international strategic management - SUDZUCKER company Germany
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lec5.pptxCORP 5039 LECTURE 5 The Organisational Context: The Resource Based View
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Shift in Strategy Analysis – From External to Internal Environments
© 2013 Robert M. Grant
www.contemporarystrategyanalysis.com
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Rationale for Resource-Based Approach to Strategy
Provides a counter argument to the ‘outside in’ perspective
When the industry environment is volatile, internal resources and capabilities offer a more stable basis for strategy than an industry or market focus
Resources and capabilities are the primary sources of profitability
© 2013 Robert M. Grant
www.contemporarystrategyanalysis.com
3
Contributions to Variance in Profitability across Business Units
Rumelt, R (1991) How much does industry matter?, Strategic Management Journal, Mar, in
Lynch (2003) Corporate Strategy, p. 227.
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Source within Corporation
Corporate Ownership
Industry Effects
Contribution to the total profitability of the organisation
0.8%
Cyclical Effects
Business unit specific effects
Unexplained factors
Total Across Corporation
8.3%
7.8%
46.4%
36.7%
100%
Prescriptive Strategies – Profit Maximising & Competition Based Theories
Analysis
of the
Environment
Analysis
of Resources
Vision,
Mission &
Objectives
Options
Development
Rational
Selection
Implementation
COMPETITION
PROFIT-MAXIMISING CHOICE
Long term monitoring
Long term monitoring
Adapted from Lynch, R (2010)
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Prescriptive Strategies – Profit Maximising & Competition Based Theories
Analysis
of the
Environment
Analysis
of Resources
Vision,
Mission &
Objectives
Options
Development
Rational
Selection
Implementation
RESOURCES DIRECT &
GUIDE KEY STRATEGY AREAS
Long term monitoring
Long term monitoring
Adapted from Lynch, R (2010)
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Emergence of the Resource-Based View
No one author created the theory but rather the RBV reflects the development of an Incremental school of thought over the last 20 years.
Some key authors however include:
Wernerfelt (1984) A resource-based view of the firm, (SMJ)
Prahalad & Hamel (1990) The Core Competence of the Corporation (HBR)
Barney (1991) Firm resources and sustained competitive advantage (JoM)
Grant (1991) The resource-based theory of competitive advantage:
Implications for strategy formulation (CMR)
Kay (1994) Foundations of Corporate Success (Book)
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Critical Assumptions of the Resource-Based View
Relies upon two key fundamentals assumptions about the resources and capabilities that a firm may control:
Resource heterogeneity
Resource immobility
8
Criteria for SCA & Strategic Implications
Dess, Lumpkin and Eisner (2008) Strategic Management , Adapted from: Barney , J. (1991) ‘Firm Resources and Sustained Competitive Advantage’, Journal of Management, 17(1):99-120
| Valuable? | Rare? | Difficult to Imitate? | Without Substitutes? | Implications for Competitiveness |
| No | No | No | No | Competitive disadvantage |
| Yes | No | No | No | Competitive parity |
| Yes | Yes | No | No | (Temporary) Competitive Advantage |
| Yes | Yes | Yes | Yes | Sustainable Competitive Advantage |
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Links Between Resources, Capabilities & Competitive Advantage
© 2013 Robert M. Grant
www.contemporarystrategyanalysis.com
10
Appraising Resources
© 2013 Robert M. Grant
www.contemporarystrategyanalysis.com
| Resource | Characteristics | Indicators | |
| Tangible Resources | Financial | Borrowing capacity Internal funds generation | Debt/Equity ratio Credit rating Net cash flow |
| Physical | Plant and equipment: Size, location, technology flexibility. Land and buildings Raw materials | Market value of fixed assets. Scale of plants Alternative uses for fixed assets | |
| Intangible Resources | Technology | Patent, copyrights, know how, R&D facilities Technical and scientific employees | No. of patents owned Royalty income R&D expenditure R&D staff |
| Reputation | Brands. Customer loyalty, company reputation (with suppliers, customers, government) | Brand equity Customer retention Supplier loyalty | |
| Human Resources | Training, experience, adaptability, commitment and loyalty of employees | Employee qualifications, Pay rates, turnover |
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Identifying Organisational Capabilities
© 2013 Robert M. Grant
www.contemporarystrategyanalysis.com
| Functional Area | Capability | Exemplars |
| CORPORATE FUNCTIONS | Financial control | ExxonMobil, PepsiCo |
| Management development | General Electric, Shell | |
| Strategic innovation | Google, Haier | |
| Multidivisional coordination | Unilever, Shell | |
| Acquisition management | Cisco Systems, Luxottica | |
| International management | Shell, Banco Santander | |
| Corporate Social Responsibility | Johnson & Johnson, Danone | |
| INFORMATION MANAGEMENT | Integration of IT with decision making | Wal-Mart, Capital One, Cemex |
| RESEARCH & DEVELOPMENT | Research capability | IBM, Merck |
| New product development | Apple, 3M | |
| Fast-cycle new product development | Canon, Inditex (Zara) | |
| OPERATIONS | Operational efficiency | Briggs & Stratton, UPS |
| Continuous improvement | Toyota, Wal-Mart | |
| Flexibility and speed of response | Four Seasons Hotels | |
| DESIGN | Product design capability | Apple, Alessi |
| MARKETING | Brand management | Procter & Gamble, Altria |
| Building reputation for quality | Johnson & Johnson | |
| Responding to consumer requirements | L'Oréal, Amazon | |
| SALES AND DISTRIBUTION | Effective sales promotion and execution | PepsiCo, Pfizer |
| Efficient, fast order processing | L. L. Bean, Dell Computer | |
| Speed of distribution | Amazon.com | |
| SERVICE | Customer service | Singapore Airlines, Caterpillar |
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Canon: Products & Core Technical Capabilities
© 2013 Robert M. Grant
www.contemporarystrategyanalysis.com
Fine
Optics
Micro-
Electronics
Precision
Mechanics
35mm SLR camera
Compact fashion camera
EOS autofocus camera
Digital camera
Video still camera
Video security systems
Camcorders
Plain-paper copier
Color copier
Color laser copier
Laser copier
Basic fax
Laser fax
Scanners
Mask aligners
Excimer laser aligners
Stepper aligners
Inkjet printer
Laser printer
Color video printer
Digital commercial
printer
Calculator
Notebook computer
Binoculars
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RBV & SCA – An Amalgamation of Factors
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Sustainable CA.
Innovative capability
Prior or acquired resources
Imitability
Durability
Appropriability
Substitutability
Truely Competitive
The Activity System
An activity system is an integrated set of value creation processes leading to the supply of product and/ or service offerings.
This activity system is frequently referred to as the value chain or Porter’s value chain
The value chain identifies the key generic functions of an organisation.
The purpose of an organisation is to create ‘value’
The chain is a way to disaggregate costs from value creation across primary activities.
This can then enable an understanding of which capabilities will contribute to which value creating activities.
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Porter’s Value Chain
E.g.: Quality control; receiving raw materials; supply schedules
E.g.: Manufacturing; packaging; production control; maintenance
E.g.: Finished goods; order handling; dispatch; delivery; invoicing
E.g.: Order taking; market research; sales analysis; customer management
E.g.: Warranty; maintenance; education & training; upgrades
Legal, accounting, financial management
Personnel; resource planning, recruitment, training etc
R&D, Product/process design, production engineering
Supplier management, funding, subcontracting etc
Margin
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Analyzing the Value Chain
Questions you need to ask yourself:
Where in the business system do we take profit?
What has determined the size of our margins?
What are the major cost and price drivers?
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Approaches to Identifying an Organization’s Resources & Capabilities
© 2013 Robert M. Grant
www.contemporarystrategyanalysis.com
Starting from the outside
1. Key Success factors
How do customers choose?
What do we need to survive competition?
2. What resources & capabilities do we need to deliver these KSFs?
Starting from the inside
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Appraising the Strategic Importance of Resources & Capabilities
© 2013 Robert M. Grant
www.contemporarystrategyanalysis.com
19
Appraising Resources & Capabilities
Identify the firm’s resources and capabilities
Explore the linkages between resources and capabilities
Appraise the firm’s resources and capabilities in terms of:
(a) strategic importance
(b) relative strength to competitors
© 2013 Robert M. Grant
www.contemporarystrategyanalysis.com
20
Appraising Resources & Capabilities
Develop strategy implications:
In relation to strengths
How can these be exploited more effectively and fully?
In relation to weaknesses
Identify opportunities to outsource activities that can be better performed by other organisations.
How can weaknesses be corrected through acquiring and developing resources and capabilities?
© 2013 Robert M. Grant
www.contemporarystrategyanalysis.com
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Framework for Appraising Resources & Capabilities
© 2013 Robert M. Grant
www.contemporarystrategyanalysis.com
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The Resources & Capabilities of Ducati Motor Holding Pre-Audi Acquisition
| Strategic Importance (1 to 10) | Relative strength (1 to 10) | |
| Resources | ||
| Proprietary technology | Extensive industry diffusion (3) | History of technical innovation/few patents (6) |
| Location | Some advantages – market proximity, industry knowledge & low cost inputs (4) | Italy-biggest European motorcycle market & centre for engineering & design know-how (10) |
| Distribution | Critical – buyer access/service (9) | Strong in Italy, weak in major markets (3) |
| Brand | Important; difficult to replicate (8) | Iconic, racing heritage (10) |
| Finance | Important for R&C upgrades (7) | Weak cash flow, limited fin resources (1) |
| Capabilities | ||
| Manufacturing | Critical wrt efficiency/quality... (10) | High cost due to low output/history of quality problems (2) |
| Design | Essential but easily replicable (6) | History of innovative designs (10) |
| Engineering | Key input into NPD (8) | Strong in ingenuity & innovation (8) |
| New Product Devpt | Regular model launch critical (10) | Strong success record (9) |
| Marketing | Important but capability not rare (6) | Effective brand promotion (8) |
| Customer service | Essential for reputation (7) | Weak outside Italy (2) |
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The Resources & Capabilities of Ducati Motor
© 2013 Robert M. Grant
www.contemporarystrategyanalysis.com
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Comments on the RBV
It remains a list of factors to consider - there is no ‘rule to riches’, but then the RBV by definition is not about generic industry solutions.
There is no analysis about the development of resources above and beyond the concept of innovation.
There is no consideration of the human element in resource development.
May RBV be considered tautological?*
There is no emphasis upon the emergent approach to resource development. That each element needs mere definition and then it will happen automatically is a gross oversimplification.
* See Priem and Butler (2001) & Barney’s reply to this argument (2001)
Academy of Management Review
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