2. Overview
Distinction between ‘environmental’ model of
competitive advantage and ‘Resource-based’
model
Framework used to structure understanding of
Sustained Competitive Advantage – 1960’s
3. Overview
Framework – SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Resource-
based Model
Environmental
Model
Internal
Analysis
External
Analysis
4. Environmental Model
Little emphasis on impact of idiosyncratic
attributes on a firm’s competitive position
Two simplifying assumptions:
No difference between the strategically relevant
resources of each firm and the strategies they
pursue
Where different resources develop, these will
quickly become available to all
Resources are homogeneous and mobile
5. Resource-based Model
Differences do exist between the strategically
relevant resources of each firm and the
strategies they pursue
These resources are not mobile and so
differentiation can be long-lasting
Resources can be heterogeneous and
immobile
6. Defining Resources
Resources – all assets, capabilities, knowledge
and experience controlled by a firm
Physical Capital Resources – e.g. technology,
location, equipment
Human Capital Resources – experience, skills
Organisational Capital Resources - Culture, formal
reporting structures, control systems, coordinating
systems, informal relationships
7. Next is competitive advantage.
A competitive advantage is simply an advantage
you have over your competitors.
A competency will produce competitive advantage
provided:
A) it produces value for the organization, and
B) it does this in a way that cannot easily be
pursued by competitors.
8. Competencies vs. Core Competencies vs.
Distinctive Competencies
A competency is an internal capability that a
company performs better than other internal
capabilities.
A core competency is a well-performed internal
capability that is central, not peripheral, to a
company’s strategy, competitiveness, and
profitability.
A distinctive competence is a competitively
valuable capability that a company performs
better than its rivals.
9. Competitive Advantage and Sustainable
Competitive Advantage
CA - When a firm implements a value-creating
strategy not being simultaneously implemented
by competitors
SCA – as above + competitors are unable to
duplicate
10. Building Sustainable Competitive
Advantage
Resources must be heterogeneous and
immobile
Also, must be
Valuable
Rare
Imperfectly imitable
No strategically equivalent substitutes
11. Sustainable Competitive Advantage
1. The Question of Value:
Capabilities are valuable when they enable a firm to
conceive of or implement strategies that improve efficiency
and effectiveness.
Value is dependent on type of strategy:
Low cost strategy: lower costs (Timex)
Differentiator: add enhancing features (Rolex)
To be valuable, the capability must either
Increase efficiency (outputs / inputs)
Information system reduces customer service agents
required, or increases the number of calls the same
number of agents can answer
Increase effectiveness (enable some new capability not
previously held)
Opening a new regional campus enables outreach to a
new market of students
12. Sustainable Competitive Advantage
2. The Question of Rareness:
Valuable resources or capabilities that are
shared by large numbers of firms in an
industry are therefore not rare, and cannot be
a source of SCA.
Some researchers think only organizational
assets or resources are rare (such as culture).
What do you think?
13. Sustainable Competitive Advantage
3. The Question of Imitability
Valuable, rare resources can only be sources of SCA if firms that
do not possess them cannot obtain them. They must be
“imperfectly imitable”, i.e. impossible to perfectly imitate them.
Ways imitation can be avoided:
Unique Historical Conditions (Caterpillar, e.g.)
Causal Ambiguity (why resources create SCA is not
understood, even by the firm owning them)
Imitating firms cannot duplicate the strategy since they do
not understand why it is successful in the first place.
Social Complexity (trust, teamwork, informal relationships,
causal ambiguity where cause of effectiveness is uncertain)
E.g. A competitor steals all the scientists in an R&D lab and
relocates them to a new facility. But, the “dynamics”,
“culture” and “atmosphere” are not the same.
14. Sustainable Competitive Advantage
4. The Question of Substitutability
There must be no equivalent resources that can be exploited
to implement the same strategies.
Forms of substitutability:
Duplication: Although no two management teams are
the same, they can be strategically equivalent, produce
the same results.
Substitution: Very different resources can be substitutes,
e.g.
A charismatic leader with a clear vision vs. a strategic
planning dept.
A superior marketing strategy for a recognized brand
name.
A superior technical support group for an intelligent
diagnostic software package
15. Sustainable Competitive Advantage
5. The Question of Exploitation:
Later research qualified this as another critieria
for SCA. Is a firm organized to exploit the full
competitive potential of its resources and
capabilities?
Are systems in place to enable firms to support the
execution of a particular strategy?
Xerox, e.g
16. Notes on “Sustainable”
Sustainable is not measured in calendar
time.
Sustainable does not mean the advantage
will last forever.
Sustainable suggests the advantage lasts
long enough that competitors stop trying
to duplicate the strategy that makes the
advantage sustained.
17. Summary
Firms cannot expect to simply ‘purchase’
Sustained Competitive Advantage
Can only be found within the resources already
controlled by the firm
Focus on Internal — describes firm’s internal
characteristics and performance
Firms have idiosyncratic, not identical
strategic resources. Resources are not
perfectly mobile and therefore
heterogeneous.
