PhD. Louise Kelly
Looking inside for competitive advantage
Jay B. Barney
Jaime Aguilar Plata
Efforts have focused on the relation between a firm’s environmental opportunities and threats on the other hand, and its internal strengths and weaknesses on the other.
SWOT analysis, this traditional logic suggests that firms that use their internal strengths in exploiting environmental opportunities and neutralizing environmental threats, while avoiding internal weaknesses, are more likely to gain more competitive advantages than other kinds of firms.
The importance of integrating internal with environmental analysis can be seen when evaluating the sources of competitive advantage of many firms.
These firms have gained competitive advantages despite the unatractive, high threat, low opoertunity environments within they operate.
4 Important questions that managers that managers respond:
The question of Value
The question of rareness
The question of inimitability
The question of organization
1) The question of Value
Do a firm’s resources and capabilities add value by enabling it to exploit opportunities and/or neutralize threats?
DO resources respond to changes in the structure of the industry?
Do companies invest for that purpose?
Do the recognize new opportunities and threats?
Although a firm’s resources and capabilities may have added value in the past, changes in customer tastes, industry structure, or technology can render them less valuable in the future.
One of the most important responsibilities of strategic managers is to constantly evaluate weather or not their firm’s resources and capabilities continue to add value, despite changes in the competitive environment.
Examples of companies that have done a good job are:
AT&T, Hunter Fan Company (Ceiling Fans)
The resources and capabilities of different firms can be valuable in different markets, even if they are competing in the same industry
Example Rolex and Timex.
The Quintin Watch produced by Jacob & Co. costs around
2) The question of Rareness
If a particular resource and capability is controlled by numerous competing firms, then that resource is unlikely to be a source of competitive advantage for any one of them
Example NEC and AT&T. They develop similar resources.
3) The question of inimitability
Do firms without a resource or capability face a cost disadvantage in obtaining it compared to firms that already possess it?
Imitation and substitution
The importance of history:
Resources and capabilities reflect the unique personalities, experiences and relationships that exist only in a single firm.
In general, whenever the acquisition or development of valuable and rare resources depends upon unique historical circumstances, those imitating these resources will be at a cost disadvantage building them. Such resources can be sources of sustained competitive advantage.
The importance of Numerous “Small Decisions”.
“More and more frequently, a firm’s competitive advantage seems to depend on numerous “small decisions” through which a firm’s resources and capabilities and capabilities are developed and exploited
The importance of Socially Complex Resources.
Reputation, trust, friendship, teamwork and culture.
Example: Hewlett Packard.
Sony is a good example of resources that can be imitated.
As soon as Sony creats a new component, several if its competitors duplicate it.
Sony gets the benefits of the introduction, and that is only a very short-lived competitive advantage.
However, Sony’s capability advantages do lead to a sustained competitive advantage.
4) The question of Organization
A firm must be organized to exploit its resources and potential, a firm must also be organized to exploit its resources and capabilities.
Is a firm organized to exploit the full competitive potential of its resources and capabilities?
Examples: Caterpillar, WalMart
Coca Cola and Pepsi.
Do they have resources that represent advantages?