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Strategic Management
Notes 3. Distinctive competence is an activity that a company performs better than its rivals.
4. Distinctive competencies become the basis for competitive advantage.
Figure 6.3: Creation of Competitive Advantage
Competitive Advantage
Distinctive competencies
Core competencies
Competencies
Strengths and weaknesses
Tangible and intangible Organizational capabilities
resources
Barney, in his VRIO framework of analysis, suggests four questions to evaluate a firm’s key
resources.
1. Value: Does it provide competitive advantage?
2. Rareness: Do other competitors possess it?
3. Imitability: Is it costly for others to imitate?
4. Organisation: Is the firm organised to exploit the resource?
If the answer to these questions is “yes” for a particular resource, that resource is considered a
strength and a distinctive competence.
Using Resources to Gain Competitive Advantage: 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.
3. Appraise the profit potential of these resources and capabilities.
4. Select the strategy that best exploits the firm’s resources and capabilities relative to external
opportunities.
5. Identify resource gaps and invest in overcoming weaknesses.
6.3.2 Strategic Importance of Resources
Johnson and Sholes (2002 ) explain the strategic importance of resources with the concept of
‘strategic capability’. According to them, strategic capability is the ability of an organisation to
put its resources and capabilities to the best advantage so as to enable it to gain competitive
advantage. There are three type of resources:
Available Resources
Strategic capability depends on the resources available to an organisation because it is the
resources used in the activities of the organisation that create competences. As already explained
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