1. RESOURCE, CAPABILITIES, CORE COMPETENCIES, AND ACTIVITY ANALYSIS
The fundamental building blocks for building winning strategies

2. Key Elements of Business Strategies: Understanding Resources, Capabilities, and Competencies is the key
Selecting a business strategy that exploits valuable resources and distinctive competencies (ie. competitive advantages)
Ensuring that all resources and capabilities are fully employed and exploited
Building and regenerating valuable resources and distinctive competencies -- competitive advantages

3. 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 source of profitability. Firm-specific strategic differences account for percent of observed differences in firms’ profits

4. Resources, Capabilities, and Competitive Advantage: The Basic Relationships
INDUSTRY
KEY
SUCCESS
FACTORS
COMPETITIVE
ADVANTAGE
STRATEGY
ORGANIZATIONAL
CAPABILITIES
RESOURCES
Tangible
Intangible
Human 19 39 40 4 4 4

5. Categories of Firm Resources
• Financial
$ ¥ £
• Physical
• Human
• Technological
• Reputational 4 4 4 4 5 5 5 4 4

6. Valuable Resources and Competencies: The “key” to Competitive Advantages
Resources can be:
Physical ie the wiring into your home (ramp for the info highway)
Human ie. skilled and creative employees (Wal*Marts’ dedicated employees)
Intangible ie. brand names and technological know-how (Coca-Cola, Disney, Sharp LCDs)
Organizational Capabilities embedded in the business’ routines, processes, culture (Japanese auto makers)

7. Defining Organizational Capabilities
Organizational Capabilities = firm’s capacity for undertaking a particular activity. (Grant)
Distinctive Competence = things that an organization does particularly well relative to competitors. (Selznick)
Core Competence = capabilities that are fundamental to a firm’s strategy and performance. (Hamel and Prahalad) 15 16 16

8. What Makes a Resource Valuable?
Scarcity
Appropriability
Demand
Value creation zone
The dynamic interplay of three fundamental market forces determines the value of a resource.
Source: Collis and Montgomery, Corporate Strategy (1996) 5 5 5 5 7 7 7 5 5

9. Resource Imitability Cannot be imitated: Patents Unique location
Unique assets
(e.g. Mineral rights)
Difficult to Imitate:
Brand Loyalty
Favorable cost position
Employee Satisfaction
Reputation for Fairness
Can be Imitated (but may not be):
Capacity Pre-emption
Economies of Scale
Easy to Imitate:
Cash
Commodities
Source: Collis and Montgomery, Corporate Strategy: Resources and the Scope of the Firm (1996). 9 9 9 9 11 11 11 9 9

10. First-Mover Advantages in Resource Acquisition
Patents
Brand Recognition
Reputation
Accumulated Learning
Attractive Locations
Installed Base 14 14

11. Identifying a Company’s Capabilities and Value Chain
Functional Area
Capability
Example
• Corporate head office
• Capability in basic
research
• Ability to produce
innovative products
• Speed of new
product development
e.g., IBM, AT&T,
Sony
• 3M
• Canon
• Management information
• Research and development
• Manufacturing
• Product design
• Marketing
• Sales and distribution
Source: Robert M. Grant,
Contemporary Strategy Analysis
, Basil Blackwell, 1991. 9

12. Summary: Key Elements of Resource-Based Strategy
Select a strategy that exploits principal resources and competencies.
Ensure that resources are fully employed and exploited.
Build a resource base.
Source : Hamel and Prahalad 15 25 15 25 34 34 34 15 15

13. Strategic Implications of Competing on Resources
Investing in resources, continually
Upgrading resources, creating or acquiring new resources, finding alternatives resources
Leveraging resources
Rapid redeployment of resources