1. Strategic Charles W. L. Hill Management Gareth R. Jones
Chapter 4 Internal Analysis: Resources, Capabilities, Competencies, and Competitive Advantage
Strategic Charles W. L. Hill Management Gareth R. Jones
Fifth Edition
PowerPoint Presentation by Charlie Cook
An Integrated Approach
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2. Competitive Advantage: Value Creation, Low Cost, and Differentiation
Competitive advantage is a firm’s ability to outperform its competitors (earn higher profits).
The source of competitive advantage is value creation for customers.
Sustained competitive advantage comes from maintaining higher profits than competitors over long periods of time.
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3. Return on Capital Employed for Selected U. S
Return on Capital Employed for Selected U.S. Department Stores,
FIGURE 4.1
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Source: Data from Value Line Investment Survey

4. Value Creation
FIGURE 4.2
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5. Generic Building Blocks of Competitive Advantage
FIGURE 4.3
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6. The Impact of Quality on Profits
FIGURE 4.4
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7. The Impact of Efficiency, Quality, Innovation, and Customer Responsiveness on Unit Costs and Prices
FIGURE 4.5
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8. The Value Chain
FIGURE 4.6
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9. Distinctive Competencies, Resources, and Capabilities
The roots of competitive advantage:
FIGURE 4.7
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10. Strategic Resources and Capabilities
Tangible
Land
Buildings
Plant
Equipment
Intangible
Brand names
Reputation
Patents
Technological or marketing know-how
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11. Distinctive Competencies
Skills in effectively coordinating and managing resources for productive use.
Unique resources and capabilities, or
Common resources and unique capabilities.
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12. Strategy and Competitive Advantage
The relationship between strategies and resources and capabilities:
FIGURE 4.8
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13. The Durability of Competitive Advantage
Barriers to imitation
Speed of imitation by competitors in reducing advantage
Imitation by acquiring similar resources
Imitation of capabilities (more difficult)
Limits on competitors
Prior strategic commitments
Absorptive capacity for change
Industry dynamism
The rapid innovation shortens product life cycles.
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14. Why Do Companies Fail? What went wrong?
Inertia
Prior strategic commitments
The Icarus paradox
Avoiding failure and sustaining competitive advantage:
Focus on the building blocks of competitive advantage.
Institute continuous improvement and learning.
Track best industrial practice and use benchmarking.
Overcome inertia.
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