Case 3
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Week4PPT.docx
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Course structure
Business
models
Identifying
Problem
Analysing
customers
Analysing
context
Analysing
distribution
Analysing
resources
Strategy
develop
-
ment
Strategy
evaluation
Implement
-
ation
Today
Learning objectives
1.
Gain a broad perspective of the resources
available to firms and how to value these
2.
Understand the resource
-
based view of strategic
planning
4
Agenda
1.
Firm resources defined
•
Resource location
•
Resource ownership
•
Valuation difficulties
2.
Resource
-
based view (VRIO analysis tool)
•
Knowledge
•
People
•
Time
•
Money
•
Partnerships and alliances
3.
Resources analysis models
•
Value chain analysis
•
Business Model Canvas
Internal environment and resources
Owning versus controlling
•
Owning may be good but consider opportunity cost
•
Controlling is more important, not owning
•
Rent them, as long as contracts are enforceable
•
e.g. licence, employment, lease
•
Borrow or co
-
opt them, but limited time for use?
•
e.g. strategic alliances, Joint Ventures
•
Location inside or outside the firm?
•
e.g., reputation, tacit knowledge
Resources and Capabilities
· Tangible: physical, processing plant, organizational and technological
· Intangible: human, reputation, creativity/innovation
· Capabilities: A company's ability to deploy resources; knowledge and use of resources through processes, information exchange, systems, etc
Competitive advantage comes from how the resources are employed rather than merely possessing them
Firm resource categories and items
Source: Grant (1991); Chetty & Wilson (2003)
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Value of resources
· Entrepreneurs requires (assumes) people to hold different values about the value of resources
· Information asymmetries
· Entrepreneurs have the insight to see how a price is set too low and that through adding value or moving resource it can be sold at a higher price
· Resource owners must not be able to see that same value
· Economies in constant disequilibrium because new information alters the value of resources
Source: Shane and Venkataraman, 2000
Resources as the basis of profitability
Source: Grant (1991)
Resource
-
based
strategy process
Source: Grant (1991)
https://
/
Resources
Discussion of some business examples
Boutique
Small hotel
Bakery
Software developer
Resources leading to competitive
advantage
–
VRIO model
VRIO framework criteria
Value
:
Resources are valuable when they can exploit an
opportunity or neutralize a threat.
Rare
:
Valuable resources are possessed by a small
number of competing firms.
Imperfectly imitable
:
Competing firms cannot obtain the
valuable and rare resources.
Organization
:
The firm’s ability to integrate, build, and
reconfigure its resources better than its rivals.
VRIO
model used for resource analysis
Or some
Example
VRIO Framework – reflection
Advantages
· Separate strategic resources from operational resources
· Helps identify unused competitive advantages to transform into sustained competitive advantages
· Entrepreneurs can understand which activities are important or rank them
· Identify gaps and allocate resources to areas that gives them greatest returns
Disadvantages
· May not account for all the resources and activities
· The sustainable competitive advantage (or lack of it) could change quickly due to environment
Characteristics of select resources
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Knowledge as a resource
· Path dependent – knowledge encourages further development of knowledge
· Non-rivalry (and non-depleting) - one person’s use of an idea does not preclude another from using it at the same time
· Irreversibly transferrable – once I know it I cannot give it back (e.g. secrets)
· High initial costs but low marginal cost – expensive to gain but cheap to reproduce (e.g. piracy)
· Substitutable – can replace other forms of resources (less use of labour or transport)
Pricing knowledge
•
Data
-
information
-
knowledge
-
wisdom are not the
same
•
Intellectual capital of company = difference
between market value at sale of company and asset
(
book) value on balance sheet
•
Asymmetric information between buyer and seller
–
can’t tell you information before purchase
•
Buyer needs expertise to judge value
People (humans) as a resource
•
Somewhat controlled but
never owned (not slavery)
•
Who owns employee
knowledge?
•
Who paid for the training?
•
Who owns employee
business relationships or
company data?
Time as a resource
•
Limited; cannot be bought
•
“Cash burn” rate for start
-
ups
•
Limited time before
competitor imitates
innovation
•
Time available for success
(
Perlow
et. al. 2002)
•
Too fast or too slow?
•
Early mover or late mover?
•
Linked to implementation of
a plan
Characteristic of time as a resource
Cash as a resource
•
Test against VRIO model….
•
Only a potential resource; flexible means of trading
for productive resources
•
Valuable but not rare: competitive parity
Partnerships & alliances as a resource
•
NOT Every relationship or network connections is a
partnership
•
Means of accessing additional resources
•
Complementary resources?
•
Not central to core competencies?
•
But controlling?
Two other
frameworks
for resource
analysis
Porter’s Value Chain analysis
•
How to identify competitive
advantage?
•
Every firm has value creating
activities
•
Five primary activities and
four support activities
•
Primary activities should
help create value that
exceeds the cost
–
generate
profit
•
Source of competitive
advantage can be from one
or more activities
Example of a value chain
-
McDonalds
Business Model Canvas (BMC)
The BMC is a shared language for
describing, visualizing, assessing and
changing business models.
The BMC describes the
rationale
of how an
organization
creates
,
delivers
and
captures
value
Key issues
Creates value
Delivers value
Captures value
Business model canvas
Example 1
Example 2
Summary
· Resources underpin strategy
· Broad set of tangible and intangible elements of business might be resources
· Important resources are difficult to value:
· Knowledge, people, time, relationships
· Resource control is central; ownership less so
· Creating value and delivering it is central to strategy process
· Understanding the relationships among business stakeholders helps in strategy development.
References
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99-120.
Chetty, S., & Wilson, H. I. (2003). Collaborating with competitors to acquire resources. International Business Review, 12(1), 61-81.
Das, T. K. (1991). Time: The hidden dimension in strategic planning. Long Range Planning, 24(3), 49-57.
Freeman, S., Edwards, R., & Schroder, B. (2006). How smaller born-global firms use networks and alliances to overcome constraints to rapid internationalization. Journal of International Marketing, 14(3), 33-63.
Grant, R. M. (1991). The resource-based theory of competitive advantage: Implications for strategy formulation. California Management Review, 33(3), 114135.
Perlow, L. A., Okhuysen, G. A., & Repenning, N. P. (2002). The speed trap:
Exploring the relationship between decision making and temporal context. Academy of Management Journal, 45(5).
Shane, S., & Venkataraman, S. (2000). The promise of entrepreneurship as a field of research. Academy of Management Review, 25(1), 217-226.
