Discussion: Resource Imitation & Substitution

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Discussion: Resource Imitation & Substitution

Discussion: Resource Imitation & Substitution

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Resources to Attain Competitive Advantage Valuable and rare resources that firms must leverage to establish a superior resource position help companies attain competitive advantage. A resource is considered valuable when it enables the firm to become more efficient, effec- tive, or innovative. It is a rare resource when other firms do not possess it. For example, many banks today would not think of doing business without a mobile banking app. Mobile banking apps are very valuable to the banks in terms of their operations. A bank’s customers expect it to provide a mobile banking app that can be used on any mobile device. However, because many other banks also have mobile banking apps, they are not a rare resource, and they do not offer a strategic advantage. Some call them table stakes or resources required just to be in the business. Many systems in Eras I and II, and especially Era III, were justified on their ability to provide a rare and valuable resource. In some cases these very systems have become table stakes.

Resources to Sustain Competitive Advantage Many firms that invested in systems learned that gaining a competitive advantage does not automatically mean that they could sustain it over the long term. The only way to do that is to continue to innovate and to protect against resource imitation, substitution, or transfer. For example, Walmart’s complex logistics management is deeply embedded in both its own and its suppliers’ operations so that imitations by other firms is unlikely. The Oakland Athletics’ use of information systems propelled it to victory, as depicted in the movie Moneyball, but as soon as other teams learned about the secret behind the success Oakland was having with analytics and information sys- tems, they, too began to use similar techniques, reducing the advantage Oakland initially enjoyed. Finally, to sustain competitive advantage, resources must be difficult to transfer or replicate, or relatively immobile. Some information resources can be easily bought. However, technical knowledge—especially that which relates to a firm’s opera- tion—an aggressive and opportunistic company culture, deep relationships with customers, and managerial experi- ence in the firm’s environment is less easy to obtain and, hence, considered harder to transfer to other firms.

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