j berney

1. Firm Resources
and
Sustained Competitive Advantage
 Written By Jay Barney
 Journal of Management
 Vol. 17, No.1, 1991

2. Overview
 Distinction between ‘environmental’ model of
competitive advantage and ‘Resource-based’
model
 Framework used to structure understanding of
Sustained Competitive Advantage – 1960’s

3. Overview
 Framework – SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Resource-
based Model
Environmental
Model
Internal
Analysis
External
Analysis

4. Environmental Model
 Little emphasis on impact of idiosyncratic
attributes on a firm’s competitive position
 Two simplifying assumptions:
 No difference between the strategically relevant
resources of each firm and the strategies they
pursue
 Where different resources develop, these will
quickly become available to all
 Resources are homogeneous and mobile

5. Resource-based Model
 Differences do exist between the strategically
relevant resources of each firm and the
strategies they pursue
 These resources are not mobile and so
differentiation can be long-lasting
 Resources can be heterogeneous and
immobile

6. Defining Resources
 Resources – all assets, capabilities, knowledge
and experience controlled by a firm
 Physical Capital Resources – e.g. technology,
location, equipment
 Human Capital Resources – experience, skills
 Organisational Capital Resources - Culture, formal
reporting structures, control systems, coordinating
systems, informal relationships

7. Next is competitive advantage.
 A competitive advantage is simply an advantage
you have over your competitors.
 A competency will produce competitive advantage
provided:
A) it produces value for the organization, and
B) it does this in a way that cannot easily be
pursued by competitors.

8. Competencies vs. Core Competencies vs.
Distinctive Competencies
 A competency is an internal capability that a
company performs better than other internal
capabilities.
 A core competency is a well-performed internal
capability that is central, not peripheral, to a
company’s strategy, competitiveness, and
profitability.
 A distinctive competence is a competitively
valuable capability that a company performs
better than its rivals.

9. Competitive Advantage and Sustainable
Competitive Advantage
 CA - When a firm implements a value-creating
strategy not being simultaneously implemented
by competitors
 SCA – as above + competitors are unable to
duplicate

10. Building Sustainable Competitive
Advantage
 Resources must be heterogeneous and
immobile
 Also, must be
 Valuable
 Rare
 Imperfectly imitable
 No strategically equivalent substitutes

11. Sustainable Competitive Advantage
1. The Question of Value:
 Capabilities are valuable when they enable a firm to
conceive of or implement strategies that improve efficiency
and effectiveness.
 Value is dependent on type of strategy:
 Low cost strategy: lower costs (Timex)
 Differentiator: add enhancing features (Rolex)
 To be valuable, the capability must either
 Increase efficiency (outputs / inputs)
 Information system reduces customer service agents
required, or increases the number of calls the same
number of agents can answer
 Increase effectiveness (enable some new capability not
previously held)
 Opening a new regional campus enables outreach to a
new market of students

12. Sustainable Competitive Advantage
2. The Question of Rareness:
 Valuable resources or capabilities that are
shared by large numbers of firms in an
industry are therefore not rare, and cannot be
a source of SCA.
 Some researchers think only organizational
assets or resources are rare (such as culture).
What do you think?

13. Sustainable Competitive Advantage
3. The Question of Imitability
 Valuable, rare resources can only be sources of SCA if firms that
do not possess them cannot obtain them. They must be
“imperfectly imitable”, i.e. impossible to perfectly imitate them.
 Ways imitation can be avoided:
 Unique Historical Conditions (Caterpillar, e.g.)
 Causal Ambiguity (why resources create SCA is not
understood, even by the firm owning them)
 Imitating firms cannot duplicate the strategy since they do
not understand why it is successful in the first place.
 Social Complexity (trust, teamwork, informal relationships,
causal ambiguity where cause of effectiveness is uncertain)
 E.g. A competitor steals all the scientists in an R&D lab and
relocates them to a new facility. But, the “dynamics”,
“culture” and “atmosphere” are not the same.

14. Sustainable Competitive Advantage
4. The Question of Substitutability
 There must be no equivalent resources that can be exploited
to implement the same strategies.
 Forms of substitutability:
 Duplication: Although no two management teams are
the same, they can be strategically equivalent, produce
the same results.
 Substitution: Very different resources can be substitutes,
e.g.
 A charismatic leader with a clear vision vs. a strategic
planning dept.
 A superior marketing strategy for a recognized brand
name.
 A superior technical support group for an intelligent
diagnostic software package

15. Sustainable Competitive Advantage
5. The Question of Exploitation:
 Later research qualified this as another critieria
for SCA. Is a firm organized to exploit the full
competitive potential of its resources and
capabilities?
 Are systems in place to enable firms to support the
execution of a particular strategy?
 Xerox, e.g

16. Notes on “Sustainable”
 Sustainable is not measured in calendar
time.
 Sustainable does not mean the advantage
will last forever.
 Sustainable suggests the advantage lasts
long enough that competitors stop trying
to duplicate the strategy that makes the
advantage sustained.

17. Summary
 Firms cannot expect to simply ‘purchase’
Sustained Competitive Advantage
 Can only be found within the resources already
controlled by the firm
 Focus on Internal — describes firm’s internal
characteristics and performance
 Firms have idiosyncratic, not identical
strategic resources. Resources are not
perfectly mobile and therefore
heterogeneous.