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    Wal-Mart 2021

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    krishnav.mathuresh

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    Wal-Mart 2021

    Uploaded by

    krishnav.mathuresh
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    © All Rights Reserved
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    6 views23 pages

    Wal-Mart 2021

    Uploaded by

    krishnav.mathuresh

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    jmj

    The Resource Based View of the Firm


    The object of strategic analysis…

    • Explain why a firm or a group of firms is making above


    normal returns
    – i.e. More than their long run average costs
    • Two possible explanations
    – It’s something to do with the industry in which they
    operate
    External analysis - Porter 5 Forces
    – It’s something the firm owns or controls
    Internal analysis, the RBV
    Why some firms make more $ than
    others
    • If firms are identical and their products are
    commodities
    – Industry concentration
    – Up and down stream bargaining power
    – Threat of new entry or substitution
    • If products or firms are heterogeneous
    – Differences in:
    • Cost structure
    • Value created (innovation, brand)
    • Value appropriated (brand, switching costs)
    Two puzzles

    • Some industries with no apparent industry barriers


    to entry are concentrated and profitable
    • Empirical study - firm differences account for
    much more variation in performance than industry
    differences
    (Rumelt 1992)
    • In some fragmented industries some firms making
    substantial profits
    – e.g., Nucor in steel
    The Fundamental Question
    Why are some firms more successful than others?

    Industrial Organization Perspective:


    Profits = f (industry structure)
    Choose “good” industries, adapt your strategy to “fit”

    Resource-Based View:
    Profits = f (internal firm capabilities)
    Step 2

    Internal Analysis
    SWOT Analysis
    Firm resources

    Tangible resources Intangible resources


    • Land
    • Buildings
    • Materials
    • Money Relational resources Capabilities
    • Relationships • Knowledge
    `contracts’ (CI, mkt insight)
    • Reputation •Capabilities
    `brands’ NPD (R&D, Mkt Res)
    •Attitude
    • Resource: an observable - but not
    necessarily tangible - asset that can be
    valued and traded (e.g. brand, patent,
    land or license)
    • Capability: is intangible- can not be
    valued and can change hands only as
    part of its entire unit

    (Source: Makadok, 2001)


    RBV argues that…..
    the heterogeneous market positions
    of close competitors arise from
    each firm’s unique bundle of
    resources and capabilities

    (Source: Hoopes, Madesn and Walker, 2003)


    • RBV explains sustained competitive
    advantage in terms of heterogeneity in
    resources and capabilities
    • Scarce resources and capabilities that
    are critical for value creation can be
    imperfectly mobile and cannot be
    acquired in the open market

    (Source: Besanko, Dranove, Shanley and Schaefer, 2004)


    • Competitive advantage is sustainable if
    competitors can not duplicate/
    neutralize it. This happens when
    • Firms may differ with respect to
    resources & capabilities and the
    differences persist
    • Isolating mechanisms (analogous to
    barriers to entry) may work to
    protect the competitive advantage
    of firms
    (Source: Besanko, Dranove, Shanley and Schaefer, 2004)
    • Isolating mechanisms are to firms what entry barriers are to industries
    • Impediments to imitation
    • Legal restrictions
    • Superior access to inputs/customers
    • Market size and scale economies
    • Intangible barriers
    • Casual ambiguity
    • Historical circumstances
    • Social complexity
    • Early mover advantage
    • Reputation and buyer uncertainty
    • Switching costs
    • Network Effects

    (Source: Besanko, Dranove, Shanley and Schaefer, 2004)


    • Positioning analysis
    • Would the proposal provide competitive advantage?
    • Sustainability – Is the competitive advantage sustainable?
    • Imitation
    • Substitution
    • Hold-up
    • Slack
    • Flexibility – Is it possible to exit/ back-track on the
    commitment?
    • Judgment – Is the commitment credible? Does it fit with the
    firm’s distinctive competence?
    Sustainability of Competitive Advantage

    Imitation Substitution

    Added Value

    Appropriated
    Value

    Slack Holdup

    (Source: Ghemawat, 2006)


    Is the resource or Implications
    capability…
    • Neutralize threats and
    Valuable exploit opportunities

    Rare • Not many firms possess

    Difficult to imitate • Physically unique


    • Path dependency
    • Causal ambiguity
    • Social complexity
    Difficult to substitute • No equivalent strategic
    resources or capabilities
    (Source: Dess, Lumpkin & Eisner, 2004)
    Is a Resource…

    Difficult Without Implications


    Valuable Rare to Substitutes for Competitiveness
    Imitate
    No No No No Competitive disadvantage
    Yes No No No Competitive parity
    Yes Yes No No Temporary competitive
    advantage
    Yes Yes Yes Yes Sustainable competitive
    advantage

    Source: Adapted from Barney 1991. Firm Resources a Sustained Competitive Advantage. Journal of Management, 17:99-120.
    Gregory G. Dess and G. T. Lumpkin
    Competence

    Distinctive
    competence Knowledge
    Tangible
    Resources
    Resources
    Core or Capabilities
    Competence
    Fruin’s ‘bow tie’ model of core
    competency
    Core (distinctive) Products
    competency
    e.g. Honda
    Small internal
    combustion engine
    Motorcycles
    Cars
    Lawn mowers
    Outboard motors
    ATVs
    Generators
    “V.R.I.”

    • Valuable
    – To customers
    • Which means we may be able to raise prices above those of our less
    valued competitors.
    – To us
    • Which means we may be able to maintain lower costs than our
    competitors
    • Their costs are a floor below which prices will not fall, leaving us with a
    profit even when they have none.
    • Rare
    – If customers have no alternative they will have to pay more than it
    costs us to make the product or deliver the service
    – We can appropriate some of the value we create
    • Inimitable
    – ensures rarity into the future
    WalMart Inc.
    Distribution centers
    Walmart discount operations, HBS case, 1987
    • The second worst thing a
    manufacturer can do is to sign a
    contract with Wal-Mart. The worst?
    Not sign one.

    Anonymous consultant

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