Miles A. Zachary

MGT 4380

Managing Firm ResourcesChapter 4

Discuss Exam 1Lecture

RBTIntellectual PropertyValue ChainAlternative Theories in StrategySWOT Analysis

SWOT ExerciseSimulation

Overview

Resource-based theory (RBT) suggests that firms that possess strategic resources have a greater chance of developing a competitive advantage over competitors and in turn, higher profitability

A strategic resources is an asset that is:Difficult to imitateRareValuableNon-substitutable

Resource-Based Theory

Be DRVN

Difficult to imitate-competitors have a hard time duplicating the resource

Rare-the resource is difficult to cultivate or find in the industry

Valuable-a resource that helps a firm create strategies that capitalize on opportunities and ward off threats

Non-substitutable-competitors are unable to find an alternative way to enjoy the benefits provided by a particular resource

Resource-Based Theory

Additionally, some firms are able to bundle strategic and non-strategic (generic) resources together

Firms able to combine multiple resources are often able to create a unique business model that puts the firm far ahead of its competitors

Ex. Southwest Airlines: Combined their unique corporate culture (a strategic resource) with other generic (yet valuable) resources such as direct flights, low fares, one-plane fleet, and unique passenger boarding to create an effective and efficient competitive advantage

Resource-Based Theory

Firms in possession of strategic resources that meet the four criteria of RBT are often in a position to gain a sustained competitive advantage

A sustained competitive advantage is one that will endure over time and will help the firm remain successful well into the future

While anyone of the qualities is good, possessing a resources with fewer than all four will likely lead to only a temporary advantage

On occasion, the external environment can turn a generic resource into a strategic resource

Resource-Based Theory

Resources are goods and services owned by an organizationTangible Resources-resources readily seen,

touched, and quantified; often physical objects or placesEg., a firm’s property, plant, and equipment, cash

Intangible Resources-resources difficult to see, touch, or be quantifiedEg., knowledge and skills, organizational culture,

firm reputation

Resources

Capabilities refer to the firm’s ability to bundle, manage, or otherwise exploit resources such that value is added and a competitive advantage results

More generally, capabilities are what a firm can do with their resources

Capabilities tend to arise over timeDynamic capabilities are the ability to create new

and better capabilitiesAdaptive firms use dynamic capabilities to stay up or

ahead of the every-changing environmentEx. Coca-Cola-has a knack for being an excellent

brand builder

Capabilities

While resources and capabilities are determinants of firm performance, customers must often be convinced to purchase the resulting goods and services

The marketing mix (or 4 Ps) helps firms do that by providing a strong alignment among:Product-what a firm sellsPrice-what it sells it forPlace-where it sells itPromotion-how a firm communicates these

things

Marketing Mix

Intellectual property refers to creations of the mind (e.g., inventions, artistic products, symbols, etc.)

Four main types of intellectual property include:PatentsTrademarksCopyrightsTrade Secrets

Intellectual property resources are strategic resources when they fit the RBT criteria

Even IP resources that have only some of the RBT criteria can be bundled with other resources

Can be protected by formal and/or informal methods

Intellectual Property

Patents-legal decrees that protect inventions from direct imitation for a limited period of timeDifficult to get; must be new, non-obvious, and

usefulPatents are core advantages in many industries

Trademarks-protected phrases, pictures, names, or symbols used to identify an organizationHelp an organization stand out and build an

identity in the marketplaceOther firms use trademarks to carve out niche

positions

Intellectual Property

Copyrights-provide exclusive rights to the creators of artistic works (e.g., books, movies, songs, etc.)Pirated material violates copyright material

Trade Secrets-formulas, practices, and designs that are central to a firm’s business, but remain unknown to competitorsEx.-KFC’s secret spice blend, the formula for

WD-40, the recipe for Coca-ColaThe copying of trade secrets is legally

protected; however, once a secret is revealed, it is legally a secret no longer

Intellectual Property

Patent

Copyright

Trade Secret

Trademark

The value chain charts the path by which products and services are created and eventually sold to customers; firm specific

Organizations need to consider their resources and capabilities alongside the value chain when formulating and implementing strategies

Composed of two sets of activitiesPrimary ActivitiesSecondary Activities

Value Chain

A supply chain is a system of people, activities, information, and resources involved in creating a product and moving it to the customer

The supply chain is a broader concept that captures the entire process of creating and distributing a product, often times across different firms

Supply Chain

Best value supply chains combine the concept of the supply chain with the considerations of the value-creation process within a firm

Like other multi-metric performance assessments, BVSCs focus on total value added, specifically to customers

Four components:Strategic supply chain managementAgilityAdaptabilityAlignment

Best Value Supply Chains

Using a supply chain to create competitive advantages and enhance performance

Strategic SC use is measured by:Speed-time from initiation to completion of the

production and distribution processQuality-relative reliability of SC processesCost-enhance value by reducing expensesFlexibility-refers to the responsiveness of the

supply chain to changes in customer needs

Strategic Supply Chain Management

The supply chain’s relative capacity to act rapidly in response to changes in supply and demand

Agility can be achieved by using buffersExcess capacityTechnical information systems

Co-locating with customers can provided important face-to-face interaction

Agility

Adaptability is the willingness and capacity to reshape supply chains when necessary

While one supply chain is desired since it is cost effective, it is not always the best value solution

Having a variety of options increases adaptability

Adaptability

Alignment refers to creating consistency in the interests of all participants in a supply chain

When situations arise that pit the interests of one party and the whole supply chain against each other, conflict ensues

Maintaining alignment is necessary to keep the supply chain operating with maximum efficiency

Carefully writing incentives, collaborating on forecasting, and meeting with participants can improve supply chain alignment

Alignment

Enactment-firms can create and manipulate their own environment through outstanding strategy

Environmental determinism-a firm’s environment is a dominating force that determines the fate of the organization

Institutional theory-suggests that firms are bound by social pressures that result in imitation of strategies

Transaction cost economics-firms determine whether to make or buy the products/services they need based on transaction costs

Alternative Theories on Firm Performance

SWOT analysis is a simple tool firms can use to evaluate their internal strengths and weaknesses and external opportunities and threats when determining strategic decisions

Internal and external factors should not be confused with each other

Opportunities should not be confused with strategic moves to capitalize on opportunities

The simplicity of the analysis suggests that it should not be over-evaluated

SWOT Analysis

Simple SWOT Matrix

SWOT-TOW Matrix