Chapter 5 Analyzing Resources and Capabilities

Chapter objectives Appreciate the role of a firm’s resources and capabilities as a basis for formulating strategy Identifying and appraise the resources and capabilities of a firm Evaluate the potential for a firm’s resources and capabilities to confer sustainable competitive advantage Use results of resources and capability analysis to formulate strategies that exploit internal strength while defending against internal weaknesses

Analysts have tended to define assets too narrowly, identifying only those that can be measured, such as plant and equipment. Yet the intangible assets, such as a particular technology, accumulated consumer information, brand name, reputation, and corporate culture, are invaluable to the firm’s competitive power. In fact, these invisible assets are often the only real source of competitive edge that can be sustained over time. Hiroyuki Itami, Mobilizing Invisible Assets

Basing strategy on resources and capabilities Strategy is concerned with matching a firm’s resources and capabilities to the opportunities that arise in external environment

Canon core competencies Canon’s products involve three technological capabilities: Precision mechanics Microelectronic Fine optics

Kodak Eastman Kodak’s dominance of the world market for photographic products based on chemical imaging has been threatened by digital imaging

You’ve gotta do what you do well. Licino Noto, Former vice chairman, exxon mobil

Resources of the firm Tangible resources Intangible resources Human resources

Brand as an intangible asset

Organizational capabilities firm’s capacity to deploy resources for a desired end result. Those things that an organization does particularly well relative to its competitors

Core competences According to Hamel and Prahalad, are those that: Make a disproportionate contribution to ultimate customer value, or the efficiency with which that value is delivered and Provide a basis for entering new markets

Approaches to Classifying capabilities Functional Analysis: identifies capabilities in relation to each of the principal functional areas of the firm Value-chain Analysis: separates the activities of the firm into sequential chain.

Appraising resources and capabilities Establishing competitive advantage Scarcity Relevance Sustaining competitive advantage Durability Transferability Reliability Appropriating the returns to competitive advantage

When your competitive advantage walks out the door: Gucci