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Resources and Capabilities, Organisations are not identical, they have…
Resources and Capabilities
Resource Based View (RBV)
The competitive advantage and superior performace of an organisation are explained by the distinctiveness of its resources and capabilities
Resources
What we have
Assets an org has
Physical
Financial
Human
Managers, employees, partners, suppliers, customers
Balance sheet, cash flow, suppliers of funds
Machines, buildings, raw materials, patents, databases
Capabilities
The ways in which assets are deployed
What we do
Physical
Financial
Human
How people gain exp, use it, skills, knowledge, relationships, motivate others, innovate
Ability to raise funds and manage cash flows, debtors, creditors, etc.
Ways of achieving utilisation of plant, efficiency, productivity, felxibility, marketing
Threshold
Threshold R&C are one required to meet necessary requirements to compete at all in a given market, & achieve parity with competitors in that market
Qualifiers
Change over time, IT resources in retail suppliers changed to meet increasing demands and meet retailer requirements, same level of IT, digital, logistics support a decade or two ago?
Distinctive R&C needed to achieve competitive advantage & superior economic performance
In public / not for profit, equivalent concern is how to sustain relative superior performance and set org apart from others
V.R.I.O
Value
Rarity
Inimitability
Organisational support
Orgs structure and formal and informal management control systems to support and facilitiate R&C exploitation
Works as an adjustment factor
Competitive advantage can be lost if org. not organised in a way that can fully take advantage of V-R-I R&Cs
1 more item...
Resources / capabilities competitors find difficult to imitate, obtain, or substitute
Assets can usually be imitated or acquired , e.g. IT systems or similar can be bought off open market
Linkages between activities, skills, people
IT system - the capability to manage, develop, deploy a system to benefit a customer is more costly to imitate than buying software
3 more items...
Valuable but common, unlikely to be source of competitive advantage
Car manufacturers add tech, see valuable, other manufacturers add same gadgets = no longer rare
Rare = possessed uniquely by one org, or only a few
Patents!
Brands
Library has unique collections
Prime location
unique skills
Relationships with customer / supplier
Value to customers
Managers may see something as valuable, but do not meet customers critical success factors
Taking advantage of opportunities and neutralising threats
To be valuable, must address Opps/threats. Using resource/capability that fails to exploit opportunities or neturalise threats is not creating value
Cost
Product or service needs to be at a cost that allows org to make expected returns
VRIO helps to analyse and evaluate if, how, and to what extent an org or company has resources and capabilities that are - valuable, rare, inimitable, and supported by the organisation
Effects are additive
The more they meet all four criteria, the more they provide sustained advantage
Competitive disadvantage
Competitive parity
Temporary competitive advantage
Sustained competitive advantage
Value chain
Describes categories of activities which collectively create a product or service
Most orgs are part of wider 'value system'
Companies rarely do all activities from design through to delivery of final product or service to end consumer
Make or buy?
What are the activities and cost/price structures of value system?
Where are the profit pools?
Different levels of profit available at different parts of the value system
Partnering
Who may be best partners within various parts of value system? What relationships are important?
Primary activites are directly concerned with creation of service or product
Manufacturing example
Inbound logistcs
Operations
Outbound logistics
Marketing and sales
Service
Support activities improve effectiveness or efficiency of primary activity
Procurement
Technology development
HR Dept.
Infrastructure
Activity Systems
How activities fit together, how they differ from competition
Mapping activity systems
Identify 'higher order strategic themes'
Ways an org meets CSFs
Identify clusters of activities that underpin each theme
Emphasise
Relationship to value chain
Importance of linkages and fit
Relationships to VRIO
Superfluous activities
Are there any activities not required in order to pursue a particular strategy? Any that don't contribute to value creation?
Linkages and fit could be basis of competitive advantage - in combination they may be valuable, rare, inimitable...
understand linkages between activities, how they reinforce each other, how they fit with needs of clients
Danger of piecemeal change, tinkering with systems that may damage benefits of linkages
challenge of managing change - when change is needed, manage through the whole system
activities represented can be seen as parts of value chain
Benchmarking
Industry / sector benchmarking
Best-in-class benchmarking
compared to best, incremental changes to R&Cs to overcome industry/sector benchmark negatives
Benchmark against similar orgs rather than everyone. E.g. Rural police grouped differently to urban police. Danger = whole industry could be underperforming
Two potential limitations
Surface comparisons - doesn't directly identify reasons for differences.
Simply achieving competitive parity. Can develop same as best in class, best performance is parity. Could develop further, develop own distinctive R&Cs
SWOT
Provides general summary of SW / OT
Aim is to identify which are relevant
Assumes environmental impacts identified
two main dangers
Listing
Summary, not a substitute
Not a substitute for other analysis tools. Absence of more thorough analysis can mean reliance on preconceived notions/views, bias. Lack of specificity.
Can generate long lists of apparent SWOTs, what matters is to be clear and concise
Should be used to compare against a competitor, comparable organisation
Can help discussion on strategic choices
TOWS
Organisations are not identical, they have their own resources and capabilities
Contribute to sustained competitive advantage
SO (strengths to take advantage of opportunities)
W
S
O
T
WO (opportunities by overcoming weakness)
ST (use strengths to avoid threats)
WT (Minimise weakness & avoid threats)
Internal
External