Organizational Capital Resources

The competencies and skills that a firm employs to transform inputs into outputs.

Include a firm`s formal reporting structure, its formal and informal planning, controlling, and coordinating systems, as well as informal relations among groups within a firm and between a firm and those in it`s environment.

Competitive Advantage and Sustained Competitive Advantage

A firm is said to be a competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors.

A firm is said to have a sustained competitive advantage when it is implementing a value creating strategy being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy

Potentials:

The resources must be valuable in the sense that is exploits opportunities and/or neutralizes threats in the firm`s environment.

It must be rare among the firm`s current and potential competitors.

The resource must be difficult for competitors to imitate.

The resource must have no strategically equivalent substitutes.

Is the resource valuable?

Is the resource rare?

Can the resource be imitated easily?

Physical uniqueness Path dependency Causal ambiguity Social complexity

Are substitutes readily available?