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FIRM RESOURCES AND SUSTAINED COMPETITIVE ADVAN-TAGE, BARNEY,JAY B, JOURNAL OF MANAGEMENT, 1991
DATE: 10/27/2015 ID: 20155636NAME: RIRI KUSUMARANI
ITM 501 - INNOVATION MANAGEMENT (2014)
ONE SENTENCE SUMMARY
10/27/2015ITM 501 - INNOVATION MANAGEMENT 2
The proposed framework can be used to analyze resources potential as source for sustained competitive advantage of a firm
when firm resources are heterogeneous and immobile
1960’S FRAMEWORK
SWOT Analysis
Show How Firms Sustain their competitive advantages by implementing strategies
Exploiting StrengthsResponding to OpportunitiesNeutralizing ThreatsAvoiding Weaknesses
Porter’s Five Forces Model
Attributes of an attractive industry and suggests greater opportunities with less threats
ASSUMPTION IN PROPOSED FRAMEWORK
Firms in an industry may be heterogeneous with respect to the strategic resources they control
Resources may not be perfectly mobile, therefore Heterogeneity can be long-lasting
CONCEPT IN THIS PAPER : FIRM RESOURCES
All assets, capabilities, organizational processes, firm attributes, information, knowledge etc. that are controlled by firms to be used as strength for improving efficiency and effectiveness (Daft,1983)
Three Categories in this paper:
Physical capital. Ex: technologies, infrastructures, location, access to materi-als etc
Human capital. Ex: training, experience,relationship,worker & manager skills Organizational capital . Ex:reporting structure, planning, controlling, informal
relations among groupThese resources can act as barriers or enabler of a firms ability to implement valuable strategies for sustaining competitive advantage.
Even so, this paper focus only on the function as enabler of firms sustainable competitive advantage
CONCEPT IN THIS PAPER : COMPETITIVE ADVANTAGE & SUSTAINED COMPETITIVE ADV.
Competitive AdvantageFirm is implementing a value creating strategy not simultaneously being implemented by other firms
Sustained Competitive AdvantageFirm is implementing a value creating strategy not simultaneously being implemented by other firms and when other firms are unable to duplicate the benefits of the strategy
Does not mean it will last forever. But will not be competed away through the duplication efforts.
The inability of existing and potential firms to duplicate strategy
Schumpeterian Shocks : A firm enjoying a sustained competitive adv. may experience major shifts in the structure of competition.
RESOURCE HETEROGENEITY AND IMMOBILITY
The search for sources of sustained competitive advantage must focus on firms’ resource heterogene-ity and immobility
Homegeneity & Mobility If an industry is populated with identical firms that have access to similar resources, it is impossible for
these firms to enjoy sustained competitive advantage. In order to be a first-mover advantage, firms in an industry must be heterogeneous in terms of the re-
sources they control Entry barriers and mobility barriers can be source of sustained competitive advantage when resources
are heterogeneous and immobile.
ATTRIBUTES OF RESOURCES AS SOURCE FOR SUSTAINED COMPETITIVE ADVANTAGE
Valuable Enable firms to implement strategies for
increasing effectiveness and efficiency Exploit opportunities , Neutralizing threats
Rareness If a resources is valuable but easy to ob-
tain, it can not be used as source of com-petitive advantage
However, valuable and common resources can also be used to ensure firms’ survival.
If number of firms possess a valuable of resources is less than the number of firms needed to generate perfect competi-tion industry : It’s a source!
Imitability Valuable & rareness resources must be difficult to
imitate in order to be considered as source for sus-tained competitive advantage.
Imperfectly imitable because: Dependent upon unique historical conditions The link between firms sus. competitive adv. and re-
sources is casually ambiguous Resource generating firms’ advantage is socially com-
plex Physical Technology resources is not included in
this attributes
Substituability Resources must be no strategically equiv-
alent valuable resources that are them-selves either not rare or imitable.
ATTRIBUTES OF RESOURCES AS SOURCE FOR SUSTAINED COMPETITIVE ADVANTAGE (2)
PROPOSED FRAMEWORK
Examples on applying this framework are given in the paper : Strategic Planning Information processing systems Positive reputations
FORMAL & INFORMAL STRATEGIC PLANNING AS RESOURCE FOR S.C.A
Value & Rareness Valuable :
Enable to recognize opportunities & threats Enable to recognize & exploit firms re-
sources not Rare:
Thoroughly described & documented
Imitability & Substituable imitable :
Through documentation in public sources Other firms can learn to do the same strat-
egy substitutable:
Through strategic informal planning Valuable :
Enable to recognize opportunities & threats Firms that recognize the importance of this
processs will likely to gain S.C.A Rare:
Firms try to prevent processes from unfolding
Imperfectly imitable Processes are socially complex
substitutable Substitutable through formal planning?
Form
alin
form
al
INFORMATION PROCESSING SYSTEMS AS RESOURCE FOR S.C.A
Value & Rareness Valuable :
Enable to recognize opportunities & threats Enable to recognize & exploit firms re-
sources not Rare:
Machines are available to purchase across markets
If embedded through formal-informal man-agement decision making process, then it can be considered as rare
Imitability & Substituable imitable :
Because machines can be purchased, then they are highly imitable
The presence of highly experienced man-agement team makes IPS as source of S.C.A
substitutable: Through strategic informal planning
POSITIVE REPUTATION AS RESOURCE FOR S.C.A
Value & Rareness Valuable :
Positive reputation among customers and suppliers
Rare: If only a few firms have positive reputa-
tions
Imitability & Substituable imitable :
Difficult to duplicate because of historical setting
Known as Socially complex relation substitutable:
Substitute with Guarantee and reassurance?
IMPLICATIONS
Social Welfare and S.C.A Higher level of performance a firm with a resources are due to the efficiency it exploits the advantages,
and not to the effort of firm to create a imperfectly competitive conditions in a way that fails to maximize social welfare.
Organization Theory Behavior and S.C.A Proposed framework suggests research in organizational theory and behavior can act as a rich source to
find resources that are valuable, rare, non-imitable and no substitute. It anticipates a more intimate integration of the organizational and the economic as a way to study S.C.A
Firm Endowments and S.C.A Assumption that managers are limited by their ability to manipulate all the attributes and characteristic of
their firms However this make firms resources imperfectly imitable
LIMITATION & COMMENT ON PAPER
This paper is written more than 24 years ago, some perspective might have changed. This paper is based on the assumption that in order to be considered as source of S.C.A , a
resource must be Heterogeneous and immobile. Question raised : what about homoge-neous and mobile resources?
Comment on reading Is there any tradeoff when firms try to engage in sustained competitive advantage? The role of openness and sustained competitive advantage? As a barrier or enabler? Does sustaining competitive advantage more important than surviving the competition? Difficulties in finding resources that match 4 criteria for source of S.C.A All resources that a firm has must be having valuable point, if not, they will not be acquired
by the firm. So what is the definition of valuable ?