Corporate Policy & Strategy: Dr. Nguyễn Gia Ninh

Corporate Policy & Strategy
Dr. Nguyễn Gia Ninh

CHAPTER 4:
Evaluating a
Company’s
Resources,
Capabilities, and
Competitiveness
CHAPTER 4 OBJECTIVES
LO 1 How to take stock of how well a company’s strategy is

working.
LO 2 Why a company’s resources and capabilities are centrally
important in giving the company a competitive edge over rivals.
LO 3 How to assess the company’s strengths and weaknesses in
light of market opportunities and external threats.
LO 4 How a company’s value chain activities can affect the
company’s cost structure and customer value proposition.
LO 5 How a comprehensive evaluation of a company’s
competitive situation can assist managers in making critical
decisions about their next strategic moves.
QUESTION 1: HOW WELL IS THE COMPANY’S PRESENT STRATEGY
WORKING?
QUESTION 1: HOW WELL IS THE COMPANY’S PRESENT STRATEGY
WORKING?
Specific indicators of how well a company’s strategy is

working include:
• Trends in the company’s sales and earnings growth.
• Trends in the company’s stock price.
• The company’s overall financial strength.
• The company’s customer retention rate.
• The rate at which new customers are acquired.
• Evidence of improvement in internal processes such as
defect rate, order fulfillment, delivery times, days of
inventory, and employee productivity.
QUESTION 2: WHAT ARE THE COMPANY’S MOST IMPORTANT
RESOURCES AND CAPABILITIES, AND WILL THEY GIVE THE COMPANY
A LASTING COMPETITIVE ADVANTAGE OVER RIVAL COMPANIES?
A company’s resources
and capabilities represent
its competitive assets
and are determinants of
its competitiveness and
ability to succeed in the
marketplace
Identifying the Company’s Resources and Capabilities
A resource is a competitive
asset that is owned or
controlled by a company;
A capability or competence
is the capacity of a firm
to perform some internal
activity competently.
Capabilities are developed
and enabled through the
deployment of a company’s
resources
Identifying the Company’s Resources and Capabilities
Identifying Capabilities
Capabilities are harder to categorize than resources and more

challenging to search for as a result.
 The first method takes the completed listing of a firm’s

resources as its starting point.
For example, a fleet of trucks, the latest RFID tracking technology,
and a set of large automated distribution centers => sophisticated
capabilities in logistics and distribution.
Identifying Capabilities – cont.
 The second method of identifying a firm’s capabilities takes a

functional approach.
Many capabilities relate to fairly specific functions; these draw
on a limited set of resources and typically involve a single
department or organizational unit
Example, capabilities in basic research, strategic innovation, or

new product development link to a company’s R&D function
 A resource bundle is
a linked and closely
integrated set of
competitive assets centered
around one or more cross-
functional capabilities.
 An example is Nike’s cross-

functional design
process, spanning R&D
activities, marketing research
efforts, styling expertise, and
manufacturing
Assessing the Competitive Power of a Company’s

Resources and Capabilities
 The Four Tests of a Resource’s Competitive Power
The VRIN tests for

sustainable competitive
advantage ask whether
a resource is Valuable,
Rare, Inimitable, and
Nonsubstitutable.

 The Four Tests of a Resource’s Competitive Power
Very few firms have resources and capabilities that can pass all
four tests, but those that do enjoy a sustainable competitive
advantage with far greater profit potential.
Walmart is a notable example, with capabilities in logistics and

supply chain management that have surpassed those of its
competitors for over 40 years

 A Company’s Resources and Capabilities Must Be Managed
Dynamically
Organizational resources and capabilities that grow stale can

impair competitiveness unless they are refreshed, modified,
or even phased out and replaced in response to ongoing
market changes and shifts in company strategy.

 The Role of Dynamic Capabilities
A dynamic capability is the ability to modify, deepen, or
augment the company’s existing resources and capabilities.
 This includes the capacity to improve existing resources and

capabilities incrementally, in the way that Toyota aggressively
upgrades the company’s capabilities in fuel-efficient hybrid
engine technology and constantly fine-tunes its famed Toyota
production system.

 The Role of Dynamic Capabilities
 A dynamic capability also includes the capacity to

add new resources and capabilities to the company’s
competitive asset portfolio.
 An example is Pfizer’s acquisition capabilities, which have
enabled it to replace degraded resources such as expiring
patents with newly acquired capabilities in biotechnology
QUESTION 3: WHAT ARE THE COMPANY’S STRENGTHS
AND WEAKNESSES IN RELATION TO THE MARKET
OPPORTUNITIES AND EXTERNAL THREATS?
SWOT analysis is a simple

but powerful tool for sizing
up a company’s strengths
and weaknesses, its market
opportunities, and the
external threats to its future
well-being
Identifying a Company’s Internal Strengths
 Basing a company’s strategy

on its most competitively
valuable strengths gives the
company its best chance for
market success

 A strength is something a company is good at doing or an
attribute that enhances its competitiveness in the
marketplace
 3M Corporation has a core

competence in product
innovation—its record of
introducing new
products goes back several
decades and new product
introduction is central to
3M’s strategy of growing its
business
 For instance, Walt Disney has

a distinctive competence in
feature film animation.
Identifying Company Weaknesses and
Competitive Deficiencies
 A weakness, or competitive
deficiency, is something a
company lacks or does
poorly (in comparison to
others) or a condition that
puts it at a disadvantage in
the marketplace.
Identifying Company Weaknesses and
Competitive Deficiencies
 A company’s internal weaknesses can

relate to
 (1) inferior or unproven skills, expertise,
or intellectual capital in competitively
important areas of the business;
 (2) deficiencies in competitively important
physical, organizational, or intangible
assets; or
 (3) missing or competitively inferior
capabilities in key areas.
Identifying a Company’s Market Opportunities
 Market opportunity is a big factor in shaping a company’s

strategy.
 The market opportunities most relevant to a company are

those that match up well with the company’s competitive
assets, offer the best prospects for growth and profitability,
and present the most potential for competitive advantage.
Identifying the Threats to a Company’s Future
Profitability
 Threats can stem from such factors as the emergence

of cheaper or better technologies, the entry of lower-cost
foreign competitors into a company’s market stronghold,
etc.
Identifying the Threats to a Company’s Future
Profitability
 Threats can stem from such factors as the emergence

of cheaper or better technologies, the entry of lower-cost
foreign competitors into a company’s market stronghold,
etc.
QUESTION 4: HOW DO A COMPANY’S VALUE
CHAIN ACTIVITIES IMPACT ITS COST STRUCTURE
AND CUSTOMER VALUE PROPOSITION?
QUESTION 4: HOW DO A COMPANY’S VALUE
CHAIN ACTIVITIES IMPACT ITS COST STRUCTURE
AND CUSTOMER VALUE PROPOSITION?
Comparing the Value Chains of Rival Companies
 Value chain analysis facilitates a comparison of how rivals, activity by

activity, deliver value to customers.
 How each activity is performed may affect a company’s relative cost

position as well as its capacity for differentiation.
 Thus, even a simple comparison of how the activities of rivals’ value chains
differ can reveal competitive differences.
QUESTION 5: IS THE COMPANY COMPETITIVELY
STRONGER OR WEAKER THAN KEY RIVALS?
QUESTION 6: WHAT STRATEGIC ISSUES AND PROBLEMS
MERIT FRONT-BURNER MANAGERIAL ATTENTION?
The “worry list” of issues and problems that have to be wrestled with can
include such things as how to stave off market challenges from new foreign
competitors, how to combat the price discounting of rivals…
QUESTION 6: WHAT STRATEGIC ISSUES AND PROBLEMS
MERIT FRONT-BURNER MANAGERIAL ATTENTION?
 If the items on the worry list are relatively minor—which suggests that the
company’s strategy is mostly on track and reasonably well matched to the
company’s overall situation—company managers seldom need to go much
beyond fine-tuning the present strategy.
 If, however, the problems confronting the company are

serious and indicate the present strategy is not well suited for the road
ahead, the task of crafting a better strategy needs to be at the top of
management’s action agenda
END OF CHAPTER 4
References
Thompson, A. A., Strickland III, A. J. and Gamble,
J. E. (2010). Crafting & Executing Strategy: The
Quest for Competitive Advantage, Concepts and
Cases (17th ed.). NY: McGraw-Hill Irwin.

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Corporate Policy & Strategy

Dr. Nguyễn Gia Ninh

LO 1 How to take stock of how well a company’s strategy is

Specific indicators of how well a company’s strategy is

Identifying the Company’s Resources and Capabilities

Capabilities are harder to categorize than resources and more

 The first method takes the completed listing of a firm’s

Identifying Capabilities – cont.

 The second method of identifying a firm’s capabilities takes a

Example, capabilities in basic research, strategic innovation, or

Identifying Capabilities – cont.

Identifying Capabilities – cont.

 An example is Nike’s cross-

Assessing the Competitive Power of a Company’s

The VRIN tests for

Assessing the Competitive Power of a Company’s

Walmart is a notable example, with capabilities in logistics and

Assessing the Competitive Power of a Company’s

Organizational resources and capabilities that grow stale can

Assessing the Competitive Power of a Company’s

 This includes the capacity to improve existing resources and

Assessing the Competitive Power of a Company’s

 A dynamic capability also includes the capacity to

SWOT analysis is a simple

Identifying a Company’s Internal Strengths

 Basing a company’s strategy

Identifying a Company’s Internal Strengths

 3M Corporation has a core

 For instance, Walt Disney has

 A company’s internal weaknesses can

 Market opportunity is a big factor in shaping a company’s

 The market opportunities most relevant to a company are

 Threats can stem from such factors as the emergence

 Threats can stem from such factors as the emergence

Comparing the Value Chains of Rival Companies

 Value chain analysis facilitates a comparison of how rivals, activity by

 How each activity is performed may affect a company’s relative cost

 If, however, the problems confronting the company are

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