A FRAMEWORK FOR ANALYSIS : VRIO Resource-based analysis of the firm determines which resources and capabilities result in which strengths or weaknesses Strategies are to be implemented which exploit (or build) strengths and avoid (or eliminate) weaknesses What constitutes a strength or weakness is partially a function of the external environment Framework for analysis: VRIO - resources and capabilities should be o Valuable o Rare o Inimitable o Organization can effectively exploit them VALUE of resources and capabilities A VALUABLE resource or capability (or a combination thereof) must o Contribute to fulfillment of customer's needs o At a price the consumer is willing to pay, which is determined by Customer preferences Available alternatives (including substitute products) Supply of related or supplementary goods Thus, value is partially a function of external environment (product market, demand forces) Changes in consumer tastes, industry structure, technology, etc. can result in changed value Resources of different firms can be valuable in different ways (e.g., Timex versus Rolex) Value = Lowered costs or increased revenues or both SCARCITY of resources and capabilities Resources and capabilities must be in short supply to create competitive advantage (and go beyond competitive parity) What would happen if this were not the case? An analysis of the firm's resources and capabilities must include critical assessment whether they are unusual when compared to those of competitors How rare does a resource have to be in order to have potential for generating a competitive advantage? Example of a rare resource: Wal-Mart's point-of-purchase... ... middle of paper ... ...s and competitors Competitive advantage is not just a function of how to play the game of business, but also of how assets can be deployed and re-deployed in a changing market Strategy analysis must be situational Strategy involves choosing among and committing to long-term paths of competence development; strategic change is difficult and costly Entry decisions must be made with reference to competencies and capabilities Business opportunities lie close to firm's existing business Focus needs to be defined in terms of distinctive capabilities, not products Inherent limitations of firm's dynamic capabilities Learning is typically incremental, not path breaking Search for new sources of competitive advantage is path dependent Development of new products and capabilities can either enhance or destroy the value of complementary assets
The strategic recommendations provided will improve and enable the business to cope with the competitors, while the implementation of the strategy section will outline the way to go about achieving these alternatives in the business setting. Lastly, we put up a discussion on the evaluation procedures and necessary controls for the business. In the case study, it was discovered that there were sources of opportunities in which the company would invest.
It is also perhaps not feasible to evaluate the attractiveness of an industry independent of the resources a firm brings to that industry. It is thus argued that this theory be coupled with the Resource-Based View (RBV) in order for the firm to develop a much more sound strategy. It provides a simple perspective for accessing and analysing the competitive strength and position of a corporation, business or organisation.
Porter, Michael E. "From competitive advantage to corporate strategy." Harvard Business Review (1987): 43-59. Print. May 2014.
S, Tywoniak 2007, Making sense of resource based view, Academy of Management Conference, University of Technology, Australia.
Arthur, A., Thompson, Margaret, A., Peteraf, John, E. Gamble, A., J., Strickland III. (2014). Crafting & Executing Strategy: The Quest for Competitive Advantage 19e: Concepts & Cases. C6-C25.
Lynch (2012) asserts that it is necessary for an organization to carry out an analysis of its resources and capabilities as it help it in identifying the places where value can be added by the organization. This also helps the company in finding out ways to gain competitive advantage in the market. The given case on Nintendo showed that by 2005, Nintendo appeared to be heading towards an end as its rivals Microsoft and Sony has captured the market through Xbox 360 and PlayStation 3 respectively. In this scenario, Nintendo innovated Wii which changed the market scenario in 2007. The case showed that innovative new strategy by Nintendo with its Wii games machine has transformed the industry and revived the profitability of the company. Since the release of the Wii, Nintendo is the leader in the video game industry. By introducing a totally new, one of a kind console, Nintendo has set clearly its goal and objectives, i.e. to reach an unexplored market share by introducing new gaming experiences, and therefore being the leader over its two main competitors, Sony and Microsoft. The case thus highlights the need to take a resource based view of the capabilities of the company so that such resources can be exploited to generate higher value for the firm.
Internal resource is the first consideration that can lead to sustainable competitive advantage and Resource –Based View (RBV) is a theory that usefully helps a firm focus on internal resources (Kraaijenbrink, Spender & Aard, 2010). According to RBV (Valuable, Rare, hard to imitate and non-substitutable), companies have different tangible and intangible resources, these resources can be transformed into unique ability, this special ability cannot flow between firms and rival firms and difficult to reproduce. These unique resources and abilities are the source of enterprise sustainable competitive advantage. In this part, Starbucks and Apple are worth to be analyzed by RBV.
Resources are organization’s productive assets and capabilities are what an organization is capable of doing. The relationship between resources and capabilities of a company forms a competitive advantage. Capabilities and resources help in gaining value and competitive advantage over competitors.
Pitts and Koufopoulos (2012) argue that resources and capability are highly important internal factors that should be taken into account by the organization in order to obtain the successful performance in the long run.
of a firm to attain new forms of competitive advantage (Müller, 2011). It is due to these
Thompson, A. A., Strickland, A. J., & Gamble, J. E. (2008). Crafting & executing strategy: The quest for competitive advantage (16th ed.). New York: McGraw-Hill Irwin.
Selecting a business strategy that details valuable resources and distinctive competencies, strategizing all resources and capabilities and ensuring they are all employed and exploited, and building and regenerating valuable resources and distinctive competencies is key. The analysis of resources, capabilities and core competencies describes the external environment which is subject to change quickly. Based off this information a firm has to be prepared and know its internal resources and capabilities and offer a more secure strategy. Furthermore, resources and capabilities are the primary source of profitability. Resources entail intangible, tangible, and human resources. Capabilities describe environment and strategic environment. Core competencies include knowledge and technical capability. In this section we will attempt to describe in detail the three segments which are resources, capabilities, and core competencies.
A key part of an organizational strategy is to identify market opportunities by finding a niche or a gap in the marketplace that they can pursue to take their company ahead of all their competitors. An organiz...
We can define competitive advantage as simply what a given company excels best at. This could be the distinguishing factor as to why consumers purchase from your company and not the competition. This could also be understood from the perspective of quality that a business can create for the consumer.
...ompletes an analytical assessment of a firm. A firm establishes its competitive building by investing scarce resources again and again in its value-added activities. By doing this the organizations will be able to give rise superior products and services that the buyer's desire and continue to grow the business and adhere to its strategic plan once implemented.