Chapter 5 Analyzing Resources and Capabilities

Chapter objectives
 Appreciate the role of a firm’s resources and
capabilities as a basis for formulating strategy
 Identifying and appraise the resources and
capabilities of a firm
 Evaluate the potential for a firm’s resources and
capabilities to confer sustainable competitive
 Use results of resources and capability analysis to
formulate strategies that exploit internal strength
while defending against internal weaknesses
Analysts have tended to define assets too narrowly,
identifying only those that can be measured, such as
plant and equipment. Yet the intangible assets, such
as a particular technology, accumulated consumer
information, brand name, reputation, and corporate
culture, are invaluable to the firm’s competitive
power. In fact, these invisible assets are often the only
real source of competitive edge that can be sustained
over time.
Hiroyuki Itami, Mobilizing Invisible Assets
Basing strategy on resources and capabilities
Strategy is concerned
with matching a firm’s
resources and
capabilities to the
opportunities that
arise in external
Canon core competencies
 Canon’s products involve
three technological
Precision mechanics
Fine optics
Eastman Kodak’s
dominance of the world
market for photographic
products based on
chemical imaging has
been threatened by
digital imaging
You’ve gotta do what you do well.
Licino Noto, Former vice chairman, exxon mobil
Resources of the firm
 Tangible resources
 Intangible resources
 Human resources
Brand as an intangible asset
Organizational capabilities
firm’s capacity to deploy resources for a desired end result.
Those things that an organization does particularly well
relative to its competitors
Core competences
According to Hamel and
Prahalad, are those that:
 Make a disproportionate
contribution to ultimate
customer value, or the
efficiency with which that
value is delivered and
 Provide a basis for entering
new markets
Approaches to Classifying capabilities
 Functional Analysis: identifies capabilities in relation
to each of the principal functional areas of the firm
 Value-chain Analysis: separates the activities of the
firm into sequential chain.
Appraising resources and capabilities
 Establishing competitive advantage
 Scarcity
 Relevance
 Sustaining competitive advantage
 Durability
 Transferability
 Reliability
 Appropriating the returns to competitive advantage
When your competitive advantage walks out the
door: Gucci