Resources Capabilities

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5
Analyzing Resources and Capabilities

Analysts have tended to define assets too narrowly, identifying only those that can be measured, such as plant and equipment. Yet the intangible assets, such as a particular technology, accumulated consumer information, brand name, reputation, and corporate culture, are invaluable to the firm’s competitive power. In fact, these invisible assets are often the only real source of competitive edge that can be sustained over time.
—HIROYUKI ITAMI, MOBILIZING INVISIBLE ASSETS

You’ve gotta do what you do well.
—LUCINO NOTO, FORMER VICE CHAIRMAN, EXXON MOBIL

OUTLINE l Introduction and Objectives l The Role of Resources and l Organizational Capabilities Classifying
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Let us consider each of these factors.

Basing Strategy on Resources and Capabilities
During the 1990s, ideas concerning the role of resources and capabilities as the principal basis for firm strategy and the primary source of profitability coalesced into what has become known as the resource-based view of the firm.1 To understand why the resource-based view has had a major impact on strategy thinking, let us go back to the starting point for strategy formulation: typically some statement of the firm’s identity and purpose (often expressed in a mission statement). Conventionally, firms have answered the question “what is our business?” in terms of the market they serve: “who are our customers?” and “which of their needs are we seeking to serve?” However, in a world where customer preferences are volatile and the identity of customers and the technologies for serving them are changing, a market-focused strategy may not provide the stability and constancy of direction needed to guide strategy over the long term.2 When the external environment is in a

FIGURE 5.1 Analyzing resources and capabilities: the interface between strategy and the firm
THE FIRM l Goals and Values l Resources and Capabilities l Structure and Systems

THE INDUSTRY ENVIRONMENT STRATEGY l l

Competitors Customers l Suppliers

The Firm–Strategy Interface

The Environment–Strategy Interface

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PART II

THE TOOLS OF STRATEGY
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