Strategy

Strategy Formulation

 

Resource-based Model of Strategic Management

  Vadim Kotelnikov advice quotes

Vadim Kotelnikov, founder of 1000ventures - personal logo   Business e-Coach   Innompic Games icon

Vadim Kotelnikov

  

Achieving superior returns by best exploiting internal Resources and Capabilities

 

The Tree of Business Success Download PowerPoint presentation, pdf e-book

 

 

Strategic Management: RESOURCE-BASED MODEL

 

 "Effective managers live in the present ‒ but concentrate on the future."

~ James L. Hayes

 

 

 

Resources and Capabilities Defined

Resources are inputs into a firm's production process; can be classified into three categories:

1. Physical capital

2. Human capital

3. Organizational capital

A capability is a capacity for a set of resources to integratively perform a Stretch task of an activity

 

 

  

 

10 Rules for Building a Great Business

❸ Build and synergize corporate capabilities that will help your business achieve its vision... More

Build Your Sustainable Competitive Advantage

Sustainable Competitive Advantage Download PowerPoint presentation, pdf e-book is the prolonged benefit of implementing some unique value-creating strategy based on unique combination of organizational resources, core competencies and capabilities that cannot be replicated by competitors... More

SWOT Analysis: Questions To Answer

What is your strongest business asset?

What unique resources do you have?... More

New Paradigm: Resource-based View of Firms

The resource-based theory and resource-based view (RVB) of firms and Corporate Strategy Download PowerPoint presentation, pdf e-book is based on the concept of economic rent and the view of the company as a collection of both distinctive and reproducible capabilities. This systemic view of corporate strategy has a coherence and integrative role that places it well ahead of many other mechanisms of strategic decision making.

Traditional strategy models such as Michael Porter's five forces model focus on the company's external competitive environment. Most of them do not attempt to look inside the company. In contrast, the resource-based perspective highlights the need for a fit between the external market context in which a company operates and its internal capabilities.

In contrast to the Input / Output Model (I/O model), the resource-based view is grounded in the perspective that a firm's internal environment, in terms of its resources and capabilities, is more critical to the determination of strategic action than is the external environment.

10 Rules for Building a High-growth Business

"Instead of focusing on the accumulation of resources necessary to implement the strategy dictated by conditions and constraints in the external environment (I/O model), the resource-based view suggests that a firm's unique resources and capabilities provide the basis for a strategy.

The business strategy chosen should allow the firm to best exploit its core competencies relative to opportunities in the external environment," write M.A. Hint, R.D. Ireland, and R.E. Hoskisson in Strategic Management ‒ Competitiveness and Globalization >>>

Smart Business Architect Download PowerPoint presentation, pdf e-book

Creating Economic Rent

The resource based view of strategy emphasizes economic rent creation through distinctive capabilities.

Economic rent, or Economic Value Added (EVA), is what companies earn over and above the cost  of the capital employed in their business. It is the measure of the competitive advantage, and Sustainable Competitive Advantage Download PowerPoint presentation, pdf e-book is the only means by which companies in competitive markets can earn economic rent. The objective of a company is to increase its economic rent, rather than its profit as such.  "A company which increases its profits but not its economic rent ‒ as through investments or acquisitions which yield less than the cost of capital ‒ destroys value Download PowerPoint presentation, pdf e-book." writes C. C. Markides in A Dynamic View of Strategy.

The perspective of economic rent forces the question 'why can't competitors do that?' into discussion.  >>>

Resources and Capabilities

Each organization is a collection of unique resources and capabilities that provides the basis for its strategy and the primary source of its returns. In the 21st-century hyper-competitive landscape, a firm is a collection of evolving capabilities that is managed dynamically in pursuit of above-average returns. Thus, differences in firm's performances across time are driven primarily by their unique resources and capabilities rather than by an industry's structural characteristics.

Resources are inputs into a firm's production process, such as capital, equipment, skills of individual employees, patents, finance, and talented managers Download PowerPoint presentation, pdf e-book. Resources are either tangible or intangible in nature. With increasing effectiveness, the set of resources available to the firm tends to become larger. Individual resources may not yield to a competitive advantage. It is through the synergistic Download PowerPoint presentation, pdf e-book combination and integration of sets of resources that competitive advantages are formed.

A capability is the capacity for a set of resources to integratively perform a stretch task or an activity. Through continued use, capabilities become stronger and more difficult for competitors to understand and imitate. As a source of competitive advantage, a capability should be neither too simple that it is highly imitable, nor too complex that it defies internal steering and management.