1. Global Business 2e C ha p t e r 4 Leveraging Capabilities Globally
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2. LEARNING OBJECTIVES
After studying this chapter, you should be able to:
Define resources and capabilities.
Explain how value is created from a firm’s resources and capabilities.
Articulate the difference between keeping an activity in house and outsourcing it.
Explain what a VRIO framework is.
Understand how to use a VRIO framework.
Participate in two leading debates on leveraging resources and capabilities.
Draw implications for action.
READ THE BOOK TOGETHER IN CLASS!
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3. UNDERSTANDING RESOURCES AND CAPABILITIES
Resource-based view
Certain resources and capabilities specific to one company are not shared by competitors.
SWOT analysis
A tool for determining a firm’s strengths (S), weaknesses (W), opportunities (O), and threats (T).
SWOT HW – due next week!
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4. UNDERSTANDING RESOURCES AND CAPABILITIES
Resources (or capabilities)
The tangible and intangible assets a firm uses to choose and implement its strategies.
Tangible resources and capabilities
Assets that are observable and easily quantified.
Intangible resources and capabilities
Assets that are hard to observe and difficult (if not impossible) to quantify.
Learn now – tangible and intangible – Describe Michael Jordan! Describe one student v. another student! Famous saying – it’s the intangibles that count!
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5. © 2011 Cengage Learning. All Rights Reserved
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

6. OFFSHORING OR NOT?
Original equipment manufacturer (OEM) Firm that executes design blueprints provided by Western firms Original design manufacturer (ODM) Firm that executes manufacturing based on their own design blueprints Original brand manufacturer (OBM) Firm that executes manufacturing based on their own design blueprints and sells the product under their own brand name
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

7. RESOURCES, CAPABILITIES, AND THE VALUE CHAIN
Value chain Series of activities used in the production of goods and services that make a product or service more valuable
? What do you think are the most important activities in the value chain in the production and sale of a common product, such as a cup or coffee?
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

8. RESOURCES, CAPABILITIES, AND THE VALUE CHAIN
Benchmarking
Examining whether a firm has resources and capabilities to perform a particular activity in a manner superior to competitors
Commoditization
Process of market competition through which unique products that command high prices and high margins gradually lose their ability to do so, thus becoming commodities
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9. That’s why different parts of a product are made in al different places.
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10. Offshoring – RCA story – that’s why its dangerous to Asia and that’s why, as an American, I feel like Apple is taking a stand. And, it should – it is the most valuable company in the WORLD for the first time!
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

11. RESOURCES, CAPABILITIES, AND THE VALUE CHAIN
Outsourcing
Turning over an organizational activity to an outside supplier that will perform it on behalf of the focal firm.
Captive sourcing
Setting up subsidiaries abroad so that the work done is in-house but the location is foreign. Also known as foreign direct investment (FDI).
Offshoring
Oursourcing to an international or foreign firm.
Inshoring
Outsourcing to a domestic firm.
Nike – great at design and marketing – not physically making shoes – this is how Korea started. I still remember, Made in Korea – Nike Shoe! WOW! Talk about Boeing, Sony and Ericsson!
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12. © 2011 Cengage Learning. All Rights Reserved
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

13. © 2011 Cengage Learning. All Rights Reserved
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

14. ANALYZING RESOURCES AND CAPABILITIES WITH A VRIO FRAMEWORK
Resource-based view focusing on the value (V), rarity (R), imitability (I), and organizational (O) aspects of resources and capabilities
VRIO is for INNER ANALYSIS – SWOT is against competition!
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15. © 2011 Cengage Learning. All Rights Reserved
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

16. VALUE Value-Adding resources lead to competitive advantage
IBM, GM, FORD AND STEEL
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17. RARITY Valuable and rare resources provide competitive advantage
Valuable and common resources at best lead to competitive parity
BARBE, GM and Ford on quality – no advantage
? When you think of a commonly known firm, what are some of the rare resources it possesses?
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18. IMITABILITY
Valuable and rare resources offer competitive advantage when they are hard for competitors to imitate
Causal ambiguity
Difficulty of identifying the actual cause of a firm’s successful performance
Toyota and Supaa Ginosha – Does Korea have?
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19. ORGANIZATION
Firms must be properly organized to take full advantage of the resources and capabilities they possess
Complementary assets
Combination of numerous
resources and assets that enable
a firm to gain a competitive advantage
Social complexity
Socially intricate and interdependent
ways firms are typically organized
Movie Stars and Background cast – before investing in a stock – you should be able to do ALL of this – or REALLY YOU ARE JUST GAMBLING AND GETTING LUCKY!
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20. Samsung and Apple
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21. Read Hyundai’s uphill Battle 4. 3 and Amazon. Show Kindle Video
Read Hyundai’s uphill Battle 4.3 and Amazon. Show Kindle Video! Ipad killer? APPLE IS AMERICA”S HOPE! Still designed in the USA – only 1!
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.