Chapter 3 - Looking Inside the Organisation Flashcards
Positioning School
Market forces dictate strategy for competitiveness
Firm positions products and services within markets based on analysis of competitive forces
Organisation configures its structure and activities to allow it to position products/services
Resource-Based View
Shifts focus away from products that compete in the market but the systems of production. Structures and activities of an organisation shape its strategy and success.
Shows more emphasis towards strengths and weaknesses than on opportunities and threats. It complements positioning school’s insights.
RBV primarily came from?
Economics.
Penrose: firms can be understood as collections of resources, which shape firm growth
Wernerfeldt: by analysing firms resources, it is possible to infer strategies it might pursue
Barney: idiosyncratic/specific resources may give firms sustained competitive advantage
Resources
Tangible/intangible things which firm has some ownership/control of. e.g. Capital, labour, land.
Capabilities
the capacity of a set of resources to perform a task/activity.
Resources are the source of capabilities, but capabilities make the organisation competitive.
How to facilitate sustained competitive advantage?
Resources must be valuable, rare, difficult to imitate and difficult to substitute
Valuable
Improve efficiency/ effectiveness. Make a product/ service valuable to customers. Make people want to buy/willing to pay more.
They are only valuable if they allow the organisation to exploit opportunities or neutralise threats.
E.g. Ford developed production lines and made processes more efficient leading to low cost, mass production that is cheap and reliable.
Rare
Not possessed by many other firms. Resources only facilitate sustained competitive advantage if no/not many other competitors have them.
e.g. Google organisational culture that encourages innovation.
Difficult to Imitate
Others can’t copy them easily. If other organisations can copy it the competitive advantage it confers won’t be sustainable. e.g. Geographic location of Singapore airlines as natural airline hub that can’t be easily imitated.
Difficult to Substitute
Others can’t do the same thing as you, with some other easily obtainable resource. A resource which can’t easily be replaced with another resource which does the same job will contribute to sustained competitive advantage. Innovation makes this challenging to maintain.
e.g. Aluminium drink can substituted drink cans.
Barney’s Classification of Resources
Physical capital: technology, plant, geographic location
Human capital: training, experience, relations
Organisational capital: reporting structure, formal/ informal processes, team relations
Grant’s Classification of Resources
financial resources physical resources technological resources human resources reputation organisational resources
Criticisms of RBV
Circularity: we only know that a resource is valuable if it belongs to a firm that we know has sustained competitive advantage. Difficult to determine whether something creates value for the firm.
Equifinality: an almost infinite number of configurations of resources are effective, so where is the competitive advantage? But there are different ways to get to the same end, if there is a point to analysing all resources.
Could be questioned whether RBV provides firms with enough guidance about what they should do.
How Resources Shape Strategy
Evaluate resources, identify capabilities, assess value of capabilities, select a strategy, identify resource gaps and attempt to fill them
Evaluate Resources
Think about human, physical and organisational capital. Identify which of these are creating value.
