Compare the resource based and positional views of strategy as explanations of the success of Apple since the launch of the first iPhone
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Questions:
Compare the resource based and positional views of strategy as explanations of the success of Apple since the launch of the first iPhone.
– Two Views of Competitive Advantage
– Competitive positioning view
– Sustained superior performance requires effective product-market
positioning
Market share – Product features
– Cost position – Brand positioning
– Geographic scope – Vertical integration
– Resource-based view
– Sustained superior performance requires unique resources & capabilities
– Technological skills – Teamwork
– Business processes – Leadership
– Innovation – Organization culture
Sources of Competitive Advantage
Resource-based view Competitive Positioning view
I I
FACTORS OF PRODUCTION –> FIRM –> PRODUCTS & SERVICES
Input markets
• People
• Technology
• Capital equipment
• Buildings
• Land
Output markets
• Technology products
• Industrial products
• Consumer products
• Agricultural products
• Services
The Resource-Based View
1. The firm is a portfolio of attributes
– Not a chess piece
– Not just competitive, marketing or financial attributes
– Looking inside for competitive advantage
2. Advantages stem from resources & capabilities
– Valuable, scarce, difficult to imitate
– Advantages persist due to barriers to imitation
3. Competitive advantages must be built
– Discrete vs. compound advantages: the importance of
“fit”
– The continuous renewal of advantages
The History Slide
Deep roots back as far as Schumpeter’s notion of cycles of creative
destruction (1934)
• Penrose (1959) maintains that firms can create economic value not due to
mere possession of resources, but due to effective and innovative
management of resources
• “Unused productive services are, for the enterprising firm, at the same time
a challenge to innovate, an incentive to expand,and a source of competitive
advantage. They facilitate the introduction of new combinations of resources
– innovation – within the firm”. (Penrose, 1959, p. 85; emphasis added)
• Rumelt (1984: 561) notes that the strategic firm ‘is characterized by a
bundle of linked and idiosyncratic resources and resource conversion
activities’.
• Nelson and Winter (1982) –organisations have repertoires of creative
routines.
• Firm-specific capabilities and assets and the existence of isolating
mechanisms as the fundamental determinants of firm performance (Teece,
1984)
The firm as portfolio of attributes:
(image attached)
A Resource-Based Proposition
To produce sustainable competitive advantage, an attribute must be:
1. Valuable
– Significant performance consequences (increases revenues, reduces
costs)
2. Scarce
– Not widely disseminated among competitors
3. Difficult to imitate
– Not readily imitable by competitors; not substitutable; causal
ambiguity
“Competitive advantage cannot be bought: it must be built”
Barriers to resource imitation
CAUSAL AMBIGUITY
– Rivals cannot observe the resource
– Rivals cannot replicate or reverse engineer the resource
– The social complexity of organizational resources
Examples: Organizational culture, systems, motivation, commitment
UNIQUE HISTORICAL CONDITIONS
– Rivals cannot replicate the historical sequence of events
– The path-dependency of firm performance
Examples: First-mover advantages such as location, raw materials
TIME COMPRESSION DISECONOMIES
– The resource is inherently time-consuming to accumulate
Examples: Reputation, knowledge, skills, relationships, experience
Resource Cycles
Fast-cycle resource – Diffuses quickly through a population
of firms; not a sustainable competitive advantage
Examples: Web design; breakfast cereals; retail store layout;
fashion items
Medium-cycle resource – Diffuses more slowly through a
population of firms; sustainable in the short-run
Examples: TQM in manufacturing.; business process reengineering
Slow-cycle resource – Diffuses very slowly through a
population of firms; sustainable as competitive advantage
Examples: Microsoft’s operating system; Disney’s experience;
legally protectable IP
Jay Barney (1980s/90s)
Resources – “ the tangible and intangible assets that
a firm controls which it can use to conceive of and
implement its strategies”
• Types – financial, physical, human and
organisational
• Capabilities – a subset of the firm’s resources; the
assets that enable a firm to take full advantage of the
other resources it controls.
• Heterogeneity – apparently similar firms may posses
different bundles of resources.
• Immobility – resource differences between firms may
be long lasting.
• Path dependence – history of firm matters to the
accumulation of resources
VRIO Analysis (Barney 1991)
Valuable? Rare? Costly to imitate? Organized to exploid?
Where do VRIO resources come from?
Teece et al, Eisenhardt – Dynamic Capabilites approach
– Examine how VRIO resources are created
– Idea of dynamic capabilities – “ the firm’s ability to integrate, build and
reconfigure internal and external competence to address rapidly
changing environments” (Teece et al 1997)
– Capabilities themselves do not need to be idiosyncratic – “ competitive
advantage lies in the resource configurations they create, not in the
capabilities themselves.” (Eisenhardt and Martin, 2000).
– Examples of capabilities
1. Strategic decision making
2. Acquisitions and alliances
3. Innovation
4. Divestment
5. Absorptive Capacity
Criticisms
Vagueness, how to falsify
• Ex post analysis not prediction
• What are the mechanisms precisely
through which resources create
competitive advantage?
• How practically useful particularly for new
firms in dynamic environments?
• What are the organisational correlates of
effective resource management?
Hamel and Prahalad:
Core Competences
• integral to the organisation’s success
• generating fundamental customer or cost benefit
• providing competitive differentiation
• learning-based accumulations of skill and experience
• vested in people
• supported by technology, processes and value
“the collective learning in the organisation, especially
how to co-ordinate diverse production skills and
integrate multiple streams of technologies” (p. 82)
Core Competences are not
values or sets of wishes
• physical or financial assets
• individual skills
• patents or intellectual property rights
• Products
They provide
• Access to markets
• Consumer benefits
Structure
Exposure to capital market oversight triggers strategic change.
Divisionalising a business tends not to be an event but a process. Since
divisionalisation helps transparency on costs and revenues it facilitates
decisions on the make or buy decision, and the exit decision. It is thus a
process that can migrate a company across industry boundaries.
An N-1 rule tends to operate in the divisionalisation process in which N-1
divisions make sense in product and market terms, and the Nth division is a
residual of businesses that may be legacy, or growth potential, or both.
The Nth division will probably contain the next CEO.
It is difficult to use the same performance management metrics across all
divisions, particularly Nth. Which raises questions about which is the Nth and
then what measures to use
Strategy Today
In the practice of strategy the separation of conception as analysis
from execution as process is very rare.
• This means that industry analysis, competence analysis and change
management often need to be synergistic.
• But, for consulting firms, it does not follow that clients will buy all
three from a single provider (many consulting firms now organise
around industries).
• The Leninist question “What should be Done” is often less
problematic than the question “Who will do it?” (But he had an
answer to that too). Who should do strategy?
• In many business schools there are strategy faculty who are focused
on process or decision making (sociology, psychology) and those
who do analysis (economics, game theory).
Summary and Conclusions
• RBV an extension of the ‘Penrose’ tradition which in turn develops
Chandler’s idea of the firm as a bundle of capabilities.
• The managerial role is to identify and leverage these capabilities to
generate performance; this is similar to the implied role in structural
contingency theory.
• RBV developed partly in reaction to the Porter emphasis on external
industry factors and firm homogeneity.
• However the VRIO approach also adopts the Porter notion of sustained
competitive advantage.
• The dynamic capabilities model moves away from static analysis and
implies an extension to the managerial role into the development of firm
capabilities; it also identifies generic capabilities that may be transferable.
• The competence approach tends towards the conclusion that industry does
not matter at all, since products flow from competence application.
• However, in all of these approaches, ex ante identification of resources,
capabilities and competences is poorly theorised – the world is a case
study
Compare the resource based and positional views of strategy as explanations of the success of Apple since the launch of the first iPhone
1936 Words