Student Essay

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Summary of Competing on Resources: Strategy in the 1990s by David J. Collins and Cynthia A. Montgomery This article looks at corporations’ strategic advantages based on their resources. These resources can be classified into: • Core competencies and capabilities, including intangibles such as brand name or know-how and physical resources such as ownership of necessary hardware or manufacturing capability. • Organizational capabilities that are embedded in a company’s routines, processes and culture. An example of this is the Japanese automobile companies. The article goes on to show that resources can not be evaluated in isolation because their value is determined by an interplay with market forces. A resource that is valuable in a particular industry or at a particular time might not have the same value in a different industry or time period. The article identifies qualifications for resources as a basis for an effective strategy. The following are market tests of a resources value: 1. The test of imitation: Is the resource hard to copy? 2. The test of durability: How quickly does this resource depreciate? 3. The test of appropriability: Who captures the value that the resource creates? 4. The test of substitutability: Can a unique resource be trumped by a different resource? 5. The test of competitive superiority: Whose resource is really better? The article goes on in explaining the strategic implications of the results of these tests and what should be done: • Managers should build their strategies on the resources that meet the five tests above. • Because resources depreciate continuous investment is required. • Companies must upgrade their resources. • Managers must leverage their resources. Other general take away messages: • Looking at the resources gives the firm a clear strategy and identifies their competitive

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