Resource-Based View

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Resource-Based View
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IO vs. RBV
Industrial Organization (IO) Resource Based View (RBV)
Some Authors Porter, Rumelt Barney, Wernerfelt
Focus Externaldescribes environmental conditions favoring high levels of firm performance Internaldescribes firms internal characteristics and performance
Assumptions Firms within an industry have identical strategic resources. Resources are highly mobile (easily bought and sold) and therefore homogeneous. Firms have idiosyncratic, not identical strategic resources. Resources are not perfectly mobile and therefore heterogeneous.



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Business Level Strategy

• How do we support the corporate strategy?
• How do we compete in a specific business arena?
• Three types of business level strategies
• Low cost producer
• Differentiator
• Focus

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Business Level Strategy

• Four areas of focus, objectives of business-level
  strategy
• Generate sustainable competitive advantages
• Develop and nurture (potentially) valuable
  capabilities
• Respond to environmental changes
• Approval of functional level strategies

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Sustainable Competitive Advantage

• An asset is anything the firm owns or controls.
• Loosely, Asset is to Accounting as Resource
  is to Management.
• Types of assets
• Physical plant equipment, location, access to
  raw materials
• Human training, experience, judgment,
  decision-making skills, intelligence,
  relationships, knowledge
• Organizational Culture, formal reporting
  structures, control systems, coordinating
  systems, informal relationships

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Types of assets

• Physical plant equipment, location, access to
  raw materials, IT infrastructure
• Can IT infrastructure provide a source of
  competitive advantage?
• How can we manage physical assets
• Regular maintenance
• Outsourcing
• Co-location
• Profit center
• Etc.

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Types of assets

• Human training, experience, judgment,
  decision-making skills, intelligence,
  relationships, knowledge
• Can People be a source of competitive advantage?
• How do we manage people assets
• HR Management
• Motivation theories
• Influence and power
• Effectiveness

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What is Project Human Resource Management?

• Making the most effective use of the people
  involved with a project.
• Processes include
• Human resource planning Identifying and
  documenting project roles, responsibilities, and
  reporting relationships.
• Acquiring the project team Getting the needed
  personnel assigned to and working on the project.
• Developing the project team Building individual
  and group skills to enhance project performance.
• Managing the project team Tracking team member
  performance, motivating team members, providing
  timely feedback, resolving issues and conflicts,
  and coordinating changes to help enhance project
  performance.

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Maslows Hierarchy of Needs

• Abraham Maslow argued that human beings possess
  unique qualities that enable them to make
  independent choices, thus giving them control of
  their destiny.
• Maslow developed a hierarchy of needs, which
  states that peoples behaviors are guided or
  motivated by a sequence of needs.

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Figure 9-1. Maslows Hierarchy of Needs
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Types of assets

• Organizational Culture, formal reporting
  structures, control systems, coordinating
  systems, informal relationships
• Can Organizational assets be a source of
  competitive advantage?
• How do you manage organizational assets
• Teams
• Structure

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Networked Organizations (cont.)
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Components of Information Systems
Which one of the following is not an asset?

• Hardware is a set of devices such as processor,
  monitor, keyboard, and printer.
• Software is a set of programs that enable the
  hardware to process data.
• Database is a collection of related files,
  tables, relations, and so on, that stores data.

• Network is a connecting system that permits the
  sharing of resources between computers.
• Procedures are the set of instructions about how
  to combine the above components.
• People are those individuals who work with the
  system or use its output.

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IT Assets Electronic Framework
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Business-Level Strategy

• The primary objective of business-level strategy
  is to create sources of sustainable competitive
  advantage.
• What is sustainable competitive advantage?
• There are many definitions, used by different
  people in different ways.
• What follows is a practical description. But
  first, we need to back up a bit

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Sustainable Competitive Advantage

• A capability is usually considered a bundle of
  assets or resources to perform a business process
  (which is composed of individual activities)
• E.g. The product development process involves
  conceptualization, product design, pilot testing,
  new product launch in production, process
  debugging, etc.
• All firms have capabilities. However, a firm
  will usually focus on certain capabilities
  consistent with its strategy.
• For example, a firm pursuing a differentiation
  strategy would focus on new product development.
  A firm focusing on a low cost strategy would
  focus on improving manufacturing process
  efficiency.
• The firms most important capabilities are called
  competencies.

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Competencies vs. Core Competencies vs.
Distinctive Competencies

• A competency is an internal capability that a
  company performs better than other internal
  capabilities.
• A core competency is a well-performed internal
  capability that is central, not peripheral, to a
  companys strategy, competitiveness, and
  profitability.
• A distinctive competence is a competitively
  valuable capability that a company performs
  better than its rivals.

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Examples Distinctive Competencies

• Toyota, Honda, Nissan
• Low-cost, high-quality manufacturing capability
  and short design-to-market cycles
• Intel
• Ability to design and manufacture ever more
  powerful microprocessors for PCs
• Motorola
• Defect-free manufacture (six-sigma quality) of
  cell phones

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Where are we?

• We are discussing sustainable competitive
  advantage, and have defined Competencies
• Assets?Capabilities?Competencies?Competitive
  Advantage
• Next is competitive advantage.
• A competitive advantage is simply an advantage
  you have over your competitors.
• A competency will produce competitive advantage
  provided
• A) it produces value for the organization, and
• B) it does this in a way that cannot easily be
  pursued by competitors.

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Sustainable Competitive Advantage

• However, we said the primary objective of
  business-level strategy was to create sources of
  sustainable competitive advantage (SCA).
• How do we know SCA when we see it? What is it?
  When is it considered sustainable?
• To produce SCA, the capability must
• Produce value
• Be rare
• Imperfectly imitable, i.e. not be easily imitated
  or substituted
• Be exploitable by the organization

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Sustainable Competitive Advantage

• The Question of Value
• Capabilities are valuable when they enable a firm
  to conceive of or implement strategies that
  improve efficiency and effectiveness.
• To be valuable, the capability must either
• Increase efficiency (outputs / inputs)
• Information system reduces customer service
  agents required, or increases the number of calls
  the same number of agents can answer
• Increase effectiveness (enable some new
  capability not previously held)
• Opening a new regional campus enables outreach to
  a new market of students

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Sustainable Competitive Advantage

• The Question of Rareness
• Valuable resources or capabilities that are
  shared by large numbers of firms in an industry
  are therefore not rare, and cannot be a source of
  SCA.
• Given the following, which are rare?
• A web server
• An MIS instructor
• A state-of-the-art stamping press
• None of these are rare. Some researchers think
  only organizational assets or resources are rare
  (such as culture). What do you think?

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Sustainable Competitive Advantage

• The Question of Imitability
• Valuable, rare resources can only be sources of
  SCA if firms that do not possess them cannot
  obtain them. They must be imperfectly
  imitable, i.e. impossible to perfectly imitate
  them.
• Ways imitation can be avoided
• Unique Historical Conditions (Caterpillar, e.g.)
• Causal Ambiguity (why resources create SCA is not
  understood, even by the firm owning them)
• Social Complexity (trust, teamwork, informal
  relationships, causal ambiguity where cause of
  effectiveness is uncertain)

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Sustainable Competitive Advantage

• The Question of Substitutability
• There must be no equivalent resources that can be
  exploited to implement the same strategies.
• Forms of substitutability
• Duplication Strategically equivalent resources
  that can produce the same results.
• Substitution Very different resources can be
  substitutes,

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Sustainable Competitive Advantage

• The Question of Exploitation
• Later research qualified this as another criteria
  for SCA. Is a firm organized to exploit the full
  competitive potential of its resources and
  capabilities?
• Are systems in place to enable firms to support
  the execution of a particular strategy?
• Xerox, e.g

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Notes on Sustainable

• Sustainable is not measured in calendar time.
• Sustainable does not mean the advantage will last
  forever.
• Sustainable suggests the advantage lasts long
  enough that competitors stop trying to duplicate
  the strategy that makes the advantage sustained.

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Economic Performance
Valuable? Rare? Costly to Imitate? Exploited by the Organization? Competitive Implications Economic Performance
No -- -- -- Competitive Disadvantage Below Normal
Yes No -- -- Competitive Parity Normal
Yes Yes No -- Temporary Competitive Advantage Above Normal
Yes Yes Yes Yes Sustained Competitive Advantage Above Normal
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Business Level Strategy

• Generate sustainable competitive advantages
• Develop and nurture (potentially) valuable
  capabilities
• Respond to environmental changes
• Approval of functional level strategies