Strategic management concepts, RBV theory of the firm (2017)



Resource Based Theory of the Firm - Strategic Management Concepts Resources are a firm’s productive assetsTo value a firm’s tangible resources, one needs to understand their potential for creating competitive advantageThe culture of an organization is a key intangible resource'Reputation' in the context of an organization's resources can provide competitive advantage because It is difficult to copyCapabilities are what a firm can doThreshold capabilities enable a firm to do what every firm in its industry must do. Distinctive or core competences Enable it to earn higher profits or greater market share than its competitors in the same industryA value chain and functional classifications are often used to map out a firm’s main activities into threshold and distinctive capabilities. A capability requires individuals to coordinate with each other, and some capital or technology, to achieve a valuable transformation to goods or services. Organizational routines are a critical element of organizational capabilities.Tight complex organizational routines are hard for rivals to replicateCompetitive advantage is firm’s ability to earn a persistently higher profit rate than its rivalsA firm with a competitive advantage, but not manifest higher profitability, but may be experiencing a rising market share and strong and rising customer loyalty. This is often the case in growth industries and attributed to good executive perks, or both, or Investing in new technologies its rivals do not haveTo establish a competitive advantage, the resource or capability needs to be scarce and relevant to the key success factors (KSF’s) in the market. KSF’s are identified within an industry context of market segments or product lines (which are identified in the business model-see U1a1). To stop rivals acquiring a core resource or capability, firms must make that resource or capability immobile.3 characteristics of resources and capabilities determine the sustainability of the competitive advantage: they offer durability, transferability and replicability.Cost & differentiation are sources of competitive advantage to achieve a higher rate of profit over rivals.Firms can achieve competitive advantage by supplying a product at lower cost than competitors or by effectively differentiating their product so that the customer is willing to pay a higher price. Cost leadership means a firm must exploit all sources of cost advantage in providing customers with a standardized product.Seven principal cost drivers can be analyzed relative to competitors and cast into the value chain to diagnose inefficiencies (strategic issues) and make recommendations for improvement. The central task of a differentiation strategy is to yield a price premium for the firm; to add valuable new features to your product so long as the extra value to customers exceeds the extra cost to the firm of supplying it. Analyzing differentiation requires looking at both the firm (the supply side) and its customer (supply side); the firm needs to discern from all of its customers’ how interactions with its products could be enhanced even more. Innovation is the integration of customers desires, technological feasibility, and economic viability (Tim Brown, Change by Design, 2009). Strategic innovation is a source of competitive advantage, created internally, that involves creating value for customers from new products, experiences, or modes of delivery. Strategic innovations are generated internally via the resources and capabilities of the firm and undermines the competitive advantage of other firms. Strategic innovation is most often found in modifications to the value chain. Strategic innovation” involves pioneering in at least one of the three dimensions of strategy: new industry, new customer segment, or new source of competitive advantage. Porter’s FOCUS strategy is a combination of cost and differentiation with a firm’s choice of which customer requirements to focus on – industry wide or single market segment. In many industries the market leaders manage to reconcile low costs with some effective differentiation, typically referred to as a hybrid. The most successful firms are often those who manage a balance of differentiation in a cost effective manner. Both organizational design and management systems are topics addressed in MBA pre-requisite courses for Organizaitonal Strategy, MBA 6024. Below is a primer for anizational Structure Primer The fundamental problem with organization is reconciling specialization with coordination and cooperation. To address this problem, hierarchies of organizational units by tasks, products, geography, and process have dominated the principals of design. The summary below identifies trends that could substantiate the validity of strategic issues and initiate insights for strategic recommendations for organizational designs in support of resources and capabilities. There is limited evidence of a revolution in organizaiotnal design – the basic features of organizations (hierarchy, financial control mechanisms, strategic planning( are still persent.Several trends of the past 20 years includeDelayering – hierarchies becoming flatterAdhocracy and teamed based organizaiton – emphasis on shared value, participatioin, flexible roles and communication, lack of authorityProject based organizaitons – dynamic structures with innovative communicaiton stuctures; lack of authorityNetwork structurs – organization or groups of organizaitons where coordination is based upon informal social links.Management Systems PrimerThe relationship between management systems and oganizational structure could be viewed as analagous to the skeleton and bodily systems of a human body. Management systems provide the mechanisms for communication, decision making, and control that solve organzational problems of coordination and cooperation. Grant (2015) posits four management systems that are of primary importance: information systems, strategic planning systems, financial systems, and human resources management systems. From the perspective of managemet systems and organizational structures in the support resources and capabilties that implement business strategy, I would argue managmeent information and financial systems are the most important. ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download