resources and capabilities - sriteja reddy
TRANSCRIPT
International BusinessMaria Jell-Ojobor, WT [email protected]
Sriteja Reddy Wudaru
Resources and CapabilitiesPeng, 2014, Chapter 3
Resources and Capabilities
Tangible• Resources and capabilities
that are observable and easily quantified
Intangible• Resources and capabilities
not easily observed or difficult (or impossible) to quantify, communicate, transfer (tacitness and immobility of resources)
What are resources?
What are capabilities?
Resources and Capabilities
Tangible• Resources and capabilities
that are observable and easily quantified
• Broadly organized in three categories:
• Financial• Physical • Technological
Intangible• Resources and capabilities
not easily observed or difficult (or impossible) to quantify, communicate, transfer (tacitness and immobility of resources)
• Examples include:• Human • Innovation • Reputation• Culture
Resource-based view
Industry-based view: how firms compete in an industry on an aggregate level
Resource-based view: how individual firms differ –how your firm can outperform competition (industry average and industry leaders)
Tools: SWOT, VRIN
SWOT ANALYSIS in International Business
SWOT analysis – a tool for determining a firm’s strengths (S), weaknesses (W), opportunities (O), and threats (T)
• The industry-based and institutional views deal with the external O and T, enabled and constrained by the industry competition as well as formal and informal rules of the game
• The resource-based view concentrates on the internal S and W to identify and leverage sustainable competitive advantage
Resources, Capabilities, and the Value Chain
Value Chain
The functional, vertical activities within the firm that create value in the goods and services produced
Components of the Value Chain
• Primary activities
Are directly associated with the development, production, and distribution of goods and services
– Support activities
Assist in the accomplishment of primary activities
Value Chain
Source: Peng, 2014, Fig. 3.6
Outsourced
• Benchmarking – examining whether a firm has resources and capabilities to perform a particular activity in a manner superior to competitors
• Better awareness over Strengths and Weaknesses• This is where industry analysis and within-firm
analysis comes together• Goal: achieve ‘Sustained Competitive Advantage’
Benchmarking
VRIN Resources and Capabilitiesvaluable – rare – inimitable – non substitutable (Barney, 1991)
VALUABLEResources must create greater value, in terms of relative costs and benefits, than similar resources in competing firmsRAREResources must be rare, in the sense that they are scarce relative to the demand for its use
VRIN Resources and Capabilities (cont’d)
INIMITABLEResources are difficult to imitate, due to:• Path dependency/history - hard to acquire in a
short time what competitors have developed over a long time
• Causal ambiguity - Difficult to identify causal determinants of performance
• Organizational embeddednessNON SUBSTITUTABLEOther different types of resources cannot be functional substitutes
The VRIN Framework
VALUABLE? RARE?
COSTLY TOIMITATE?
NOT EASY TO SUBSTITUTE?
COMPETITIVE IMPLICATIONS
FIRM PERFORMANCE
No No Competitive disadv. Below averageYes No No Competitive parity Average
Yes Yes No No Temporary competitive/comparative advantage
Above average
Yes Yes Yes Yes Sustained competitive advantage
Consistently above average
Is a Resource or Capability…
Source: Peng, 2014, Table 3.2
Static vs Dynamic Resources & Capabilities
• Understand what you ‘need’ by analyzing ‘what is there’ and ‘what is changing’ in the industry
• Tacit knowledge• “Learning before doing” versus “learning by
doing”• Slow versus fast-moving industries• Goal: achieve resources & capabilities that are
VRIN, ever-evolving, and set your firm apart from the competition
Static vs Dynamic Resources & Capabilities
Dynamic Capabilities
SLOW-MOVING INDUSTRIES FAST-MOVING INDUSTRIES
Market environment
Stable industry structure, defined boundaries, clear business models, identifiable players, linear and predictable change
Ambiguous industry structure, blurred boundaries, fluid business models, ambiguous and shifting players, nonlinear and unpredictable change
Attributes ofcapabilities
Complex, detailed, analytic routines that rely extensively on existing knowledge(“learning before doing”)
Simple, experiential routines that rely on newly created knowledge specific to the situation (“learning by doing”)
Focus
Leverage existing resources and capabilities, exploitation
Develop new resources and capabilities, exploration
Execution
Linear Iterative
Organization A tightly bundled collection of resourceswith relative stability
A loosely bundled collection of resources that are frequently added, recombined, and dropped
Outcome
Predictable UnpredictableStrategic goal
Sustainable competitive advantage(hopefully for the long term)
A series of short-term (temporal)competitive advantages
Source: Peng, 2014, Table 3.3
Determinants of Global Strategy
Firm-specific resources & capabilities
PerformanceGlobal Strategy
VRIN resources & capabilities Exploitation and/or exploration
through integration/centralizationversus outsourcing/alliancing
• Understand your resources and capabilities• Plan how to capitalize on them: expand, let go, acquire
new ones?• Plan strategy: exploration vs exploitation, integration
vs outsourcing?
The firm is made up by a bundle of resources and capabilities.The firm‘s strategy should focus on the exploitation and/or exploration of heterogeneous, immobile (VRIN-) resources and capabilities,
Industry-based competition
Institutional conditions
Resource-based and Organizational Capabilities Theory
Firm-specific resources & capabilities
PerformanceGlobal Strategy
which have the potential to result in sustainable competitive advantage.
(Wernerfelt, 1984; Rumelt, 1984; Penrose, 1959)
Outsourcing
• Outsourcing – turning over an activity to an outside supplier that will perform it on behalf of the focal firm
• Advantages: no investments in fixed assets, building on low costs, focus on core activities
• Is it exploitation? Do either country benefit?• Ethical control? Rivalry?• What will you retain as core capability?
Resources Exploitationthrough:
A Decision Model in Value Chain Analysis
Outsourcing/Alliancing
Resources Explorationthrough:
Integration
Centralization
Can a firm perform a particular activity better than competitors?
Source: Peng, 2014, Fig. 3.2
Hourly Labor Cost in Manufacturing (US$)1975 2000 2012
Switzerland 6.09 21.24 57.79Australia 5.62 14.47 47.68Germany 6.31 24.42 45.79France 4.52 15.70 39.81US 6.36 19.76 35.67Japan 3.00 22.27 35.34Italy 4.67 14.01 34.18UK 3.37 16.45 31.23Spain 2.53 10.78 26.83Korea 0.32 8.19 20.72Taiwan 0.40 5.85 9.46Mexico 1.47 2.08 6.36Philippines 0.62 1.30 2.10 Source:
Grant, 2017
Item Supplier Location
Design and operating system
Apple USA
Flash memory Samsung Electronics S. Korea
DRAM memory Samsung Electronics;Micron Technologies
S. KoreaUSA
Application processor Murata Japan/Taiwan
Baseband Infineon;Skyworks; Triquint
TaiwanUSA
Power management Dialog Semiconductor TaiwanAudio Texas Instruments USATouchscreen control Cirrus Logic USAAccel. and gyroscope ST Microelectronics ItalyE-compass AKM Semiconductor JapanAssembly Foxconn China
Where Does the iPhone Come From?
Source: Grant, 2017
Escape slides: Air Cruisers (USA)
Horizontal Stabiliser:Alenia Aeronautica (Italy)
Centre fuselage:Alenia Aeronautica (Italy)
Final assembly: BoeingCommercial Airplanes (USA)
Vertical Stabiliser: BoeingCommercial Airplanes (USA)
Landing gear: Messier-Dowti (France)Electric brakes: Messier-Bugatti (France)Tires: Bridgestone Tires (Japan)
Doors & windows:Zodiac Aerospace (USA)PPG Aerospace (USA)
Software: Dassault Systemes (France)Navigation: Honeywell (USA)Pilot control system: Rockwell Colins (USA)Wiring: Safran (France)
Centre wing box:Fuji Heavy Industries (Japan)
Engines: GE Engines (USA), Rolls Royce (UK)
Wing box: Mitsubishi Heavy Industries (Japan)Wing ice protection: GKN Aerospace (UK)
Engine nacelles: Goodrich (USA)Aux. power unit: HamiltonSundstrand (USA)
Flight deck seats:Ipeco (UK)
Lavatories:Jamco (Japan)
Cargo doors: Saab (Sweden)
Forward fuselage:Kawasaki Heavy Industries (Japan)Spirit Aerosystems (USA)
Raked wing tips: Korean AirlinesAerospace division (Korea)
Passenger doors:Latécoère Aéroservices (France)
Prepreg composites:Toray (Japan)
Rear fuselage:Boeing South Carolina (USA)
Globally-dispersed production: Boeing 787 Dreamliner
Source: Grant, 2017
Case Discussion: From Copycats to Innovators
• What kind of Western firms’ strategy could have fueledthe problem of imitation?
• What are the core resources and capabilities of emerging multinationals from emerging economies?
• What are the core resources and capabilities of most multinationals from developed economies?
• Some of the copycat strategies embraced by emerging multinationals have violated the intellectual property rights of their rivals in developed economies. As a new CEO of an emerging multinational brought from the outside, you have just discovered this issue at your new employer. What are you going to do about it?
Some Answers to Case Discussion
• What kind of Western firms’ strategy could have fueledthe promblem of imitation?
The problem of imitation can be attributed to the developed economies’ policies of outsourcing. In their quest for low-cost solutions, Western firms have encouraged Indian firms to imitate rather than innovate. The rationale behind this was to ensure that these firms remain permanently behind leading Western firms.
Some Answers to Case Discussion (cont‘d)
• What are the core resources and capabilities of emerging multinationals from emerging economies?
The core capabilities and resources of multinational firms from emerging economies is their learning ability—the ability to learn from others and to replicate it in their own contexts. Unlike their Western counterparts, they have recognized the potential of the base-of-the-pyramid markets.
Some Answers to Case Discussion (cont‘d)
• What are the core resources and capabilities of most multinationals from developed economies?
Western firms emphasize the need for innovation which is consistent with its traditional belief that a firm can achieve world-class competitive advantage only from the unique products that it owns. This ownership advantage enables Western firms to establish their reputation as world leaders.
Some Answers to Case Discussion (cont‘d)
• Some of the copycat strategies embraced by emerging multinationals have violated the intellectual property rights of their rivals in developed economies. As a new CEO of an emerging multinational brought from the outside, you have just discovered this issue at your new employer. What are you going to do about it?
The importance of intellectual property (IP) rights must be emphasized. All enterprises use and create intellectual property. Given this scenario, owners must think of means of protecting and maintaining it. If you are using other people’s property, it is better to buy it in order to avoid expensive lawsuits. Further, you can use IP to increase the market value of your company.