Strategy, Classic and Contemporary Views
Lecturer: Hans Andersson & Fredrik Tell
Assignment for Seminar, Sept. 14– 10
Group nr. 9B
Emma Andersson – 880703 -1920
Mooyoung Son – 811121 -3776
Maral Antighechian– 840619 -0762
Katsiaryna Skachkova – 860205 -T222
Zebastian Nylund – 860503 -6592
A. Louis Vuitton is a French fashion house, which was established in 1854. Today it is one of the world’s
most well-known and expensive brands due to some of its core capabilities that differentiate it in the
competitive global market.
 Brand: One of the most important competitive advantages for Louis Vuitton is its brand. It is
estimated that LV is one of the most valuable brands in the world and it is recognized through
the LV monogram known to millions.
 Handmade: Sine the founding of LV in the 19th century no change has been made in the Louis
Vuitton manufacturing and its products are still made by hand which differentiate this brands
among its competitors in the fashion industry.
 High quality: The company has an empowering position to observe its products quality by
marketing the products through their own stores all over the world. Furthermore, LV is also
famous for using high-quality raw materials for all its products.
Sony was founded in 1946 and is today known as on of the worlds most successful corporations,
operating in many different industries, such as electronics, games, music, films and financial services.
The brand is associated with excellent quality, innovation and style. Sony has been able to hold a strong
leadership position over time by maintaining a strong focus on their core capabilities such as:
 Size: Sony's main competence is to miniaturize electronics. Their specialization to do small
things differentiates them from competitors. Products such as the Walkman and the portable
television are examples of miniaturization.
 Quickness: To bring miniaturization to its products, Sony must be fast with new product
development. To ensure the quick responsiveness, the corporation has developed effective
management so that technicians, engineers and marketers have a shared understanding of
customer needs and what is technologically possible to develop according to those needs.
 Structure: The combination of leadership, core capabilities and resources has helped Sony to
maintain sustainable competitive advantage.
General Motors (GM), once the largest corporation of the world went bankrupt in 2006 and is now
owned mostly by the US government. In an attempt to trace the lack of core capabilities the following
arguments can be assessed:
 Financial policies: Due to bad financial handling the liquidity has gone from bad to terrible. The
financial statements have declared that money is coming in but this is only due to previously
given car loans. If no cars are sold, no more money will come in. It is as simple as that.
Therefore, the lack of a justified financial position has deteriorated GM.
 Uncompetitive production and products: Unaesthetic and poorly built cars have a hard time
competing with other brands. Furthermore, the production process was not utilized and a core
competence was lost. To add to it, the fact that fewer cars were sold also meant that excess
production capabilities arose.
 Neglecting: Because of its competitive advantage in the second half of the 20th century, GM
acted naively to competition and was unwilling to understand the customer needs. Not being
open to change, flexibility was lost and with it a lot of customers.
 Innovation: Naturally, as GM was unwilling to change, a lot of innovative ideas were lost along
the “side of the road”. Technological advances came to quickly for GM to handle and where
Strategy, Classic and Contemporary Views
Lecturer: Hans Andersson & Fredrik Tell
Assignment for Seminar, Sept. 14– 10
Group nr. 9B
Emma Andersson – 880703 -1920
Mooyoung Son – 811121 -3776
Maral Antighechian– 840619 -0762
Katsiaryna Skachkova – 860205 -T222
Zebastian Nylund – 860503 -6592
competitors were wooing customers with innovative solutions, GM were still relying on their
previous success years.

Managing: Management was not focused on the prime issues as things started going south for
GM. It was still believed that GM was invincible and patriotism weighed more than the race with
competitors.
Eastman Kodak also was once the largest corporation in the Film industry.
 Stuck in the past: Kodak still focused on their old core competency (film) even though Sony
already introduced first digital camera (Mavica) at 1981.
 Financial ignorance: They could not give up film business because profit margin from film
industry was almost 60% while profit margin from digital product was only 15%. Moreover they
had to give up profit from printing out services if they want to change their core competence.
Sometimes the fact that the new strategy is less profitable than old one can harm the process of
innovation.
1. How does one identify resources and capabilities?
Resources: What’s at hand. Capabilities: %-age available of “what’s at hand”
2. How may resources and capabilities cause superior or inferior returns?
As proven by the companies above, there is no concrete number to certify the answer to the question.
3. Are there ‘bad’ resources and capabilities and how does one distinguish them from good ones?
The common point between the two failure companies above is that they were once best companies
but declined rapidly because of wrong decisions. Hence, it could be said that the ‘bad’ resource they had
was “authority and confidence on brand”. They believed that their positions were stable and became
too comfortable. Even though the capability “brand” looks like a good one, sometimes it can destroy the
competencies if management do not address issues outside of their conceit.
B. 1. What does ‘isolating mechanism’ mean and how do such mechanisms relate to the argument of
the resource-based view of competitive advantage?
According to RBV “establishing competitive advantage” involves formulating and implementing a
strategy that exploit a firm’s unique strengths” – internal resources and capabilities of firm(Grant, 2007,
125 ). Isolating mechanisms means creating barrier for competitors. These barriers allow protecting
company’s recourses and capabilities from imitation. Also isolating mechanisms are instruments, which
can be used for influencing industry dynamics, as they provide barriers to replication of competitive
strategies.
2. How does the structure and dynamics of industries influence the opportunities for certain resources
and capabilities to become sources of sustainable competitive advantage?
According to Grant the more highly developed a firm’s organizational capabilities are, the more difficult
it is for the firm to adapt them to new circumstances. A sustainable competitive advantage depends on
changes in industry, because the change can be both “competence enhancing and destroying”.
Strategy, Classic and Contemporary Views
Lecturer: Hans Andersson & Fredrik Tell
Assignment for Seminar, Sept. 14– 10
Group nr. 9B
Emma Andersson – 880703 -1920
Mooyoung Son – 811121 -3776
Maral Antighechian– 840619 -0762
Katsiaryna Skachkova – 860205 -T222
Zebastian Nylund – 860503 -6592
3. Are there any schematic links between certain categories of resources and capabilities and the
viability of any particular generic strategy?
Yes, certain categories of
resources and
capabilities are more
typical for choosing this
or that generic strategy.
To the extent that
different companies
within an industry have
different capability
profiles, this implies
differentiation of
strategies within the
industry (Grant, 2007,
144).
But also strategy
formulation depends not
only on resources and
capabilities of the
company.