1. Resources and Capabilities
©2015 Robert M. Grant & Judith Jordan

2. Learning Objectives
By the time you have completed this topic you will be able to:
appreciate the role of a firm’s resources and capabilities play in formulating strategy;
identify and appraise the resources and capabilities of a firm;
evaluate the potential for a firm’s resources and capabilities to confer sustainable competitive advantage;
use resource and capability analysis to formulate strategies that exploit internal strengths while defending against internal weaknesses.

3. Structure of the session
The role of resources and capabilities in strategy formulation
Identifying the organization’s resources
Identifying the organization’s capabilities
Appraising resources and capabilities
Putting resources and capabilities analysis to work
©2015 Robert M. Grant & Judith Jordan

4. Analysing resources and capabilities: the interface between strategy and the firm
©2015 Robert M. Grant & Judith Jordan

5. Rationale for the Resource-based
Approach to Strategy
When the external environment is subject to rapid change, internal resources and capabilities offer a more secure basis for strategy than market focus.
Resources and capabilities are the primary sources of profitability
©2015 Robert M. Grant & Judith Jordan

6. The links among resources, capabilities and competitive advantage
©2015 Robert M. Grant & Judith Jordan

7. Identifying resources
CHARACTERISTICS
INDICATORS
Tangible Resources
Financial
Borrowing capacity
Internal funds generation
Debt/Equity ratio
Credit rating
Net cash flow
Physical
Plant and equipment:
Size, location, technology flexibility.
Land and buildings
Raw materials
Market value of fixed assets.
Scale of plants
Alternative uses for fixed assets
Intangible Resources
Technology
Patent, copyrights, know-how, R&D facilities
Technical and scientific employees
Number of patents owned
Royalty income
R&D expenditure
R&D staff
Reputation
Brands, customer loyalty, company reputation (with suppliers, customers, government)
Brand equity
Customer retention
Supplier loyalty
Human Resources
Training, experience,adaptability, commitment and loyalty of employees
Employee qualifications,
Pay rates, turnover
©2015 Robert M. Grant & Judith Jordan

8. Major firms with the highest valuation ratios, April 2014
Company
Valuation Ratio
Country
Unilever (Hindustan)
46.6
India
Alexion Pharma.
11.9 US
Tesla Motors
37.7
Starbucks
11.8 UK
Colgate Palmolive
26.3
ITC Ltd
11.7
Altria
18.3
Mastercard
11.4
AbbVie
16.7
Roche Holding
11.3
Swz
Yum! Brands
15.4
GlaxoSmithKline
11.0
Regeneron Pharma
15.0
Salesforce.com
Amazon
14.9
Hermes Intl.
British Sky Broadcasting
14.0
ARM Holdings
10.7
United Parcel Services
13.8
CSL
10.6
Australia 8
©2015 Robert M. Grant & Judith Jordan

9. The world’s most valuable brands, 2013
Rank
Brand
Brand Value $ Billion
Change from 2009 (%)
Country of Origin 1
Apple
98.3
+28
USA 2
Google
93.3
+34 3
Coca-Cola
79.2 +2 4
IBM
78.8 +4 5
Microsoft
59.5 +3 6 GE
46.9 +7 7
McDonald’s
42.0 +5 8
Samsung
39.6
+20
South Korea 9
Intel
37.2 -5 10
Toyota
35.3
+17
Japan 11
Mercedes-Benz
31.9 +6
Germany 12
BMW
31.8
+10 13
Cisco
29.0 14
Disney
28.1 15
Hewlett-Packard
25.8 -1 16
Gilette
25.1 +1 17
Louis Vuitton
24.9
France 18
Oracle
24.1 +9 19
Amazon
23.6
+27 20
Honda
18.5 n
©2015 Robert M. Grant & Judith Jordan
Source: Interbrand

10. Identifying organizational capabilities by function
CAPABILITY
EXEMPLARS
CORPORATE FUNCTIONS
Financial control
Management development
Strategic innovation
Multidivisional coordination
Acquisition management
International management
ExxonMobil, PepsiCo
General Electric, Shell
Google, Haier
Unilever, Shell
Cisco Systems, Luxottica
Shell, Banco Santander
MANAGEMENT INFORMATION
Comprehensive, integrated MIS network linked to managerial decision making
Wal-Mart, Capital One, Dell
R&D
Research
Innovative new product development
Fast-cycle new product development
IBM, Merck
3M, Apple
Canon, Inditex (Zara)
OPERATIONS
Efficiency in volume manufacturing
Continuous improvements in operations
Flexibility and speed of response
Briggs & Stratton, YKK
Toyota, Harley-Davidson
Four Season Hotels
PRODUCT DESIGN
Design capability
Nokia, Apple
MARKETING
Brand management
Building reputation for quality
Responsiveness to market trends
Procter & Gamble, Altria
Johnson & Johnson
MTV, L’Oreal
SALES AND DISTRIBUTION
Effective sales promotion and execution
Efficiency and speed of order processing
Speed of distribution
Customer service
PepsiCo, Pfizer
L. L. Bean, Dell
Amazon.com
Singapore Airlines, Caterpillar
©2015 Robert M. Grant & Judith Jordan 10

11. Identifying resources and capabilities: Porter’s value chain
©2015 Robert M. Grant & Judith Jordan

12. Hierarchy of organizational capabilities
©2015 Robert M. Grant & Judith Jordan

13. Appraising resources and capabilities
©2015 Robert M. Grant & Judith Jordan

14. Using resource and capability analysis to formulate strategy
©2015 Robert M. Grant & Judith Jordan

15. Summary: a framework for analyzing resources and capabilities
©2015 Robert M. Grant & Judith Jordan