The Resource-based view of Competitive Advantage

Paul C. GodfreyMark H. Hansen

Marriott School of ManagementBrigham Young University

What are resources?

• The building blocks of valuable activities

• Assets, attributes, capabilities, and skills

• A Balance Sheet Asset• Supports/ facilitates

differentiation• Skill in broadening and

preserving• $23.7 BB Brand Equity (2008)

• A Balance Sheet Asset• Supports/ facilitates

differentiation• Disney’s capability has

broadened reach, deepened value

• $7.5 BB Brand Equity (2007)

ESPN equity from Forbes “The worlds top sports brands, Sep 07Disney from Millward Brown Optimor Brandz 2008 Survey

What makes a resource?

• Value– Influences a firm’s demand curve (differentiation--Apple)

– Alters a firm’s supply (cost) curve (Wal*Mart)

• Rare– Few competitors have it (McDonalds locations)

• Difficult to imitate– Isolates supply advantages

– Competitors can’t copy (Coke’s int’l distribution)

• Difficult to substitute for – Preserves demand

– Customers can’t find equal value (United Airlines)

• Appropriability– Resource and profit ownership (NFL teams and players)

Barriers to imitation

• Historical advantages (Coke)

• Path dependent development (Boeing)

• Complex systems (Pharmaceuticals)

• Tacit knowledge (Apple)

• Property rights (Oil Exploration)

Barriers to substitution

• Unique product technical attributes (Oracle databases)

• Positive externalities (Microsoft Office)

• Creating a unique experience (Major League Sports)

• Best when built on inimitable inputs (Disneyland)

Finding resources in the value chain

InboundLogistics

Operations OutboundLogistics

Marketing& Sales

After-Sales Service

M

a

rg

i

n

Primary (Core) Activities

Support(Enabling)Activities

FirmInfrastructure

Human ResourceManagement

Technology Development

Procurement

Source: Michael Porter, Competitive Advantage, 1985

Culture of decentralization, trust (Nordstroms)

Quality systems (GE)Distribution (Wal*Mart) Brand equity (Apple)

Customer Service (American Express)

Reduce costs—JIT, improve quality, innovation (Toyota)

Clearly understand costs/markets (Amazon.com)

Increased productivity, loyalty, low turnover (Costco)

The resource-base of Me, Inc.

• Knowledge, skill, and personal capabilities are your greatest assets– They are portable– They can be enhanced by personal effort

• Knowledge and skill are highly depreciable– The cutting edge of knowledge is about 6 months

• You need to be a lifelong learner

Lifelong learning

• Learning comes in many forms– Cognitive—reading, courses– Experience—activities, projects– Revelation—study, prayer, meditation

• Read for business and for pleasure

• Employer sponsored education is a must

• Personal reflection and PAR’s—what have I learned lately