The Resource-based view of Competitive Advantage

1
The Resource-based view of Competitive Advantage

• Paul C. Godfrey
• Marriott School of Management
• Brigham Young University

2
Generic Strategies
OVERALL COST LEADERSHIP
DIFFERENTIATION
FOCUS
Source Michael Porter, Competitive Strategy,
1980
3
Common Pitfalls in Cost Leadership

• Misunderstanding of actual costs
• False perception of cost drivers
• Focus on manufacturing
• Failure to exploit linkages
• Ignoring competitor behavior
• Poor implementation
• Where have you seen these mistakes?

Source P. Ghemawat, Strategy and the Business
Landscape, 1999
4
Common Pitfalls in Differentiation

• Creating differentiation that buyers do not value
• Over-fulfilling buyer needs
• Looking too narrowly at the sources of
  differentiation
• Failing to understand costs of differentiation
• Failing to recognize buyer segments
• Creating differentiation that competitors can
  emulate quickly or cheaply
• Where have you seen these mistakes?

Source P. Ghemawat, Strategy and the Business
Landscape, 1999
5
Common Pitfalls in Focus

• Picking the wrong segment (no one was in there
  for a reason)
• Picking a segment that cannot meet growth goals
• Failing to understand what adds value in the
  segment
• Failing to create a truly targeted offering for
  the segment
• Assuming that segment will pay a price premium
  for a targeted offering

6
What are resources?

• The building blocks of generic strategies

• Assets, attributes, capabilities, and skills

• A Balance Sheet Asset
• Supports/ facilitates differentiation
• Skill in broadening and preserving

• A Balance Sheet Asset
• Supports/ facilitates differentiation
• Disneys capability has broadened reach, deepened
  value

7
What makes a resource?

• Value
• Create differentiation/ cost savings (WalMart)
• Rare
• Few competitors have it (McDonalds locations)
• Difficult to imitate
• Reduces supply
• Competitors cant copy (Cokes intl
  distribution)
• Difficult to substitute for
• Preserves demand
• Customers cant find equal value (United
  Airlines)
• Appropriability
• Resource and profit ownership (NFL teams and
  players)

8
Barriers to imitation

• Historical advantages
• Path dependent development
• Complex systems
• Tacit knowledge
• Property rights

9
Barriers to substitution

• Unique product technical attributes (Oracle
  databases)
• Positive externalities (Microsoft Office)
• Creating a unique experience (Major League
  Sports)
• Best when built on inimitable inputs (Disneyland)

10
Finding resources in the value chain
Firm Infrastructure Human Resource Management Tech
nology Development Procurement
Culture of decentralization, trust (Nordstroms)
Increased productivity, loyalty, low turnover
(Costco)
Support (Enabling) Activities
Clearly understand costs/markets (Amazon.com)
M
a
Reduce costsJIT, improve quality, innovation
(Toyota)
r
g
i
Quality systems (GE) Distribution (WalMart)
n
Brand equity (Apple) Customer Service (American
Express)
Inbound Logistics
Operations
Outbound Logistics
Marketing Sales
After-Sales Service
Primary (Core) Activities
Source Michael Porter, Competitive Advantage,
1985
11
The resource-base of Me, Inc.

• Knowledge, skill, and personal capabilities are
  your greatest assets
• They are portable
• They can be enhanced by personal effort
• Knowledge and skill are highly depreciable
• The cutting edge of knowledge is about 6 months
• You need to be a lifelong learner

12
Lifelong learning

• Learning comes in many forms
• Cognitivereading, courses
• Experienceactivities, projects
• Revelationstudy, prayer, meditation
• Read for business and for pleasure
• Employer sponsored education is a must
• Personal reflection and PARswhat have I learned
  lately