Chapter 4: Internal Analysis: Resources, also must organize (O) to capture the value of

Capabilities, and Core Competencies the resources.

Core competencies —Unique strengths, Valuable resource - One of the four key criteria
embedded deep within a firm, that allow a firm in the VRIO framework. A resource is valuable if
to differentiate its products and services from it helps a firm increase the perceived value of its
those of its rivals, creating higher value for the product or service, either by adding attractive
customer or offering products value at lower features or lowering costs.
cost.
Rare resource - One of the four key criteria in the
Resources - Any assets that a firm can draw on VRIO framework. A resource is rare if the
when formulating and implementing a strategy. number of firms that possess it is less than the
number of firms it would require to reach a state
Capabilities - Organizational and managerial
of perfect competition.
skills necessary to orchestrate a diverse set of
resources and deploy them strategically. Costly-to-imitate resource - One of the four key
criteria in the VRIO framework. A resource is
Activities - Distinct and fine-grained business
costly to imitate if firms that do not possess the
processes that enable firms to add incremental
resource are unable to develop or buy the
value by transforming input into goods and
resource at a comparable cost.
services.
Organized to capture value - One of the four key
Resource-based view - A model that sees certain
criteria in the VRIO framework. The
types of resources as key to superior firm
characteristic of having in place an effective
performance. If a resource exhibits VRIO
organizational structure, processes, and systems
attributes, the resource enables the firm to gain
to fully exploit the competitive potential of the
and sustain a competitive advantage.
firm’s resources, capabilities, and competencies.
Tangible resources. Resources that have
Isolating mechanisms- Barriers to imitation that
physical attributes and thus are visible.
prevent rivals from competing away the
Intangible resources - Resources that do not advantage a firm may enjoy.
have physical attributes and thus are invisible.
Path dependence - A situation in which the
Resource heterogeneity - Assumption in the options one faces in the current situation are
resource-based view that a firm is a bundle of limited by decisions made in the past.
resources and capabilities that differ across
Causal ambiguity - A situation in which the cause
firms.
and effect of a phenomenon are not readily
Resource immobility - Assumption in the apparent.
resource-based view that a firm has resources
Social complexity - A situation in which different
that tend to be “sticky” and that do not move
social and business systems interact with one
easily from firm to firm.
another.
VRIO framework - A theoretical framework that
Dynamic capabilities - A firm’s ability to create,
explains and predicts firm-level competitive
deploy, modify, reconfigure, upgrade, or
advantage. A firm can gain a competitive
leverage its resources in its quest for competitive
advantage if it has resources that are valuable
advantage.
(V), rare (R), and costly to imitate (I). The firm
Dynamic capabilities perspective - A model that
emphasizes a firm’s ability to modify and
leverage its resource base in a way that enables
it to gain and sustain competitive advantage in a
constantly changing environment.

Resource stocks - The firm’s current level of

intangible resources.

Resource flows - The firm’s level of investments

to maintain or build a resource.

Value chain - The internal activities a firm

engages in when transforming inputs into
outputs; each activity adds incremental value.
Primary activities directly add value; support
activities add value indirectly.

Primary activities - Firm activities that add value

directly by transforming inputs into outputs as
the firm moves a product or service horizontally
along the internal value chain.

Support activities. Firm activities that add value

indirectly, but are necessary to sustain primary
activities.

SWOT analysis - A framework that allows

managers to synthesize insights obtained from
an internal analysis of the company’s strengths
and weaknesses (S and W) with those from an
analysis of external opportunities and threats (O
and T).