COMPETING

ON
RESOURCES
 Resource Based View(RBV)
1
1
Physical
Such as wire.

2
Intangible
Such as brand name, technology.

3
Capabilities
Such as organizational Source: https://hbr.org/resources/images/article_assets/1995/07/95403_A.gif
capability.
 The Test of Inimitability
Crucial for value creation and sustainable profit in business.

Characteristics of resources for sustainable competitive advantage

01 02 03 04
Physical Uniqueness Path dependency Casual Ambiguity Economic Deterrence

Non-copyable assets like Unique and scarce Resources with unclear Pre-empting competition
real estate location , patents resources built over time cause of success through large capital
etc. investments.
 Test of Durability
• Examines how quickly resources depreciate and their ability to maintain competitive advantage over time

• Longer lasting resources are more valuable

Disney’s brand name Rapidly Wasting asset in Creative Schumpeter’s Waves of

dynamic industries Destruction innovation
• Survived decades of • Technological know-how in fast- • Major • Early movers gain
neglect, moving industries becomes Companies and substantial profits
demonstrating rapidly obsolete. industries are and market
durability in a stable • Successive generations of replaced by dominance.
industry companies dominate and are new innovations
surpassed by new innovations. • Advantages are
short-lived as new
innovations emerge.
 Test of Appropriability and Substitutability
Example 1
In last 20 years, Aluminium cans
Substituted the Beer cans in
Steel Industry.
Example 2 Different Resource
Major airlines used Different
People Express Airlines
Resource and it Substituted the
Substituted Major airlines by- People Express Airlines by
making it bankrupt
low - cost flights
This Different resource which
- no frills approach Substituted was
- computer Reservation system
- infrastructure
- yeild management skills
 The Test of Competitive Superiority –
Whose Resource is Really Better

Core Competence - "feel good" Exercise, no one fails as it's assessed internally.

Core Competence should be a harsh external assessment by comparing different companies. Distinctive
Competence is more appropriate

To avoid Core Competence, we need to disaggregate the corporation resources.

Managers should make conclusions about critical resources based on objective data from markets
Research

Detailed analysis is needed

 Disaggregate the Corporation Resources.

To Identity truly For delivering actionable Valuable resource can be

distinctive resource implications combination of skills

Example – Example – Example –

Consumer marketing skills Manufacturing of medical Honey well induction
Effective brand management diagnostic equipment automation
Product line extensions & cost-
effective couponing
 INVESTING IN RESOURCES
Effective Corporate Strategy
Continual investment in building & maintaining valuable resources

DISNEY MARKS & SPENCER

Invested $50 million in Who Framed Roger Rabbit? - First
animated feature-film hit in years.
Quadrupled animated feature films output
Successive hits: Beauty and the Beast, Aladdin, The Lion
King.
Made significant investments to stay competitive.
Spent billions on store renovation.
Opened new edge-of-town locations.
Updated procurement and distribution systems.
 Investing in core competencies, but not at the expense of industry attractiveness or competitor analysis

• Core competencies are the crown jewels of a corporation and should be nurtured by the corporate office.

• However, investing in core competencies without considering industry attractiveness or competitor analysis can
be dangerous.

• For example, Masco Corporation built a competence in metalworking and diversified into tightly related
industries, but the returns from this strategy were lower than expected because the industries were not
attractive.

• Similarly, Time Warner was forced to bid billions of dollars to acquire control of cable systems, which may never
realize substantial returns because competitors are also trying to develop these core competencies internally.
STRATEGIC IMPLICATIONS
Upgrading
Companies must continually upgrade the
number and quality of their resources &
associated competitive positions in order
to hold off the almost inevitable decay in
their value.
It can be achieved by-
1. Adding new resources
2. Upgrading to alternate resources.
Leveraging
Corporate strategies must strive to leverage resources
into all the markets in which those resources
contribute to competitive advantage or to compete in
new markets that improve the corporate resources.
RBV helps us understand & identify three errors
companies make –
1. Overestimation of transferability of specific assets
& Capabilities
2. Overestimation of abilities to compete in highly
profitable industries.
3. Leveraging generic resources will be a major source
of competitive advantage in new markets.
 STRATEGIC ERRORS
Transferability
 Difficulty to replicate in new
markets.
 Example: Marks & Spencer’s
failure in the North American
market
Ability to Compete
 Difficulty to compete in
highly profitable industries.
 Accumulation of necessary
entry resources is difficult.
 Example: Philip Morris’s
entry into soft drinks failed
due to poor distribution
network
Leveraging Generic Resources
 Assuming generic resources
will give a competitive
advantage.
 Example: Chrysler’s failure in
the Aerospace industry.