Resources and Capabilities Durability

RESOURCES AND CAPABILITIES DURABILITY OF COMPETITIVE ADVANTAGE.
Competitive advantage derives from a firms distinctive competencies, which are of two types: Resources and capabilities. 1. Resources refer to the financial, physical, human, technological, and organizational resources of the company. They can be divided into tangible resources, such as land, buildings, plant, and equipment; and intangible resources, such as brand names, reputation, patents, and technological or marketing knowledge.
a. Resources that are firm-specific and difficult to imitate are unique. Resources that create a strong demand for the firms products are valuable. b. Unique and valuable resources lead to a distinctive competency. 2. Capabilities refer to a companys skills at coordinating its resources and putting them to productive use.
a. These skills reside in the way a company makes decisions and manages its internal processes. b. Capabilities are, by definition, intangible. They reside not so much in individuals as in the way individuals interact, cooperate, and make decisions within the context of an organization.
3. The distinction between resources and capabilities is of the utmost importance in understanding the source of a distinctive competency. A company may have unique and valuable resources, but unless it has the capability to use those resources effectively, it may not be able to create or sustain a distinctive competency. Thus, unique and valuable resources are helpful in creating distinctive competencies, but capabilities are essential.
The relationship between strategies and resources and capabilities:
Distinctive Competencies, Resources, and Capabilities

The roots of competitive advantage:
Distinctive Competencies and role of Resources and Capabilities

Resources
Tangible (physical) and intangible (non-physical)
Allow a company to create value for its customers Must have skills to take advantage of the resources Firm-specific and difficult-to-imitate resources as well as valuable resources that create strong demand for a companys products lead to distinctive competencies
Capabilities
Coordinating resources & putting to productive use Skills reside in the organizations rules, routines and procedures Product of its organization, processes & controls Firm-specific capabilities to manage its resources lead to distinctive competencies
Distinctive Competencies to Gain Competitive Advantage

Distinctive Competencies
Firm-specific strengths allow a company to differentiate its products and/or achieve substantially lower costs than its rivals in order to gain a competitive advantage.
Analyzing Competitive Advantage and Profitability : i) Managers must understand the financial impact of their strategies. They can compare their processes and outcomes to competitors, using benchmarking . ii) The most widely used measure of financial performance is profitability. Profitability can be measured in different ways, but return on invested capital (ROIC) is one of the most widely used.
The Durability of Competitive Advantage: i) Durability refers to the length of time that a competitive advantage lasts, once it has been created. Successful companies earn above-average returns, which send a signal to competitors. ii) Three factors lead to durability: high barriers to imitation, poor capability of competitors, and low dynamism in the industry.
Barriers to imitation are factors that make it difficult for a competitor to copy a companys distinctive competency . a) The easiest distinctive competencies to imitate are those based on firm-specific tangible resources such as buildings, plant, and equipment, which are visible to competitors and can be readily purchased . b) Intangible resources are more difficult to imitate. Brand names symbolize a companys reputation, and are protected by law
c) Marketing and technological know-how are intangible resources that are relatively easy to imitate. Avoiding Failure: Sustaining Competitive Advantage
1.Focus on the Building Blocks of Competitive Advantage Develop distinctive competencies and superior performance in: Efficiency Quality Innovation Responsiveness to Customers 2.Institute Continuous Improvement and Learning Recognize the importance of continuous learning within the organization
3. Track Best Practices and Use Benchmarking Measure against the products and practices of the most efficient global competitors 4. Overcome Inertia Overcome the internal forces that are barriers to change

Resources and Capabilities Durability

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RESOURCES AND CAPABILITIES DURABILITY OF COMPETITIVE ADVANTAGE.

The relationship between strategies and resources and capabilities:

Distinctive Competencies, Resources, and Capabilities

Distinctive Competencies and role of Resources and Capabilities

Distinctive Competencies to Gain Competitive Advantage

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