RESOURCE,

RESOURCE, CAPABILITIES,
CAPABILITIES,
CORE
CORE COMPETENCIES,
COMPETENCIES, AND
AND ACTIVITY
ACTIVITY
ANALYSIS
ANALYSIS

The fundamental building

blocks for building
winning strategies

Key
Key Elements
Elements of
of Business
Business Strategies:
Strategies:
Understanding
UnderstandingResources,
Resources, Capabilities,
Capabilities, and
and
Competencies
Competenciesis
isthe
thekey
key

Selecting a business strategy that exploits valuable

resources and distinctive competencies (ie.
competitive advantages)
Ensuring that all resources and capabilities are fully
employed and exploited
Building and regenerating valuable resources and
distinctive competencies -- competitive advantages

Rationale
Rationale for
for the
the Resource-based
Resource-based
Approach
Approach to
to Strategy
Strategy

When the external environment is subject to

rapid change, internal resources and
capabilities offer a more secure basis for
strategy than market focus
Resources and capabilities are the primary
source of profitability. Firm-specific strategic
differences account for 50-70 percent of
observed differences in firms profits

Resources,
Resources, Capabilities,
Capabilities, and
and Competitive
Competitive
Advantage:
Advantage: The
The Basic
Basic Relationships
Relationships

COMPETITIVE
ADVANTAGE

STRATEGY

INDUSTRY
KEY
SUCCESS
FACTORS

ORGANIZATIONAL
CAPABILITIES

RESOURCES
Tangible

Intangible

Human

Categories of Firm Resources

Financial
Physical
Human
Technological
Reputational

Valuable
Valuable Resources
Resources and
and Competencies:
Competencies:
The
The key
key to
to Competitive
Competitive Advantages
Advantages

Resources can be:

Physical ie the wiring into your home (ramp for the
info highway)
Human ie. skilled and creative employees
(Wal*Marts dedicated employees)
Intangible ie. brand names and technological
know-how (Coca-Cola, Disney, Sharp LCDs)
Organizational Capabilities embedded in the
business routines, processes, culture (Japanese
auto makers)

Defining
Defining Organizational
Organizational Capabilities
Capabilities

Organizational Capabilities = firms capacity for

undertaking a particular activity. (Grant)
Distinctive Competence = things that an organization
does particularly well relative to competitors. (Selznick)
Core Competence = capabilities that are fundamental to a
firms strategy and performance. (Hamel and Prahalad)

What
What Makes
Makes aa Resource
Resource Valuable?
Valuable?

Scarcity

Appropriability

Demand
Value creation zone
The dynamic interplay of three fundamental market forces
determines the value of a resource.
Source: Collis and Montgomery, Corporate Strategy (1996)

Resource
Resource Imitability
Imitability
Cannot be imitated:
Patents
Unique location
Unique assets
(e.g. Mineral rights)

Difficult to Imitate:
Brand Loyalty
Favorable cost position
Employee Satisfaction
Reputation for Fairness
Can be Imitated (but may not be):
Capacity Pre-emption
Economies of Scale
Easy to Imitate:
Cash
Commodities

Source: Collis and Montgomery, Corporate Strategy: Resources and the Scope of the Firm (1996).

First-Mover
First-Mover Advantages
Advantages in
in Resource
Resource Acquisition
Acquisition

Patents

Brand Recognition

Reputation

Accumulated Learning

Attractive Locations

Installed Base

Identifying
a
Companys
Identifying
a
Companys
Identifying a Company's
Capabilities
Capabilities
Capabilities and
and Value
Value Chain
Chain
Functional Area

Capability

Example

Corporate head office

Management information
Research and development
Manufacturing
Product design
Marketing

Capability in basic
research
Ability to produce
innovative products

e.g., IBM, AT&T,

Sony
3M
Canon

Speed of new
product development

Sales and distribution

Source: Robert M. Grant,Contemporary Strategy Analysis, Basil Blackwell, 1991.

Summary:
Summary: Key
Key Elements
Elements of
of
Resource-Based
Resource-Based Strategy
Strategy

Select a strategy that exploits principal

resources and competencies.

Ensure that resources are fully

employed and exploited.

Build a resource base.

Source : Hamel and Prahalad

Strategic
Strategic Implications
Implications of
of
Competing
Competing on
on Resources
Resources

Investing in resources, continually

Upgrading resources, creating or acquiring
new resources, finding alternatives resources
Leveraging resources
Rapid redeployment of resources