Capability and Resource

Analysis
Categories of Potential Sources
of Competitive Advantage
Tangible Assets
Physical factors, e.g. plant, equipment, land, money
Intangible Assets
Non physical factors, e.g. goodwill, brand, copyright
Organizational Capabilities
Process that transform tangible and intangible assets into
goods and services
Core Competencies
Individual human skill, collective organizational capacity,
and learning that allow firms to act on critical processes
and activities to transform its tangible and intangible
assets into competitive superior customer value


Type of Economic Rent
Ricardian Rent
Returns from owning Scare and valuable resources
Monopoly Rent
Returns from legal collusive mechanisms, or market
power (patent, entry barriers)
Entrepreneurial Rent
Returns from risk and innovation
Quasi Rent
Returns from firm specific heterogeneous resources, e.g.
works as an multiplier of other types of rent and have a
set of characteristics that make them valuable
Market Test for Quasi Rent
Generation (I)
Competitive Superiority
- Customer value - product needs to meet customer
needs, tastes, preferences and price

- Relative competitive comparison - What activities
do we do better than competitors?

- Often each resource may not be individual competitive
but a combination of them might achieve competitive
superiority




Market Test for Quasi Rent
Generation (II)
Inimitability
- Physical Uniqueness patents, prime facility location

- Path Dependency build over a period of time, in a
unique way that cannot be easy replicated, e.g. Coca
Cola

- Causal Ambiguity combination of resources create
difficulties for competitors understanding what is
involved, how it works etc, e.g. 3M
- Economic Scale Deterrence pre-emptive capacity
expansion, new market entry e.g. memory chips,
electricity generation
Market Test for Quasi Rent
Generation (III)
Durability
Speed at which the resource depreciate, due to
innovation and hyper-competition, e.g. IBM PC,
Microsoft
Appropriability
If the competitive resource is immobile or not how
closely is the resource linked to the firm e.g. consultants,
process technology
Substitutability
The availability of alternative resources, e.g. the use of
aluminum cans instead of glass bottles
Critical Success Factors
Critical success factor (CSF) is the term
for a capability / skill / resource that is
necessary for an organization to be
successful in its chosen environment. It is
critical factors or activities required for
ensuring the success of a company or an
organization
Applying the Analysis
1. Determine the firms critical success
factors (CSF)
2. Identify the firms resources
3. Evaluate the firms resources
4. Identify gaps between the firms
resources and CSF
5. Diagnose current strategy
6. Formulate rational future strategies