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Competing on Resources
harvard business review •
uly–august 2008
page 6
an asset. The competitor could replicate the re-
source but, because of limited market poten-
tial, chooses not to. This is most likely when
strategies are built around large capital invest-
ments that are both scale sensitive and specific
to a given market. For example, the minimum
efficient scale for float-glass plants is so large
that many markets can support only one such
facility. Because such assets cannot be rede-
ployed, they represent a credible commitment
to stay and fight it out with competitors who
try to replicate the investment. Faced with
such a threat, potential imitators may choose
not to duplicate the resource when the market
is too small to support two players the size of
the incumbent profitably. That is exactly what
is now occurring in Eastern Europe. As compa-
nies rush to modernize, the first to build a
float-glass facility in a country is likely to go un-
challenged by competitors.
2. The test of durability: How quickly does
this resource depreciate?
The longer lasting a
resource is, the more valuable it will be. Like
inimitability, this test asks whether the re-
source can sustain competitive advantage over
time. While some industries are stable for
years, managers today recognize that most are
so dynamic that the value of resources depre-
ciates quickly. Disney’s brand name survived
almost two decades of benign neglect between
Walt Disney’s death and the installation of
Michael D. Eisner and his management team.
In contrast, technological know-how in a fast-
moving industry is a rapidly wasting asset, as
the list of different companies that have domi-
nated successive generations of semiconduc-
tor memories illustrates. Economist Joseph A.
Schumpeter first recognized this phenome-
non in the 1930s. He described waves of inno-
vation that allow early movers to dominate
the market and earn substantial profits.
However, their valuable resources are soon
imitated or surpassed by the next great inno-
vation, and their superior profits turn out
to be transitory. Schumpeter’s description of
major companies and whole industries blown
away in a gale of “creative destruction” cap-
tures the pressure many managers feel today.
Banking on the durability of most core compe-
tencies is risky. Most resources have a limited
life and will earn only temporary profits.
3. The test of appropriability: Who cap-
tures the value that the resource creates?
Not all profits from a resource automatically
flow to the company that “owns” the resource.
In fact, the value is always subject to bargain-
How Marks & Spencer’s Resources
Give It Competitive Advantage
Freehold locations
Brand reputation
Employee loyalty
Supplier chain
Managerial judgment
Competitive Advantage
in Great Britain
1% occupancy costs versus
3% to 9% industry average
Customer recognition with
minimal advertising
No promotional sales
Lower labor turnover
8.7% labor costs versus
10% to 20% industry average
Lower costs and higher quality
of goods sold
Fewer layers of hierarchy
For the exclusive use of D. Newberry
This document is authorized for use only by Dave Newberry in BUSE 37000 (Autumn 14) Marketing Strategy (Sections 03, 04, 81) at , 2014.

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