Analysing resources and capabilities Chapter 4 Analysing resources and capabilities Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

Analysing Rs & Cs Not all resources and capabilities have the same importance Some resources and capabilities are required to do business, but have little impact on performance because they are standard (“best practice”) or because everybody has the same (eg. telephone) How can we identify those Rs & Cs that make a difference? Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

VRIE A ressource or capability that makes a difference is: Creating high Value for the customer (V) -better than “best practice” Rare (R): not everybody has it -ideally it is unique Difficult/costly to imitate (I): competitors will have trouble getting the same Exploited (E) by the firm: the firm is organised to make the best usage of the R/C Resources and capabilities that satisfy V and R and I and E are foundations competitive advantage Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

Value: Apple’s design capability “The Company’s business strategy leverages its unique ability (...) to bring to its customers new products and solutions with superior ease-of-use, seamless integration, and innovative industrial design.” (Apple Annual Report 2005, p.1) Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

Value: in the eye of the beholder The importance of context Example: sophisticated software in Sony cameras: valued by Japanese customers cursed by American buyers Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

Rare: Argyle Diamonds Rio Tinto’s Argyle mine (WA) is the world’s largest producer of pink diamonds The Argyle mine is a rare resource: only 1 diamond in every million is pink Pink diamonds sell at a premium compared to standard “white” and “brown” varieties Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

Imitation: Coke and 3M Coke: Brands 3M: Innovation Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

Exploitation: Argyle Special auctions for pink diamonds: Viewing in New York, Sydney, Tokyo, Hong Kong, London and Geneva Once-a-year event for jewellers Bidding by buyers: maximising ‘pink’ prices Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

4.3 VRIE at Belo Are Belo’s resources and capabilities V, R, I, and E? Resources / capabilities V R I E Modern, medium-sized store Friendly staff Association with wholesaler Innovativeness Location in growth suburb Special orders Promotions Free delivery Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

4.3 VRIE at Belo Are Belo’s resources and capabilities V, R, I, and E? Resources / capabilities V R I E Modern, medium-sized store Yes No Friendly staff Association with wholesaler ? Innovativeness Location in growth suburb Special orders Promotions Free delivery Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

VRIE and competitive advantage Competitive advantage: performance superior to the average of competitors Only few firms have a genuine competitive advantage Few resources / capabilities will satisfy ‘VRIE’ Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

Distinctive competence A firm obtains competitive advantage when it has developed a “distinctive competence”: it offers to its customers something that is unique (“distinctive”) and better than the average (“competence”) A distinctive competence is a combination of resources and capabilities VRIE resources / capabilities are the foundation for distinctive competence Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

Time and strategy Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

Strategy: choice and consistency It is difficult to be all things to all people: lack of focus, costs It is difficult to outperform competitors in all areas It is possible to be outstanding in a few things ... provided requisite investments are made Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

Generic distinctive competences Building competitive advantage by focusing on one (or two) of four factors where the firm will aim for outstanding performance ... Efficiency Quality Innovation Customer responsiveness ... whilst performing to standard (‘best practice’) on the others Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

Efficiency IKEA’s competitive advantage in furniture retailing is built on efficiency: design for cost and simple assembly standardisation: economies of scale with suppliers flat-packs to save on logistics combining store and warehouse to save on handling getting customers to do some of the work Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

Quality BMW cars offer superior quality and attract premium prices: engineering excellence driving experience materials craftsmanship Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

Innovation Apple has developed a competence in innovation, bringing together functionality, design, and user-friendly experience: iPod: convergence of MP3 (music) & MP4 (video) mobility, internet downloads, simple interface, seamless integration with iTunes and store iPhone: combining mobile phone, widescreen iPod, internet communications and personal organiser Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

Customer responsiveness St George Bank is Australia’s fifth largest Strategy of good service and close customer relationships Rewarding staff for quality of service and customer satisfaction Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

Several distinctive competences? Distinctive competence requires investment and time Trade-offs between generic competences e.g. effectiveness and responsiveness Some exceptional companies can combine two: e.g. Toyota: quality and effectiveness through manufacturing system Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

4.5 New Norcia resource analysis Resources / capabilities V R I E Synthesis 3 stores/cafes Wood-fired ovens Bread-making skills Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

4.5 New Norcia resource analysis Resources / capabilities V R I E Synthesis 3 stores/cafes Y N V, E Wood-fired ovens ? V, R, E Bread-making skills V, R, I, E Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

4.5 Brumby’s resource analysis Resources / capabilities V R I E Synthesis Capital Electric ovens 300 Shops Marketing Retail skills Standardisation Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak

4.5 Brumby’s resource analysis Resources / capabilities V R I E Synthesis Capital Y ? N V, E Electric ovens 300 Shops V, R, I, E Marketing Retail skills Standardisation Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Strategic Analysis: A Guide to Practice, by Waldersee Slides prepared by Robert Waldersee and Stephane Tywoniak