Strategic Resources (COMPONENTS OF AN EFFECTIVE BUSINESS MODEL)

                   A firm is not able to implement a strategy without adequate resources. This reality means that a firm’s resources substantially affect how its business model is used. For a new venture, its strategic resources may initially be limited to the competencies of its founders, the opportunity they have identified, and the unique way they plan to service their market. Core competencies and strategic assets are a firm’s most important resources.
Core Competencies
                    A core competency is a resource or capability that serves as a source of a firm’s competitive advantage over its rivals. It is a unique skill or capability that transcends products or markets, makes a significant contribution to the customer’s perceived benefit, and is difficult to imitate.20 Examples of core competencies include Apple’s competence in designing consumer products, Zappos’s competence in customer service, and Netflix’s competence in supply chain management. A firm’s core competencies determine where a firm is able to create the most value. In distinguishing its core competencies, a firm should identify the skills it has that are

(1) unique, (2) valuable to customers, (3) difficult to imitate, and (4) transferable to new opportunities.21

                    A firm’s core competencies are important in both the short and the long term. In the short term, it is a company’s core competencies that allow it to differentiate itself from its competitors and create unique value. For example, Dell’s core competencies historically have included supply chain management, efficient assembly, and serving corporate customers, so its business model of providing corporate customers computers that are price competitive, are technologically up-to-date, and have access to after-sale support makes sense. If Dell suddenly started assembling and selling musical instruments, analysts would be skeptical of the new strategy and justifiably ask, “Why is Dell pursuing a strategy that is outside its core competency?”

                    In the long term, it is important to have core competencies to grow and establish strong positions in complementary markets. For example, Dell has taken its core competencies in the assembly and sale of PCs and has moved them into the market for computer servers and other electronic devices. This

process of adapting a company’s core competencies to exploit new opportunities is referred to as resource leverage.

Strategic Assets 

                   Strategic assets are anything rare and valuable that a firm owns. They include plant and equipment, location, brands, patents, customer data, a highly qualified staff, and distinctive partnerships. A particularly valuable strategic asset is a company’s brand, which is discussed in detail in Chapter 11. Starbucks, for example, has worked hard to build the image of its brand, and it would take an enormous effort for another coffee retailer to achieve this same level of brand recognition. Companies ultimately try to combine their core competencies and strategic assets to create a sustainable competitive advantage. This factor is one to which investors pay close attention when evaluating a business.22 A sustainable competitive advantage is achieved by implementing a value-creating strategy that is unique and not easy to imitate.23 This type of advantage is achievable when a firm has strategic resources and the ability to use them in unique ways that create value for a group of targeted customers.