Strategic Management Concepts Quiz

Learning Outcomes

• Identify organizational resources and capabilities, and how they relate to organizational strategies.
• Analyze how resources and capabilities provide sustainable competitive advantage based on value, rarity, inimitability, and organizational support (VRIO).
• Diagnose resources and capabilities using benchmarking, VRIO analysis, value chain analysis, activity systems mapping, and SWOT analysis.
• Consider how resources and capabilities can be developed using dynamic capabilities.

Resources and Capabilities: Key Issues

• What are resources and capabilities?
• What types of resources and capabilities contribute to competitive advantage and superior performance?
• How can resources and capabilities be evaluated?
• How can resources and capabilities be developed and managed?

Resource-Based Strategy

• The resource-based view (RBV) of strategy asserts competitive advantage and superior performance are explained by the distinctiveness of organizational capabilities.
• It is sometimes called the 'capabilities view'.

Foundations of Resources and Capabilities

• Organizational resources and capabilities contribute to long-term survival and potentially to competitive advantage.
• Resources are organizational assets, including those obtained from partners and suppliers ('what we have').
• Capabilities are the ways those assets are used and deployed ('what we do well').

Table 4.1: Resources and Capabilities

Redundant Capabilities

• Capabilities, even if effective in the past, can become less relevant as industries evolve and change.
• These capabilities can become rigidities, hindering change and becoming weaknesses.

Threshold and Distinctive Capabilities

• Threshold capabilities: Necessary for organizations to compete and achieve parity with competitors in a given market ('qualifiers').
• Distinctive capabilities: Required to achieve competitive advantage, offering value to customers and difficult for competitors to imitate ('winners').
• A table showing threshold resources/competencies and distinctive resources/competencies.

Core Competences

• Core competences are linked skills, activities, and resources that deliver value, differentiate a business from competitors, and can be extended and developed as markets change or new opportunities arise.

Strategic Capabilities and Competitive Advantage

• The four criteria to assess capabilities for achieving sustainable competitive advantage: value, rarity, inimitability, and organizational support (VRIO).

VRIO (Value, Rarity, Inimitability, Organizational Support)

• Value: Resources and capabilities are valued by customers and support response to opportunities and threats.
• Rarity: Resources and capabilities are not (or are rarely) possessed by competitors.
• Inimitability: Resources and capabilities are difficult and costly for competitors to imitate or obtain.
• Organizational Support: Organizational structure supports the exploitation of valuable, rare, and inimitable resources and capabilities.

VRIO (2 of 5)

• Strategic capabilities are valuable when they take advantage of opportunities, neutralize threats, provide value to customers, and are offered at a cost that allows acceptable profit.

VRIO (3 of 5)

• Rare capabilities are unique to one organization or possessed by a few others.
• Rarity may be temporary (e.g., patents expire, key personnel leave, brand reputation degrades).

VRIO (4 of 5)

• Inimitable capabilities are difficult and costly for competitors to imitate, obtain, or substitute.
• Competitive advantage may stem from unique resources (e.g., a key individual or IT system.)
• Sustainable advantage often lies in competences—how resources are managed, developed, and deployed—and how competencies are linked and integrated.

Criteria for the Inimitability of Resources and Capabilities

• Complexity: Organizational linkages (internal and external).
• Causal Ambiguity: Characteristic and linkage ambiguity.
• Culture and History: Taken-for-granted activities and path dependency.

VRIO (5 of 5)

• Organizational support is crucial; the organization needs proper structure to exploit valuable, rare, and inimitable capabilities through processes and systems.

Organizational Knowledge

• Organizational knowledge is company-specific, collective intelligence developed through formal systems and shared experiences.
• Explicit knowledge (objective): Transmitted formally (e.g., manuals, market research).
• Tacit knowledge (personal): Context-specific, difficult to formalize or communicate, and challenging to imitate (e.g., knowledge and relationships in an R&D team).

VRIO Analysis

• VRIO analysis assesses the extent to which an organization has valuable, rare, inimitable, and organizationally supported resources and capabilities.

The Value Chain (1 of 2)

• The value chain describes organizational activities creating a product or service.
• Value chains consist of five primary activities (creation or delivery of a product or service) and four support activities (improving effectiveness/efficiency of primary activities).
• Competitive advantage can be analyzed in any activity of the value chain.

The Value Chain (2 of 2)

• Diagram illustrating the value chain with primary activities (inbound/outbound logistics, operations, marketing/sales, service) and support activities (firm infrastructure, human resource management, technology development, procurement).

The Value System (1 of 2)

• The value system comprises interorganizational links and relationships necessary for creating a product or service.
• Competitive advantage can be derived from linkages within the value system.

The Value System (2 of 2)

• A diagram of the value system showing inter-organizational links/relationships (supplier, organization, channel, customer).

Uses of the Value Chain

• Generic description of activities and how related activities contribute to consumer benefit.
• Identifying organizational strengths and weaknesses within specific activities.
• Analyzing competitive position using VRIO criteria to identify sources of sustainable advantage.
• Looking for ways to enhance value or decrease costs in value activities (e.g., outsourcing).

Uses of the Value System

• Understanding cost/price structures.
• Identifying profit pools.
• Making "make-or-buy" decisions.
• Establishing strategic partnerships.

Mapping Activity Systems (1 of 2)

• Identifying higher-order strategic themes; how organizations meet critical success factors.
• Identifying clusters of activities supporting these themes and how they fit together.
• Mapping interrelated activity systems.

Mapping Activity Systems (2 of 2)

• Diagram illustrating interconnected activities (e.g. recruitment, learning opportunities, internal evaluation).

Using Activity System Maps

• Relationship to value chain. Understanding strategic capabilities in activities and linkages.
• Importance of linkages and fit.
• Relationship to VRIO.
• Superfluous activities.

Benchmarking

• Benchmarking is a method of understanding how an organization compares to others (typically competitors).
• Two approaches to benchmarking:
  • Industry/sector benchmarking: Comparing performance to similar organizations within the same industry/sector.
  • Best-in-class benchmarking: Comparing performance to the best performer in any industry, even if dissimilar.

SWOT Analysis

• SWOT analysis summarizes strengths, weaknesses, opportunities, and threats.
• Internal analysis = strengths and weaknesses.
• External analysis = opportunities and threats.

Uses of SWOT Analysis (1 of 2)

• Identifying major strengths and weaknesses using chapter 4 analytic tools.
• Scoring (e.g., +5 to -5) to assess the inter-relationship between environmental impacts and strengths/weaknesses.
• Examining strengths and weaknesses relative to competitors.

Uses of SWOT Analysis (2 of 2)

• Identifying key opportunities and threats using chapter 2 and 3 analytic tools.
• Focusing on relevant opportunities and threats.
• Summarizing results and drawing concrete conclusions.
• Generating strategic options using a TOWS matrix.

Dangers in a SWOT Analysis

• Long lists without prioritization.
• Overgeneralizations.
• Using SWOT as a substitute for detailed analysis.
• Treating SWOT as an end goal instead of a tool to guide strategy.

Dynamic Capabilities

• Dynamic capabilities are the means by which an organization renews and recreates its strategic capabilities to meet changing environmental needs.
• They differentiate from ordinary capabilities that may be necessary for efficient operation but insufficient to sustain long-term superior performance.

Generic Dynamic Capabilities

• Sensing capabilities: Continuously scanning and exploring new opportunities across markets and technologies (e.g., R&D, market research).
• Seizing capabilities: Addressing opportunities through new products, processes, and activities.
• Re-configuring capabilities: Renewing and re-configuring existing capabilities for new products and processes, often involving investment in new technology.

Developing Strategic Capabilities (1 of 2)

• Internal capability development: Building and recombining capabilities, requiring creative entrepreneurial skills and a culture promoting capability innovation.
• Leveraging capabilities: Identifying capabilities in one part of the organization and transferring them to other parts (best practice sharing).
• Stretching capabilities: Building new products or services from existing capabilities.

Developing Strategic Capabilities (2 of 2)

• External capability development: Adding capabilities through mergers, acquisitions, or alliances.
• Ceasing activities: Stopping, outsourcing, or reducing non-core activities.
• Monitoring outputs and benefits: Understanding sources of consumer benefit and enhancing relevant activities.
• Awareness development: Recognizing what enhances strategy through training, development, and organizational learning.

Summary (1 of 3)

• Organizations need threshold resources and capabilities to compete, but unique and distinctive capabilities are needed to achieve sustained competitive advantage.

Summary (2 of 3)

• For sustainable competitive advantage, resources and capabilities need to meet the VRIO criteria (Value, Rarity, Inimitability, Organizational Support).
• Techniques to diagnose capabilities include VRIO analysis, value chain analysis, and activity systems mapping.

Summary (3 of 3)

• SWOT analysis provides a framework for understanding organizational strengths, weaknesses, opportunities, and threats.
• Benchmarking helps understand the relative performance of organizations.
• Managers need to adapt and change resources and capabilities in response to environmental changes, utilizing dynamic capabilities.

Test your knowledge on strategic management concepts such as SWOT analysis, dynamic capabilities, and the resource-based view (RBV) of strategy. This quiz covers key distinctions, examples, and the importance of various capabilities within organizations. Dive into the essentials for a solid understanding of strategic analysis!