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Analysis of Firms Internal Capabilities

PROF. SABYASACHI SINHA

Resources and Capabilities

Resources (tangible / intangible) are assets in control of the firm which can be used for thinking and/or implementing its strategies Capability is a sub-set of resources which enable a firm to take advantage of the other resources Resource and Capabilities can be classified into 4 broad categories

Financial Physical resource Human resource Organizational resource

Prof. S. Sinha, Indian Institute of Management - Lucknow

2/12/2014

Resources and Capabilities

Assumptions of RBV

Resource heterogeneity

Resource immobility

Prof. S. Sinha, Indian Institute of Management - Lucknow

2/12/2014

VRIN/ VRIO Framework

Value? Do they enable the firm to exploit the external opportunity or neutralize the threat

( do they help in increasing rev. or reducing costs or both)

Rare? Is it possessed by few firms / many firms Costs of imitating? - directly or substitutes

Unique historical conditions; causal ambiguity; social complexity; patents

Is the organization ready to exploit VRI resource/capabilities structure/culture/mindset etc.

2/12/2014

Prof. S. Sinha, Indian Institute of Management - Lucknow

Routines and capabilities

Routines ways of doing things (order, repetition, interdependencies, patterns) build capabilities Routines / capabilities - observable/ un-observable (habits/thoughts) Dynamic Capabilities the ability to create, re-configure, integrate, and shed the resource base to adjust with the dynamic environment

Prof. S. Sinha, Indian Institute of Management - Lucknow

2/12/2014

VRIN/ VRIO Framework

Is the resource or capability
Valuable?
No Yes Yes

Rare?
No Yes Yes

Costly to imitate?
No No Yes

Exploited by the organization?

No No No

Strengths/ Weakness
Weakness Strength Strength + Distinctive Competence Strength + Sustainable Competence

Competitive Implication
Competitive Disadvantage Competitive Parity Temp Comp. Advantage Sustainable Competitive Advantage

Performance Implication
Below avg. returns Avg. returns Avg. returns to Above Avg. returns Above Avg. Returns

Yes

Yes

Yes

Yes

Prof. S. Sinha, Indian Institute of Management - Lucknow

2/12/2014

Mckinseys Generic Value Chain

Prof. S. Sinha, Indian Institute of Management - Lucknow

2/12/2014

Porters Generic Value Chain

Prof. S. Sinha, Indian Institute of Management - Lucknow

2/12/2014

Resources and Capabilities

Is any/many of these becoming a core rigidity

Need for un-learning and new learning Role of dynamic capabilities

Prof. S. Sinha, Indian Institute of Management - Lucknow

2/12/2014