1. Strategic Management/ Business Policy 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 Strategy Resources & 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. 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. 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 ProductionDistributionMarketing & 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. Firm Resources and Organizational Learning Double-Loop Learning Production Process Engineering Process

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

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

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

34. 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

35. 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

38. 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?

39. 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