Strategy: Analysis and Practice

Slide 1 ©The McGraw-Hill Companies, 2005

7. Competitive strategy: The analysis of strategic capability

Strategy: Analysis and Practice

Slide 2 ©The McGraw-Hill Companies, 2005

Outline● The resource-based view of the firm● The language of resources and

capabilities● The importance of intangibles● Determining the value of competences● Linking the market-based and resource-

based views● Competence-based competition● Competitive strategy in practice

Strategy: Analysis and Practice

Slide 3 ©The McGraw-Hill Companies, 2005

Introduction

Strategy: Analysis and Practice

Slide 4 ©The McGraw-Hill Companies, 2005

The Resource-based View of the Firm

Resource-based View• Firm as a bundle of

resources and capabilities.

• Distinct resources and capabilities underpin competitive advantage.

• Specific combination and coordination of resources critical.

• Strategy based on skilled diagnosis and creative solutions.

Market-based View• Firm as a unit in a

market.• Distinct position in

market underpins competitive advantage.

• Detailed knowledge of market and competitive conditions critical.

• Strategy based competitive analysis and appropriate value creation.

Strategy: Analysis and Practice

Slide 5 ©The McGraw-Hill Companies, 2005

The Language of Resources and Capabilities

● Resources: inputs into a firm’s operations so as to produce goods and services.

● Capabilities: The ability to perform a task or activity that involves complex patterns of coordination and cooperation.

● Rents: a surplus of revenue over cost.● Strategic assets / Core competencies:

resources and capabilities that can earn rents.

Strategy: Analysis and Practice

Slide 6 ©The McGraw-Hill Companies, 2005

Core Competence

Core Competences

Collective knowledge of

how to coordinate skills

and technologiesPrahalad & Hamel

(1990)

Distinctive Capabilities

Business processes

connected to customer needs

Stalk, Evans & Shulman (1992)

Strategic Assets

Capacity to deploy

resources to effect a desired

end

Amit & Shoemaker (1993)

= =

The underlying capability that is the distinguishing characteristic of the organization

Strategy: Analysis and Practice

Slide 7 ©The McGraw-Hill Companies, 2005

Identifying Intangibles● Intellectual property rights of patents,

trademarks, copyright and registered designs● Trade secrets● Contracts and licenses● Databases● Information in the public domain● Personal and organizational networks● The know-how of employees, advisers, suppliers

and distributors● The reputation of products and of the company● The culture of the organization

Strategy: Analysis and Practice

Slide 8 ©The McGraw-Hill Companies, 2005

The Value of a Core Competence

Strategy: Analysis and Practice

Slide 9 ©The McGraw-Hill Companies, 2005

Identifying Key Success Factors

Strategy: Analysis and Practice

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Strategic Industry Factors and Core Competences

Strategy: Analysis and Practice

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Matching Resources and Markets

Strategy: Analysis and Practice

Slide 12 ©The McGraw-Hill Companies, 2005

Resources and Capabilities

Strategy: Analysis and Practice

Slide 13 ©The McGraw-Hill Companies, 2005

Positioning the Business for Growth

Strategy: Analysis and Practice

Slide 14 ©The McGraw-Hill Companies, 2005

Assessing Feasibility

Strategy: Analysis and Practice

Slide 15 ©The McGraw-Hill Companies, 2005

Concluding Remarks● Competitive advantage defines the

market-based view – the positioning of the firm in terms of competitors

● Core competence defines the resource-based view – the underlying capability that is the distinguishing characteristic of the organization.

Strategy: Analysis and Practice

Slide 16 ©The McGraw-Hill Companies, 2005

Concluding Remarks (continued)

● Core competence underpins market positioning and thus competitive advantage.

● The resource-based view demands attention to processes, resource leverage and intangibles.

● Resources are linked to competitive advantage through key success factors.