Analysis of Firms Internal CapabilitiesPROF. SABYASACHI SINHA

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Resources and Capabilities

Resources (tangible / intangible) are assets in control of the firm which can be used for thinking and/or implementing its strategies

Capability is a sub-set of resources which enable a firm to take advantage of the other resources

Resource and Capabilities can be classified into 4 broad categories Financial Physical resource Human resource Organizational resource

2/12/2014Prof. S. Sinha, Indian Institute of Management - Lucknow

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Resources and Capabilities

Assumptions of RBV Resource heterogeneity

Resource immobility

2/12/2014Prof. S. Sinha, Indian Institute of Management - Lucknow

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VRIN/ VRIO Framework

Value? Do they enable the firm to exploit the external opportunity or neutralize the threat

( do they help in increasing rev. or reducing costs or both)

Rare? Is it possessed by few firms / many firms

Costs of imitating? - directly or substitutes Unique historical conditions; causal ambiguity; social complexity; patents

Is the organization ready to exploit VRI resource/capabilities structure/culture/mindset etc.

2/12/2014Prof. S. Sinha, Indian Institute of Management - Lucknow

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Routines and capabilities

Routines ways of doing things (order, repetition, interdependencies, patterns) build capabilities

Routines / capabilities - observable/ un-observable (habits/thoughts)

Dynamic Capabilities the ability to create, re-configure, integrate, and shed the resource base to adjust with the dynamic environment

2/12/2014Prof. S. Sinha, Indian Institute of Management - Lucknow

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VRIN/ VRIO Framework

Is the resource or capabilityValuable? Rare? Costly to

imitate?Exploited by the

organization?Strengths/Weakness

CompetitiveImplication

Performance Implication

No No No No Weakness Competitive Disadvantage

Below avg. returns

Yes Yes No No Strength Competitive Parity

Avg. returns

Yes Yes Yes No Strength + Distinctive

Competence

Temp Comp. Advantage

Avg. returns to Above Avg. returns

Yes Yes Yes Yes Strength + Sustainable

Competence

SustainableCompetitive Advantage

Above Avg. Returns

2/12/2014Prof. S. Sinha, Indian Institute of Management - Lucknow

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Mckinseys Generic Value Chain

2/12/2014Prof. S. Sinha, Indian Institute of Management - Lucknow

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Porters Generic Value Chain

2/12/2014Prof. S. Sinha, Indian Institute of Management - Lucknow

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Resources and Capabilities

Is any/many of these becoming a core rigidity Need for un-learning and new learning

Role of dynamic capabilities

2/12/2014Prof. S. Sinha, Indian Institute of Management - Lucknow

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