The Resource-based view of Competitive Advantage Paul C. Godfrey Mark H. Hansen Marriott School of Management Brigham Young University

What are resources? The building blocks of valuable activities Assets, attributes, capabilities, and skills A Balance Sheet Asset Supports/ facilitates differentiation Skill in broadening and preserving $23.7 BB Brand Equity (2008) A Balance Sheet Asset Supports/ facilitates differentiation Disney’s capability has broadened reach, deepened value $7.5 BB Brand Equity (2007) ESPN equity from Forbes “The worlds top sports brands, Sep 07Disney from Millward Brown Optimor Brandz 2008 Survey

What makes a resource? Value –Influences a firm’s demand curve (differentiation--Apple) –Alters a firm’s supply (cost) curve (Wal*Mart) Rare –Few competitors have it (McDonalds locations) Difficult to imitate –Isolates supply advantages –Competitors can’t copy (Coke’s int’l distribution) Difficult to substitute for –Preserves demand –Customers can’t find equal value (United Airlines) Appropriability –Resource and profit ownership (NFL teams and players)

Barriers to imitation Historical advantages (Coke) Path dependent development (Boeing) Complex systems (Pharmaceuticals) Tacit knowledge (Apple) Property rights (Oil Exploration)

Barriers to substitution Unique product technical attributes (Oracle databases) Positive externalities (Microsoft Office) Creating a unique experience (Major League Sports) Best when built on inimitable inputs (Disneyland)

Finding resources in the value chain Inbound Logistics OperationsOutbound Logistics Marketing & Sales After-Sales Service M a r g i n Primary (Core) Activities Support (Enabling) Activities Firm Infrastructure Human Resource Management Technology Development Procurement Source: Michael Porter, Competitive Advantage, 1985 Culture of decentralization, trust (Nordstroms) Quality systems (GE) Distribution (Wal*Mart) Brand equity (Apple) Customer Service (American Express) Reduce costs—JIT, improve quality, innovation (Toyota) Clearly understand costs/markets (Amazon.com) Increased productivity, loyalty, low turnover (Costco)

The resource-base of Me, Inc. Knowledge, skill, and personal capabilities are your greatest assets –They are portable –They can be enhanced by personal effort Knowledge and skill are highly depreciable –The cutting edge of knowledge is about 6 months You need to be a lifelong learner

Lifelong learning Learning comes in many forms –Cognitive—reading, courses –Experience—activities, projects –Revelation—study, prayer, meditation Read for business and for pleasure Employer sponsored education is a must Personal reflection and PAR’s—what have I learned lately