1. Economics of Organization
Joe Mahoney

2. Resources and Capabilities
Strategy from a resource-based perspective
How do resources create competitive advantage?
Value-chain analysis
The linkage between organizational learning and capabilities

5. Resources and Capabilities
How much is core competencies on the mind’s of modern executives?
101 CEOs survey and 45 academics on major editorial boards
CEO Priorities (academic rankings in parentheses):
1. Managing operations and building core competencies (not ranked by academics)
2. Managing in a regulatory environment/managing the regulatory process (4)

6. Resources and Capabilities
CEO Priorities (academic rankings in parentheses):
3. Global competition (1)
4. Managing suppliers (not ranked)
5. Technology/innovation (3)
6. Competitive strategy (not ranked)
and industry analysis
7. Leadership (8)
15. Restructuring (2)

7. The Role of Strategy In Business - The Linkage Between Strategy, Resources, & Organization
& Capabilities
Organization

8. Different Types Of Resources
Physical Assets
Plant, Equipment, and Real Estate
Financial Assets
Cash and Leverage
Human Assets
Individual Skills and Capabilities
Intangible Assets
Brand Names, Technology, Reputation
Organizational Assets
Organizational Routines & Team-Embodied Skills

11. Efficiency Quality Innovation and Growth Ricardian Economics
How Do We Use These Different Resources To Create Competitive Advantage?
Efficiency
Ricardian Economics
Quality
Qualitative Differences in Resources
Innovation and Growth
Penrose’s Theory of Firm Growth

12. How Do Resources Lead to Competitive Advantage?
Valuable
Does it create “value” for the customer?
Rare
Do other firms have similar resources?
Difficult to Imitate/Substitute
Unique Historical Conditions
Causal Ambiguity
Organization
Are you organized to take advantage of your resources?

17. What Sequence of Activities Are Involved In Creating Value?
Identifying A Firm’s Resources & Capabilities Through Value Chain Analysis
What Sequence of Activities Are Involved In Creating Value?
Firm Infrastructure
Human Resource Management
Technology & Product Development
Purchasing
& Inbound
Logistics
Production
Distribution
Marketing
& Sales
Service
MARGIN

21. Using Value Chain Analysis To Determine The Sources of Competitive Advantage
Beyond simply using a value chain analysis to “map out” the sequence of activities, we need to ask the following:
What is the cost structure of each of these activities?
How do we compare with other competitors in each of these areas?
What are our strengths and weaknesses?

22. Value Chain Analysis
Outsourcing is the purchase of a value creating activity from an external supplier.
Nissan Motor Co. has signed a $1 billion contract with IBM. Covering a 9-year period, the arrangement calls for IBM to manage Nissan’s North American computer systems.
IBM will handle software and hardware for various functions, including payroll, human resources, and car distribution. Nissan expects its outsourcing decision to reduce its costs.

24. Value Chain Analysis:
Outsourcing activities in which it lacks capabilities, the firm can concentrate fully on those areas in which it can create value.
For example, Dell Computer Corporation outsources most of its manufacturing and customer service activities, so it can concentrate on creating value through its distribution channels.

25. Value Chain Analysis:
Outsourcing activities can have the unintended consequence of damaging the firm’s potential to evaluate continuously its key assumptions, learn, and create new capabilities and core competencies. Therefore, managers should verify that the firm does not outsource activities that stimulate the development of new capabilities and competencies.

26. Organization and Resources
Incentive and Reward Systems
Creation of “Knowledge”
“Gain-Sharing”
Organization Structure
Where “Knowledge” Is Located
Cross-functional Teams
Recruiting and Training Policies
Specificity of Knowledge
Organization Process
The Dynamics of Knowledge Creation

28. Inertia & Inflexibility - The Downside of the Resource-based Approach
The Problem of Inertia
Prior Strategic Commitments
Overcoming These Obstacles
Experimentation and Renewal

29. Profit-Earning Potential of Resources and Capabilities
Magnitude
of Advantage
Sustainability
Of Advantage
Uniqueness
Relevance
Transferability
Imitability
Appropriability

31. Factors Affecting Sustainability - Barriers To Transferability
Co-specialization
Organizational Routines
Team-Embodied Skills
Intangibility
Know-how
Information Asymmetry
Private Information
Experience

33. Factors Affecting Sustainability - Barriers To Imitation
Non-Transparent
Is The Skill Or Capability Easily Observed?
Replicability
Is The Resource Easily Copied?
Is it complex?
static vs. dynamic

34. Factors Affecting Sustainability - Barriers To Appropriability
Legal Rights
Brand Names
Patents
Copyrights
Relative Bargaining Power (e.g., baseball industry)
“Embeddedness” Of Resources
Information Asymmetry
Uncertain Imitability

37. The Challenges of Resource-Based Strategy
What resources do we have?
Are they fully utilized?
How else could we utilize our resources?
What resources and capabilities are we going to need in the future?
How do we build those resources and capabilities?

38. Competitive Advantage Through Resources and Capabilities
Cost Advantage
Technology
Manufacturing
Organization and Culture
Differentiation Advantage
Marketing, Sales and Service
Brand Name Capital
Product Development Organization