ORGANIZATIONAL RESOURCES
AND COMPETITIVE ADVANTAGE
Chapter 3
THE INTERNAL ENVIRONMENT
Tangible and intangible resources – assets of an organization
Capabilities – skills or activities that create or use these resources
Core competence – a capability that creates a competitive advantage
Core incompetence - a lack of a capability that leads to a competitive
disadvantage
Distinctive competence – a core competence that a firm performs better than the
competition
EXAMPLES OF HUMAN RESOURCES AND HUMAN
CAPABILITIES
Resources:
Capabilities:
•Superior CEO characteristics
•Executive leadership skills
•Outstanding board of directors
•Outstanding governance
•Experienced managers
•Excellent management development and
retention
•Well-trained, motivated, loyal
employees
•Effective decision making
•Top-notch training and motivational
practices
EXAMPLES OF PHYSICAL RESOURCES AND
PHYSICAL CAPABILITIES
Resources:
Capabilities:
•State-of-the-art machinery, plant
•Efficient production and service delivery
•Superior locations
•Ability to identify superior locations
•Excellent access to raw materials
•Excellent logistics and supply chain
management practices
•Patents, trademarks, secrets
•Strong research and development skills
•Ability to leverage patents, trademarks
and secrets
EXAMPLES OF FINANCIAL RESOURCES AND
FINANCIAL CAPABILITIES
Resources:
•Strong cash flow
•Strong balance sheet
•Capacity to borrow/credit ratings
•Superior past performance
Capabilities:
•Ability to manage and generate internal
funds
•Asset management
•Leverage capabilities
•Ability to control costs and sustain
profitability
EXAMPLES OF KNOWLEDGE AND LEARNING RESOURCES
AND KNOWLEDGE AND LEARNING CAPABILITIES
Resources:
Capabilities:
•State-of-the-art information systems
•Superior technology development
•Extensive line-up of products and
services
•Strong research and development
practices
•New business start-ups
•Management supports internal
entrepreneurship
•Total quality management, six-sigma,
ISO certifications
•Excellent innovation and learning
activities
EXAMPLES OF GENERAL ORGANIZATIONAL RESOURCES
AND GENERAL ORGANIZATIONAL CAPABILITIES
Resources:
Capabilities:
•Excellent reputation
•Public relations activities
•Well-known brands
•Marketing, pricing, advertising,
distribution capabilities
•Excellent structure and culture
•Superior management systems
•Ability to track customer buying habits
through customer loyalty programs
•Strong relationships with external
stakeholders
•Corporate social responsibility actions
A Representative Company Value Chain
4–8
TO BE A CORE COMPETENCE, THE ANSWER
SHOULD BE “YES” TO BOTH OF THESE QUESTIONS
IS THE CAPABILITY VALUABLE?
A capability has value if the company
can use it to provide a good or service
at a low cost or to provide a good or
service that is more desirable to the
consumer.
IS THE CAPABILITY UNIQUE?
A capability is unique if only one or a
small group of firms possess it.
If the capability satisfies both
questions, then it has the potential
for a competitive advantage.
STRATEGIC STRENGTH
Core
Competence
Capability
Is it
valuable?
Is it
unique?
YES
Strategic
Strength
STRATEGIC WEAKNESS
Core
Incompetence
Lack of
Capability
Is it
valuable?
Is it
unique?
YES
Strategic
Weakness