Strategy Chapter 4 - Internal Analysis

unique strengths, embedded deep within a firm

any assets such as cash, buildings, machinery or interlectual property

To use resources, capabilities are needed

• aids in identifying core competencies
• sees resources as key to superior firm performance

Critical assumptions:

• resource heterogeneity: assumes that a firm is a bundle of resources and capabilities that differ across firms (bundles are unique)
• reosurce immobility: assumes that a firm has resources that tend to be "sticky" and that do not move easily from firm to firm (resources are hard ro replicate)

To identify which of its resources could lead to a competetive advantage a firm uses the VRIO Framework

Valuable:  a resource is valuable if it helps a firm exploit an external opportunity or offset an external threat

Rare resource: A resource is rare if the number of firms that possess it it less than the number of firms it would require to reach a state of perfect competition

Costly to imitate: if firms that do not possess the resource are unable to develop or buy the reources at a comparable cost

organized to capture value: The characteristics if having in place an effective organizational structure, processes and systems to fully exploit the competetive potential of the firm's resources, capabilities, and competencies

Barriers to imitation that prevent from competing away the advantage  firm may enjoy

• Better expectations of future resources value - investment in future value
• Path dependence - the options faced are limited by past decisions
• Causal ambiguity - the cause and effect of a phenomenon are not readily apparent
• Social complexity - different social and business systems interact with one another
• Intellectual property (IP) protection - critical intagible recource that can provide a strong isolating mechanism. Major forms are: Patents, Designs, Copyrights, Trademarks, Trade secrets

core rigidity: a former core competency that tunred into a liabilty because the firm failed to hone, refine and upgrade the competency

dynamic capabilities: ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources

dynamic capability persepective: a model that emphazies a firms ability to modify and leverage its resource base in a way that it enables it to gain and sustain com. adv. in a constantly changing environment

resource stocks:  The firm's current level of intagible resources

resource flows: The firm's level of investments to maintain or build a resource

Internal activities a firm engages in when transforming inouts into outputs; each activity adds incremental value

primary activies: Firm activities that add value directly by transforming inputs into outputs as the firm moves a produc or service horizontally along the internal value chain

• supply chain management
• operations
• distribution
• marketing and sales
• after-sales service

Support activities: Firm activities that add value indirectly, but are neccessary to sustain primary activities

• research and development
• information systems
• human resources
• accounting and finance
• firm infrastructure including processes, policies, and procedures

The conceptualization of a firm as a network of interconnected activities