Handout Sheet 41

Seminar 5 Handout
Using the RBV and Competencies Perspective Analyse: CEMEX Part 1
(NB: This handout provides guidance on how to do an RBV analysis to aid you understanding
and application)

The CEMEX Part 1 case study lends itself well to analysis using both the basic RBV theory we
covered in study unit 5.

As always, we should start by thinking about what elements of the theory will help us in our analysis.
With the RBV theory we should think about a firm’s unique and immobile resources and how these
can deliver competitive advantage. So the focus must be on the resources the firm possesses –
whether owned or has access to. Be careful NOT to mix up resources with the activities in the firm –
the things it does – or we stray into the ‘strategy as choice’ perspective described in Study Units 3
and 4.

Competitive advantage is more likely to come from ‘competencies’ (bundles of resources) as they are
more likely to have a significant impact and are far more difficult to copy than single assets. Once
competencies are identified each needs to be tested using Barney’s VRIO test2. This shows if they
are core competencies i.e. are sources of competitive advantage. We should also think about the
guidance Barney (1995) gives on why resources might meet each of the 4 elements of this test in
particular what makes a resource difficult to copy.

The starting point for the analysis is to identify which competencies potentially give CEMEX
competitive advantage in Mexico. As we discussed in the lecture chunks there are two approaches to
identifying competencies. You could start by trying to map all the individual assets the firm has and
then try to group them together. While this can be done, if you want to ensure you discover the source
of a firm’s competitive advantage it is a difficult and time-consuming task.

A more effective approach is to start by asking, “why do customers (or other stakeholders) value this
company? Why do they choose them? In answering this question try to think from the customer’s
perspective and what they value. For example, I
recently broke down on the M25 motorway, and in
thinking about why I choose to go to RAC it was
because I trusted them to get to you quickly and sort
out the problem (or rescue you and your car), at any
time of day and night. It is not because they have
RAC vans or engineers – they need them – but it is
that broader need that determines my choice.

So why did customers go to CEMEX? Well in the

case first notice there are two groups of customers –
(a) individuals doing self-build projects and small
builders, and (b) large constructors/government who
buy in bulk. You need to think about what are the
most critical reason each group choose CEMEX. This
leads you to CEMEX’s strategic capability(s).

Once you are clear on why customers go to CEMEX, you should then ask, “what competencies did
CEMEX possess that enabled it to deliver that proposition?” Notice that you are already looking for
competencies that give CEMEX competitive advantage. At this stage you are brainstorming what the
likely competencies are, so try to identify a range of possibilities that don’t overlap.

1
Prepared for L3 Strategic Management Module Oct 2020 by Dr. David Webb
2
Barney’s earlier VRIN test could also be used if you prefer but do not use both

Dr. David Webb September 2020

If you get stuck, make use of the categories of
competencies (see lecture chunk slides) to prompt
your thinking in different areas. When you identify a
competency check if it is (a) really a bundle of
complementary resources (this helps us define
exactly what that competency is); (b) it is something that
CEMEX ‘possesses/owns’ (not ‘does’ – so is a
resource and not an activity); and (c) that it
contributes to current revenue. For example, R&D is an
activity and contributes to future revenues not current so
on both counts is not a competency. See the lecture
chunks for a list of other things that are frequently
mistaken for competencies – this is important as in the
exam this is something we look at in checking understanding. If you have identified different strategic
capabilities for the different customers served, then see if the second capability extends your thinking
– although remember according to Prahalad and Hamel, a feature of core competencies is that they
are used across multiple product/markets.

Often the process of identifying competencies is one of trial and error. Some of competencies you
identify will be too broadly defined, e.g. you may say the firm has a “technology competency” or
“cement technology” – but all firms have technology and several have cement technology, so what is
specific “technology” competency that you mean? For others you might have defined some
competencies too narrowly – possibly as a single asset – where it is unlikely to be significant and will
be easy to copy. Here you need to think about how that resource is part of a broader integrated
bundle – a competency. If you can’t reject that item and look elsewhere.

Once you have a reasonable number of competencies (we would suggest 3 or more as you will
discount some in the next stage) you are ready to move on to the VRIO test.

It is critical that the VRIO test is performed on each competency3. Step through each of the VRIO
elements in turn (valuable, rare, inimitable and organisation). Gather evidence from the case to show
if the competency meets that part of the test. For ‘inimitable’, make use of the factors that Barney
suggests make a resource difficult to copy, i.e. historic circumstances, social complexity and causal
ambiguity (Barney calls this ”numerous small decisions“ in the 1995 article). Note “expensive” is not a
valid reason that something is difficult to copy – remember that we are looking at the things that
create significant value and so you are likely to get the funding required unless there is another
reason blocking this i.e. Barney’s other reasons.

Where a competency is valuable and rare it is a potential source of temporary competitive

advantage. Where valuable, rare and inimitable it is a source of potential sustainable competitive
advantage. It is only if the firm is able to capture the value that the potential turns into realised
advantage (temporary or sustainable).

In the case it is clear that CEMEX has a cement manufacturing competency, so let’s quickly go
through the VRIO test on this resource. In terms of valuable, well clearly a large proportion of
CEMEX’s revenue comes from its ability to produce cement. However, the competency is not rare –
despite CEMEX’s efforts to consolidate the market, there are still both international and local rivals.
Consequently, this competency only provides parity and so we would move on and look at another
‘integration competency’ (e.g. bulk logistics) or perhaps ‘market-access competency’ (e.g.
Construrama) which in Mexico seem to be rare and so at least give temporary competitive advantage.

We then look at the inimitable test for each competency that is valuable and rare. Here we look for
evidence of historic circumstances, social complexity and causal ambiguity. Finally, we move to the
organisation element of the VRIO test. Clearly CEMEX had the organisation to realise the value from
its competencies (despite the impact of the 2008 crash and its problems with the Rinker acquisition.
3
If you have one resource that is valuable but not inimitable, another only rare and inimitable, then all a competitor has to do
to match your advantage is obtain the valuable competency. Being not inimitable this is easy to do.

Dr. David Webb September 2020

Here it is worth focusing on whether CEMEX gained the value and save consideration of how to a
discussion of dynamic capabilities (the subject of the next study unit).

It is important to stress that you MUST repeat this process of VRIO testing each of the competencies
you have identified. Many make the mistake of testing all competencies together and saying this one
is valuable, this rare and this one inimitable. However, if that is the case a competitor only needs to
pick off the one that is valuable to copy your advantage – easy to do if it is not inimitable or rare.

You now have a view on which competencies drove CEMEX’s sustainable competitive advantage (or
that they weren’t enough to sustain advantage4). You should pause and consider what the insights
you have gained on CEMEX tell you about the firm and its competitive advantage (i.e. moving up to
the “Analysis” level in Bloom’s Taxonomy).

Additional questions you may wish to consider are:

 How did CEMEX manage and develop its competencies over time?
 What are the limitations of your analysis of CEMEX?
 What are the issues with this basic form of the RBV theory?
 What other theory could be applied to analyse CEMEX?

Finally sum up with your recommendation/answer to the specific question you have been set – e.g.
what was the source of CEMEX’s competitive advantage in Mexico on which they built their success.

4
Don’t worry if none of your competencies pass the test – providing you have identified appropriate competencies and have
conducted the test correctly this is also a valuable insight

Dr. David Webb September 2020

Glossary

Resources: Things the firm owns/possesses or has access to. Be careful not to mix up with activities.
Resources include assets and competencies
Activities: Actions and things done inside the firm (this is the focus of Porter’s perspective on
Strategy)
Asset: An individual resource that can be tangible or intangible
Competency: A bundle of complementary assets that allow the firm to deliver to customers
Core competency: A competency that satisfies all elements of the VRIO test and so is a source of
competitive advantage over the firm’s existing or potential competitors
Complementary: Individual items working together so that combined they create more value than on
their own
KBV: Knowledge Based View – see lecture in study unit 4
Dynamic Capabilities: Consistent and repeatable routines by which a firm manages, deploys and
renews its competencies and other supporting resources
Immobile resources: Resources that cannot be obtained in an external market or easily
copied/developed by other firms
VRIO: The test to determine if a resource is a source of competitive advantage. See Study Unit 3.

词汇表
注：建议尽量不要把所以内容翻译成中文。对于英语水平较好的同学，请只查不认识的新的单词，其他内容都用
英文术语（resource-based view, knowledge-based view）记忆，有助于逻辑思维。对于英文相对薄弱的同
学，建议首先理解所以内容（可以对照中文翻译），然后以英语逻辑继续学习。以下翻译仅供参考。
Resources 资源：公司所有/控制或可以获得的事物。小心不要与活动（Activities）混淆。资源包括资产
assets 和 能力 competencies
Activities 活动：公司内部的活动和日常企业事宜（这是波特的理论中企业战略的重点）
Asset 资产：可以是有形的或无形的资源
Competency 企业能力：一系列互相补充的, 企业能够给客户提供的资产组合
Core Competency 核心竞争力：满足 VRIO 测试的所有要素的能力，是企业竞争优势来源（相对于目前和未
来的竞争对手）
Complementary 补充性：单个资源组合起来，能够创造出比各项自身更多的价值
KBV：知识基础观- 参见学习单元 4 中的讲座
Dynamic Capabilities 企业动态能力：企业管理，部署和更新其能力和其他支持资源的企业常规
Immobile resources 不动产资源：在外部市场无法获得的资源或其他公司不能轻易复制/开发的资源
VRIO：确定资源是否是竞争优势的来源的测试。见学习单位 3。

Dr. David Webb September 2020