Threats And Opportunities From Site

Threats to sustainability

Imitation or substitution

Market entry

Powerful buyers and suppliers

Unpredictable changes in external environment

Factors beyond a firm's control (bad luck)

Limitations of the RBV

Presented as static concept - however, many firms need to be able to cope with turbulent environments

Suggests that managers may have limited ability to create sustained competitive advantages (empirical support by "perpetually failing firms" - firms that consistently earn normal or below-normal returns

Difficult to test empirically - data problem (at the level of the unit of analysis, Le., resources and capabilities)

What is the appropriate level of analysis? How deeply does one have to look?

Principles of capabilities-based competition

Goal : Build difficult-to-imitate organizational capabilities that distinguish a company from its competitors

Principles :

o The building blocks of strategy are business processes

o The transformation of processes into valuable strategic capabilities is a key to success

o Capabilities are created by making strategic investments in support infrastructure

o CEO must be responsible, because competing on capabilities involves cross-functionality

Some lessons learned from the capabilities perspective

A capability begins and ends with the customer (or supplier)

The longer and more complex the string of business processes, the harder it is to transform into a capability or to duplicate or imitate

Outsourcing can be dangerous

A strategy for growth : Transfer essential business processes to New geographic areas (e.g., Wal-Mart) or to New businesses (e.g., Honda)

There is a difference between capabilities and core competencies

Core competencies

Coordinate diverse production skills and integrate multiple streams of technology

Are communication, involvement, and a deep commitment to working across organizational boundaries

Do not diminish with use, but are enhanced as they are applied and shared

Are the glue that binds existing businesses

Are difficult to imitate, especially if they are a complex harmonization of individual technologies and production skills

Are corporate resources and may be reallocated by corporate management

Tests to identify core competence