Strategic Management

MM ZG611/QM ZG611/ MBA ZG611/

POM ZG611
Lecture 5
Internal Scanning: Organizational Analysis (I)
BITS Pilani Dr. Neetu Yadav
Pilani|Dubai|Goa|Hyderabad neetu.yadav@pilani.bits-pilani.ac.in
 Learning Outcome
• Applying the resource-based view of the firm to determine core and distinctive
competencies
• Use the VRIO framework
• How to assess an organization’s competitive advantage and how it can be sustained

Readings:
T1 Ch. 5 5.1
C.K. Prahalad and Gary Hamel, “The core competence of the corporation”. Harvard Business Review. 1990
Jay Barney (1991), “Firm Resources and Sustained Competitive Advantage,” Journal of Management 17, no. 1
(March 1991): 99–120
Collis, D.J. & Montgomery, C.A., “Competing on Resources”. Harvard Business Review, 2008
Case I: Mobileye: The future of driverless cars, Harvard Business Publishing, 2015 (Discussion pending)
Pre-recorded video: RL 2.2.1, RL 2.2.2
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 Opening Question
• Why few companies excel while others don’t in the same
industry?
• Flipkart V/S Snapdeal
• Key insights of “Built to Last”:
 Preserve the core, stimulate progress
 Home grown management
 Cult-like culture

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 Organizational Analysis
• Organizational analysis is concerned with identifying and developing an
organization’s resources and competencies

• To identify internal strategic factors-critical strengths and weaknesses.

• Different Approaches:
• Resource-Based Approach
• Value-chain analysis
• Scanning Functional resources and capabilities
Source: Barney (1991)

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 Resource-based Approach

• Resources-Organization’s assets and basic building blocks

– Tangible Assets: Plant, Equipment, Finances, Human Assets
– Intangible Assets: Technology, Culture, Reputation
• Capabilities- Corporation’s ability to exploit its resources
– Marketing capabilities, HRM capabilities
• Dynamic Capabilities- Capabilities that are constantly being
changed and reconfigure to make them more adaptive to
uncertain environment.
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 Resource-based Approach
• Competency- A cross-functional integration and coordination of
capabilities

• Core competency- A collection of competencies that cross divisional

boundaries, is wide-spread throughout the corporation and is
something the corporation does exceedingly well

Distinctive competencies- The core competencies that are superior to

those of the competition

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 A Resource-based approach
for organizational analysis

Ways to gain access to a Distinctive Competency:

1. Asset endowment: such as key patent, coming from the founding of the company
(Xerox).
2. Acquired from someone else: through acquisition of other firm
3. Shared with another business unit or strategic partner
4. Built and accumulated over time within the company (Eg: Honda)

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 Core Competence
• Prahalad and Hamel- Core competencies are collective learning in the organization,
especially how to coordinate diverse production skills, and integrate multiple
streams of technologies.
• Eg: Sony-Miniaturization
• Philips- Optical-media
• Honda-Engines
Unlike physical assets, competencies do not deteriorate as they are applied and
shared, they grow
Three tests can be applied to identify core competence:
1. it provides potential access to wide variety of markets
2. It makes a significant contribution to the perceived customer benefits of the end product
3. Core competence should be difficult for competitors to imitate

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 Core Competence

Source: Prahalad and Hamel, The Core Competence of Corporation, Harvard Business Review: 1990.
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 VRIO Framework
• VRIO framework (Barney)- To evaluate firm’s competencies:
– Value: Does it provide customer value and competitive advantage?
– Rareness: Do no other competitors possess it?
– Imitability: Is it costly for others to imitate?
– Organization: Is the firm organized to exploit the resources?

Barney (1991): Firm resources and sustained competitive advantage

https://business.illinois.edu/josephm/BA545_Fall
%202011/S10/Barney%20(1991).pdf
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 Sustainability of
firm’s distinctive competencies

Two characteristics determine the sustainability of firm’s distinctive

competencies:

Durability- the rate at which a firm’s underlying resources, capabilities, or core

competencies depreciate or become obsolete.

Imitability- the rate at which a firm’s underlying resources, capabilities, or core

competencies can be duplicated by others.

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 Sustainability of
firm’s distinctive competencies

A core competency can be easily imitated to the extent that it is

transparent, transferable and replicable.

Transparency- the speed at which other firms can understand the relationship
of resources and capabilities supporting a successful firm’s strategy.
Transferability- the ability of competitors to gather the resources and
capabilities necessary to support a competitive challenge.
Replicability- the ability of competitors to use duplicate resources and
capabilities to imitate the other firm’s success.

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 Continuum of Resource Sustainability

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 Sustainability of an Advantage

It is relatively easy to learn and imitate another company’s core

competency or capability if it comes from explicit knowledge
than tacit knowledge.
Explicit knowledge- knowledge that can be easily articulated and
communicated

Tacit knowledge- knowledge that is not easily communicated because it

is deeply rooted in employee experience or in the company’s culture

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 BITS Pilani
Pilani Campus

Question Session

Strategic Management and Business Policy – MBA ZG611 BITS Pilani, Pilani Campus
 BITS Pilani
Pilani Campus

End of Lecture

Strategic Management and Business Policy – MBA ZG611 BITS Pilani, Pilani Campus