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IDENTIFICATION ANDCLASSIFICATION OF

RESOURCESSession 2

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Preview Identification of resources

Functional approach Value chain Activity Map Business Model Value System/ ecosystem

Classification of resources

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Summary- RBV (Rumelt, 84, wernerfelt 84, Conner 91, Barney 91, Grant 91, Peteraf, 93) The firm is a bundle of heterogenous resources that are

partly immobile (non-tradeable) Sustainable competitive advantage is derived from the

possession and utilization of valuable, rare, inimitable nonsubstitutable resources

In the long run, a firm continues to exist if it is moreeffective than its rivals in picking resources withheterogenous productivity

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Dynamic capability- competence based viewNelson and winter,82, Dietritch and Cool,89, Prahlad and hamel,90, Leonard Barton, 92, Amit and Schoemaker 93, Grant 1996, Teece et al, 97, Eisenhardt and Martin 2000

The firms is a repository of knowledge the accumulationof which proceeds in an incremental and path dependentway

The firms capability base is the evolutionary outcome ofits experiences and acts both as a source of competitiveadvantage and as a constraint

In the long run, a firm continues to exist if it leverages anddevelops capabilities sooner, more innovatively or morefortuitously than the competition

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Knowledge based view-Nonaka,94, Von Krogh et al 94, Grant, 96, Spender 96, Nonaka 2002, Nonaka and Toyama 2003

The firm is a knowledge creating function that integratesthe knowledge resident in individuals into goods andservices

Knowledge is the principal productive resource of the firm Competitive advantage conferred by an organizational

capability depends on the efficiency of knowledgeintegration

In the long run, a firm can exist only if its knowledgecreation rate is higher than that of the market

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Strategic industry factors or CSF or KSF(Amit and Shoemaker, 93)

Portfolio of resources and capabilties that have becomethe prime determinants of economic rent in a particularindustry

SIFs are determined in the market, they change over timeand drive competition

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Capabilities and competences Capabilities- repeatable pattern of action in the use of assets

to create, produce or offer products to market Capabilities arise from the coordinated activities fo groups of

people who pool their individual skills in using assets togenerate organizational action

Competence is he ability to apply assets in a coordinatedway in order to reach a certain aim (Vermelyen and Heene,1979)

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Levels of competences Individual operative competences Group level competences Firm or organization level competences

Intermediate competences in terms of managementcompetence for mobilization of inputs from othermembers of the organization

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Organization level competences Organizational knowledge related

Databases and other information about consumers, competitors ;technology

Enabling performance of group tasks Routines, standard operating procedures

Established way of doing things Corporate culture, norms and shred values

Furthermore, intangible assets have been described asresources that are created as a result or outcome ofcapabilities

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Networks and external resources Networks

Web of linkages between organization and environment Both individual (personal contacts) and organizational level (eg.

Membership of industry organizations)

Internal element corresponding to external resources Market orientation, consumer/customer insights Capability to gather external resources

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Impact of resources Success due to key resources- part of strategic core Example in defense forces

Skills: soldiering and weapon training Cultural traditions: Independent action, adherence to mission

Commitment to ideology- motivation General staff- overall coordination Combination of all the above

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Hierarchy of capabilities

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Identifying organizational capabilities- afunctional classification

Function Capability Exemplars

Corporatemanagement

Financial management, strategic control,coordinating business units, M&A

Exxon Mobil, GE,IBM< Samsung,BP, P&G,Citigroup, Cisco

MIS Speed and responsiveness through rapidinformation transfer

Walmart, Dell

R&D Research Capability, Development ofinnovative new products

Merck, Apple,3M

Manufacturing Efficient volume manufacturing,Continuous improvement, Flexibility

Nucor, Toyota

Design Design Capability Apple, Nokia

Marketing Brand management, Quality, reputation P&G, LV, J&J

Sales, dist,service

Sales responsiveness, efficiency andspeed of distribution, customer service

Pepsico, pfizer, LLBean, Dell,Caterpillar

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Hierarchy of capabilities (eg. Telecom mfr)

Cross functional capabilities (eg. NPD, customer support,quality management)

Broad functional capabilities (eg. Operations, R&D anddesign, MIS, Marketing & Sales, HR)

Activity related capabilities (Mfg, materials mgmt, productengineering)

Specialized capabilities (Assembly of telset and PCB)

Single task capabilities (where individuals specializedknowledge is put to use)

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m

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Value chain Strategically relevant activities The same outcome can be achieved in different ways Linkages

Resources underlying the different activities/linkage

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Value chain- knowledge base Knowledge about performing the particular value chain

activity Knowledge about how other activities in the value chain

can be modified Surplus knowledge or spillovers not related to the value

chain Competencies at various points on the value chain

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Value system/Ecosystem Understanding how the value chain of a firm is embedded

in a larger stream of activities Competencies related to

Having competitive advantage within the value system Coordinating and developing the value system

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Tradeoffs in the value chain

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Generate long list of strength and weaknesses fromprimary and support activities on the firms value chain

Reconceptualize long list in terms of resources andcapabilities and complete deeper inspection with theapplication of key questions

Determine where along the value chain potentialcompetitive advantage lies. Look at each competitivelyrelevant resource and capability relative to its potential asa cost or uniqueness driver

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Classify into resources and capabilities- and evaluate eachagainst the VRIO criterion ( value, rarity, imitability andorganisation)

Classify quality of capability into- inadequate, adequate,attractive, potential, competitive, distinctive

It may also make sense to classify source of advantage asa cost driver or uniqueness driver and also identify where(which component of the value chain, which part of theorganization) it is located

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What Determines Organizational Capability in Football?

Who are theoutstandingly

successful teammanagers (coaches)in British football?

Matt Busby Manchester U. 1945-70 Alf Ramsey Ipswich 1955-64Bill Shankley Liverpool 1959-74

Jock Stein Glasgow Celtic 1965-78Brian Clough Derby/Notts F. 1972-84Bob Paisley Liverpool 1974-83

Alex Ferguson Aberdeen 1980-86 Manchester U. 1986-

Arsene Wenger A Monaco 1985-95 Arsenal 1996- Jose Mourinho Porto 2000-04

Chelsea 2004-

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Building Team Capabilities in Soccer: Alex Ferguson at Manchester United

Find/develop young playersScouting staff doubled find the best. Building youth team 1992 youth team included RyanGiggs, David Beckham, Paul Scholes, Nicky Butt,Gary Neville

Training State-of-the-art training complexRigorous training schedule (+war on booze)

Developing coordination Training for team skillsBuilding team spirit team functions with singlespirit & constant flow of mutual support; Talent

without unity of purpose is hopeless

Structuring the teamBuild a core of group internally Supplement with key

purchasesBlending personalities as well as skillsPlayer rotation for experimentation & flexiblecoordination

Building the wider team coaches, scouts,physiotherapists, psychologists, even cleaners

Cross-functional integration

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Business Model How a company buys and sells goods and services and

earns money (value proposition, value appropriation,value capture) The concept that describes opportunity and strategy Capabilities that define resources necessary Value proposition

Reasoning back from CSFs- understanding capabilityrequirement

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Additional focus on superfluous strengths resource combinations

resource combinations in a particular context rigidity of resource combinations and inability to adapt it

when new resources become available

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