USING RESOURCES TO GAIN COMPETITIVE

USING RESOURCES TO GAIN COMPETITIVE ADVANTAGE
Proposing that a company’s sustained competitive advantage is primarily determined by its re-
source endowments, Grant proposes a five-step, resource-based approach to strategy analysis.
1. Identify and classify the firm’s resources in terms of strengths and weaknesses.
2. Combine the firm’s strengths into specific capabilities and core competencies.
3. Appraise the profit potential of these capabilities and competencies in terms of their po-
tential for sustainable competitive advantage and the ability to harvest the profits result-
ing from their use. Are there any distinctive competencies?
4. Select the strategy that best exploits the firm’s capabilities and competencies relative to
external opportunities.
5. Identify resource gaps and invest in upgrading weaknesses. 10
Where do these competencies come from? Acorporation can gain access to a distinctive com-
petency in four ways:
! It may be an asset endowment, such as a key patent, coming from the founding of the com-
pany. For example, Xerox grew on the basis of its original copying patent.
! It may be acquired from someone else. For example, Whirlpool bought a worldwide dis-
tribution system when it purchased Philips’s appliance division.
! Itmaybesharedwithanotherbusinessunitoralliancepartner.Forexample,AppleComputer
worked with a design firm to create the special appeal of its personal computers and iPods.
! It may be carefully built and accumulated over time within the company. For example,
Honda carefully extended its expertise in small motor manufacturing from motorcycles to
autos and lawnmowers. 11
There is some evidence that the best corporations prefer organic internal growth over acquisi-
tions. One study of large global companies identified firms that outperformed their peers on