Ch. 4 Internal Analysis, Resources, Capabilities, & Core Competencies

Core competencies

unique strengths embedded deep within a firm, that are critical to gaining and sustaining competitive advantage 

How are core competencies developed?

By resources and capabilities

Resources

any asset, such as cash, buildings, or machinery, that a firm can draw on when crafting and executing a strategy 

Capabilities (intangible)

the organizational and managerial skills necessary to orchestrate a diverse set of resources and deploy them strategically 

Activities

distinct and fine-grained business processes that enable firms to add incremental value by transforming inputs into goods and services

Core competencies that are not continuously _______ will eventually lose their ability to yield a competitive advantage 

nourished

Resource-based view

a model that sees certain types of resources as key to superior firm performance 

What are the 2 Resource Categories

Tangible & Intangible Resources

Tangible Resources

resources that have physical attributes and are visible 

Intangible Resources

resources that do not have physical attributes and are invisible 

Competitive advantage usually stems from ______ resources

intangible

Resource

any assets, as well as any capabilities and competencies that a firm can draw upon when formulating and implementing a strategy

The 2 Assumptions

Resource Heterogeneity, Reource Immobility

Resource Heterogeneity

a firm is a bundle of resources and capabilities that differ across firms 

Resource Immobility

a firm has resources tha tend to be sticky and that do not move easily from firm to firm

VRIO Framwork

evaluates a firm's resource endowments (long-term length)

The Four Parts of the VRIO Framework

Valuable, Rare, Imitate, Organized

Valuable Resource

one that helps a firm exploit an external opportunity or offset an external threat

Organized to Capture Value

having in place an effective organizational structure, process, and systems to exploit the competitive potential of a firm

Isolating Mechanisms

barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy

Casual Ambiguity

a situation in which the cause and effect of a phenomenon are not readily apparent

Path dependence

a situation in which the options one faces in the current situation are limited by decisions made in the past

Social Complexity

situations in which different social and business systems interact 

(IP) Intellectual Property Protection

a critical intangible resource that can provide a strong isolating mechanism 

Core rigidity

a former core competency that turned into a liability because the firm failed to hone, refine, and upgrade the competency as the environment changed

Dynamic Capabilities

 a firm's ability to create, deploy, modify, and reconfigure its resources in its quest for competitive advantage 

Dynamic Capabilities Perspective

a model that emphasizes a firm’s ability to modify the resource base that enables it to sustain competitive advantage in a constantly changing environment 

Resource Stocks

the firm’s current level of intangible resources

Resource Flows

the firm’s level of investments to maintain or build a resource 

Value Chain

the internal activities a firm engages in when transforming inputs into outputs 

The 2 Types of Activities

Primary, Support

Primary Activities

add value directly by transforming inputs into outputs

Support Activities

add value indirectly, but are necessary to sustain primary activities 

Strategic Activity System

the conceptualization of a firm as a network of interconnected activities