Resource-based Advantages

Strategy and Performance Management

Andy Weeger

Neu-Ulm University of Applied Sciences

July 22, 2025

Reflection

Before we start: Any questions or comments regarding the competition and positioning concepts discussed last week?

Learning objectives

After this section, you should have a solid understanding of

the nature and purpose of an internal audit in formulating strategies;
major internal factors that impact competitive advantage;
the tenets of the resource-based view and dynamic capabilities;
the construction and application of the Strengths-Weaknesses-Opportunities-Threats (SWOT) matrix;
how internal resources create sustainable competitive advantage.

Internal perspective

Internal audit

Assessing a firm’s strengths and weaknesses so that strategies can be formulated that capitalize on internal strengths and overcome weaknesses.

Key resources

Key internal areas/resources an internal assessment should focus on:

Tangible resources, intangible resources, organizational capabilities, competitive assets, knowledge management, strategic flexibility, technology as well as culture & values.

Tangible resources

Financial resources: the firm’s financial strength, including cash reserves, profitability, and access to capital
Physical assets: the firm’s physical assets such as manufacturing facilities, real estate, equipment, and inventory

Intangible resources

Intellectual property: assets including patents, trademarks, copyrights, and proprietary technology
Brands and reputation: brand equity and reputation of the firm within its industry and among consumers
Human capital: the skills, knowledge, and expertise of the firm’s employees, including leadership and talent management

Organizational capabilities:

Innovation and R&D: the firm’s capacity for innovation, research and development capabilities, and the ability to bring new products or services to market
Operational efficiency: the efficiency of the firm’s operational processes, supply chain management, and cost control measures
Marketing and sales: the firm’s marketing strategies, customer relationships, and sales capabilities

Competitive assets:

Strategic partnerships: strategic alliances, partnerships, and collaborations that provide unique competitive advantages
Exclusive contracts: exclusive contracts or agreements that offer preferential treatment or access to key resources
Market position: the firm’s position within its target markets and industry, including market share and market dominance

Knowledge management:

Knowledge repository: the firm’s ability to capture, share, and apply knowledge effectively across the organization
Learning organization: culture of continuous learning, adaptation, and knowledge creation

Strategic flexibility:

Adaptability: the firm’s ability to adapt to changing market conditions, competitive threats, and external disruptions
Resource mobility: ability to reallocate resources strategically to exploit emerging opportunities or address weaknesses

Technological capabilities:

Information systems: the quality and effectiveness of the firm’s information systems, data analytics capabilities, and technology infrastructure
Digital capabilities: the firm’s readiness to leverage digital technologies for competitive advantage

Culture and values:

Corporate culture: the organizational culture and values that influence decision-making, employee behavior, and innovation
- Ethical reputation: the firm’s ethical practices, corporate social responsibility, and its impact on reputation

Excursus: culture

Culture eats strategy for breakfast. Peter Drucker, Management consultant, educator and author

The most brilliant strategies can fail if they are not congruent with the prevailing culture within an organization. Successful organizations, thus, integrate culture and strategy.

The phrase conveys the idea that a company’s culture, which includes its shared values, beliefs, norms, and behaviors, can have a more substantial influence on the organization’s outcomes than its strategic plans or strategies (Drucker et al., 1988).

An organization’s culture influences how employees behave, make decisions, and interact with one another. If a strategic plan contradicts cultural norms or values, employees are likely to prioritize cultural consistency over strategic alignment.
Culture can either enable or constrain the execution of strategic initiatives. A supportive culture aligns with the strategy, fosters commitment, and drives performance. Conversely, a culture that resists change or lacks alignment can hinder even the most well-conceived strategy.
Leaders play a crucial role in shaping and aligning culture with strategy. Effective leaders understand the culture’s impact and work to foster a culture that supports the strategic vision.
Successful organizations integrate culture and strategy. They develop strategies that not only consider external market dynamics but also respect and leverage the existing culture.

Implications (David & David, 2016): - Strategies that require fewer cultural changes may be more attractive because extensive changes can take considerable time and effort - Political maneuvering consumes valuable time, subverts organizational objectives, diverts human energy, and results in the loss of some valuable employees - Political biases and personal preferences get unduly embedded in strategy choice decisions

Discussion

As the person responsible for shaping the strategic management process, you must take into account the role of organizational culture.

What specific, actionable measures can you implement to ensure that your culture supports strategic decision-making and execution?

Resource-based view

Reading — key takeaways

Form small groups of 3–4 students and discuss what you have learned about the Resource-Based View (RBV) from reading Peteraf (1993) and clarify issues of understanding. Focus on following questions:

How can the RBV’s key tenets be summarized
(i.e., main concepts, definitions, and underlying logic).
What are key implications for strategic management?

Key assumptions

The RBV contends that internal resources are critical for achieving and sustaining competitive advantage, even more important than the environment.

VRIO framework

To create sustained competitive advantage, resources must be valuable, rare, inimitable/non-substitutable, and organizationally supported (Barney, 1995).

The question of value

Resources must provide value to the organization and enable it to exploit opportunities or defend against threats. They should contribute to the firm’s ability to create or deliver products/services, reduce costs, or increase revenues (Barney, 1995).

Managers need to check if the firm’s resources and capabilities enable it to exploit opportunities and/or neutralize threats: - Managers should be able to evaluate/distinguish resources and capabilities - Managers should identify resources and capabilities that add value from those that do not - Managers should identify resources and capabilities that may be less valuable in the future due to changes in environmental factors - Managers should identify resources and capabilities that are valuable because they can be applied in new ways

The question of rareness

Resources should be rare or uncommon in the industry or among competitors. If a resource is widely available or easily replicable, it is less likely to provide a competitive advantage (Barney, 1995).

Therefore, managers need to assess the resources and capabilities that are considered valuable based on how many competing companies already have them: - If a valuable resource or capability is controlled by several competing firms, it forms a source of competitive parity - Resources or capabilities that are valuable and rare among competing firms, form sources of competitive advantage

The question of imitability

Resources must be difficult for competitors to imitate or replicate. This can be due to factors like unique capabilities, proprietary knowledge, complex relationships, or a combination of elements that are hard to duplicate. In addition, there should be no readily available substitutes (Barney, 1995).

Thus, managers need to check if firms without a resource or capability face a cost disadvantage in obtaining it: - If a firm possesses valuable and rare resources or capabilities, it can gain at least a temporary competitive advantage - If competing firms face a cost disadvantage in trying to imitate these resources/capabilities, then it leads to a sustained competitive advantage - Imitation can occur through duplication or substitution. Socially complex resources are much more difficult to imitate than physically complex resources

The question of organization

The organization and management of these resources play a crucial role in determining whether they can truly provide sustainable competitive advantages. Even if a resource possesses the VRIN attributes, it must be strategically deployed within the organization (Barney, 1995).

Thus strategic management need to evaluate if a firm organised to exploit the full competitive potential of its resources and capabilities: - A firm must be appropriately organised, in order to fully realise the potential for competitive advantage - The firm’s complementary resources – formal reporting structure, management control systems or compensation policies – are relevant for a firm to realize competitive advantage - To create sustained competitive advantage, managers must look inside their firms for valuable, rare and costly-to-imitate resources, and then exploit them through proper organisation

Limits to competition

Peteraf (1993) identifies ex-ante and ex-post limits to competition that are crucial for sustaining competitive advantage.

Peteraf (1993) uses the terms ex-post and ex-ante to describe different types of limits to competition:

Ex-post limits to competition are barriers that protect competitive advantage after it’s been established. They preserve the sustainability of rents (profits) by making it difficult for competitors to imitate or substitute resources and by preventing competitive forces from eroding the firm’s advantage. Examples are patents, complex social relationships, and causal ambiguity that make it hard for competitors to replicate a successful firm’s capabilities.

Example: A pharmaceutical company develops a new drug. Ex-post limits include patents making it legally difficult for competitors to produce the same drug, proprietary knowledge about formulation and manufacturing, strong brand loyalty among consumers and healthcare providers, and rigorous regulatory approvals that competitors would need to achieve.

Ex-ante limits to competition refer to barriers that exist before a firm establishes a superior position. These limits ensure that costs don’t offset the potential benefits of a strategic position. They limit competition for a position before any firm has established it, prevent the costs of acquiring resources from consuming all future profits.

Example: A tech company acquiring a patent for groundbreaking technology. Ex-ante limits include information asymmetry (better information about patent value), first-mover advantage (acting quickly before others), and unique complementary assets that make the patent more valuable to them than to competitors.

Together, these limits ensure that firms can acquire resources at costs below their ultimate value (ex-ante) and maintain their competitive advantage once established (ex-post).

Mini case: Salesforce

In the early 2000s, Customer Relationship Management (CRM) software was dominated by on-premise solutions like Siebel and SAP. Salesforce, founded in 1999, pioneered cloud-based CRM with its “No Software” mantra. By 2025, Salesforce controls approximately 23% of the global CRM market—more than its four largest competitors combined.

Despite numerous competitors entering the cloud CRM space (Microsoft Dynamics, HubSpot, Zoho, Oracle), Salesforce has maintained market leadership for over two decades. The company grew from $1.3 billion in revenue (2010) to over $34 billion (2024).

Your task:

Research Salesforce’s resources and capabilities
Identify 3-4 key resources/capabilities and analyze each using the VRIO framework
What gave Salesforce an advantage before competition began? (ex-ante limits)
What prevents competitors from imitating Salesforce now? (ex-post limits)
Which resources provide temporary vs. sustained competitive advantage?

Solution hints

Salesforce pioneered cloud CRM in 1999, grew from $1.3B (2010) to $34B revenue (2024), and maintains 23% market share despite competition from Microsoft, Oracle, HubSpot, and Zoho.

VRIO Analysis - Key Resources

AppExchange ecosystem

V: 7,000+ apps create platform value, network effects, reduce switching costs
R: Competitors have hundreds of apps vs. thousands; depth/maturity rare
I: Path dependence (2005 launch = 20yr head start), social complexity (ISV relationships), time compression diseconomies, network effects make it extremely difficult to replicate
O: Dedicated partner programs, revenue sharing, certification processes
Verdict: Most defensible resource; would take competitors 10-15 years to build equivalent

Multi-tenant architecture

V: Automatic upgrades, lower operational costs, rapid customization, economies of scale
R: True multi-tenancy at enterprise scale is rare; 25+ years of refinement
I: Architectural lock-in from 1999 decisions, causal ambiguity, legacy competitors face massive technical debt to switch
O: Core to business model, entire R&D structured around it
Verdict: Extremely costly for existing competitors to imitate; new entrants could build from scratch

Trailhead learning platform

V: 6M+ users, creates trained workforce, builds community, reduces customer implementation costs
R: Scale and gamification distinctive, but competitors (Microsoft Learn, HubSpot Academy) closing gap
I: Moderate - concept replicable, but community culture and network effects harder to copy
O: Integrated into sales, onboarding, certification programs
Verdict: Advantage narrowing; 3-5 years before competitive parity on platform (culture may last longer)

Customer success model

V: Reduces churn, increases LTV, drives >100% net retention
R: No - widely adopted across SaaS industry
I: No - easily copied, no IP protection, low barriers
O: Yes at Salesforce, but this alone doesn’t create advantage
Verdict: Once differentiated (2005-2010), now industry standard requirement

Ex-ante limits

Non-obvious insight: Cloud CRM for enterprise was uncertain in 1999; competitors skeptical about security/customization
Resource position barriers: No legacy tech debt or channel conflicts; clean-slate architecture while Oracle/SAP invested billions in on-premise
Founder resources: Benioff’s Oracle experience + Silicon Valley networks
Timing: Dot-com era receptivity, SMB frustration with expensive implementations, improving bandwidth

Ex-post limits

Path dependence: Architecture lock-in; 20-year ecosystem head start; customer data informing product development
Causal ambiguity: Unclear which factors drive success; tacit organizational knowledge; complex resource interactions
Social complexity: Ohana culture, Trailblazer community bonds, ISV trust relationships built over decades
Time compression diseconomies: Can’t buy ecosystem maturity or community trust faster with more spending
Switching costs: Data migration complexity, user training, integration ecosystem, institutional knowledge
Network effects: More customers → more apps → more value → more customers (virtuous cycle)
Economies of scale: Multi-tenant per-customer costs decrease with growth

Temporary vs. sustained advantages

Sustained (10+ years)

AppExchange ecosystem - Strong network effects, path dependence, social complexity
Multi-tenant architecture - Extreme path dependence, causal ambiguity
Brand & trust - Social complexity, time-dependent (moderate threat from service issues)

Temporary (1-5 years)

Trailhead - Concept imitable, first-mover advantage diminishing (3-5 years to parity)
Product features - Copyable within 6-18 months; requires continuous innovation
Sales/marketing excellence - Methodologies portable, execution imitable (2-4 years)
Customer Success - Already at competitive parity

Emerging threats to sustainability

Vertical specialists: Purpose-built CRMs (Veeva pharma, Toast restaurants) better for narrow use cases
Low-code/no-code: Airtable, Notion reduce “build vs. buy” barriers in SMB
AI disruption: AI-native architectures could leapfrog legacy systems; autonomous agents may change CRM paradigm
Open-source: SuiteCRM, Odoo create commoditization pressure
Decreasing switching costs: Better migration tools, standardized APIs reduce lock-in over time

Key RBV takeaways

Resources need V AND R: Customer Success valuable but common = parity; shows advantage erosion
Multiple imitability sources: Social complexity (ecosystem), path dependence (architecture), causal ambiguity (all)
Ex-ante ≠ ex-post: Before = uncertainty (didn’t know cloud would work); after = isolating mechanisms (know it works but can’t copy)
Dynamic competition: 2005 advantages (CS model) now standard; continuous innovation required
Resource combinations: Ecosystem + training + community > individual parts
RBV limits: Doesn’t explain resource acquisition; assumes resources primary (ignores positioning); backward-looking (hard to predict AI disruption)

Deep dive

If you were Microsoft, how would you compete given these isolating mechanisms?
Which resource most vulnerable to AI disruption and why?
Can resources be simultaneous strengths/weaknesses?

Dynamic capabilities

Overview

Dynamic capabilities refer to a firm’s ability to integrate, build, and reconfigure internal and external resources to address rapidly changing environments (Teece et al., 1997).

Core elements

Sensing,
(identifying and assessing opportunities)
seizing,
(mobilizing your resources to capture value from those opportunities)
and transforming
(continuously renewing the organization)

Teece et al. (1997) concept of dynamic capabilities essentially says that what matters for business is corporate agility: the capacity to (1) sense and shape opportunities and threats, (2) seize opportunities, and (3) maintain competitiveness through enhancing, combining, protecting, and, when necessary, reconfiguring the business enterprise’s intangible and tangible assets.

Sensing: Dynamic capabilities begin with the ability to sense changes in the external environment, such as shifts in customer preferences or emerging market trends. This requires organizations to collect and analyze data from both external and internal sources.

Seizing: Once an opportunity is identified, dynamic capabilities involve the rapid and efficient allocation of resources to exploit that opportunity. This requires the organization to be agile and responsive, ensuring that resources are allocated swiftly to capitalize on emerging opportunities.

Reconfiguring: In dynamic environments, organizations must be able to adapt and reconfigure their internal resources, such as talent and technology. Dynamic capabilities often necessitate changes in the organization’s structure, processes, and systems to support strategic adaptation.

Dynamic capabilities reflect the evolutionary fitness of organizations, which describes how well an organization can adapt to its environment and maintain competitive advantage (Steininger et al., 2022).

Example: Apple Inc.

Apple provides a compelling illustration of dynamic capabilities in action through sensing, seizing, and transforming.

Apple Inc. provides a compelling illustration of dynamic capabilities in action:

Sensing: Apple constantly monitors consumer trends, technological advancements, and shifts in the global market. They sense changes in customer preferences, such as the demand for smartphones, wearables, and digital services.
Seizing: When Apple sensed the growing demand for smartphones, it seized the opportunity by launching the iPhone in 2007. The rapid development and launch a service ecosystem and new iPhone models showcase their ability to efficiently capture opportunities.
Reconfiguring: The shift from traditional Mac computers to mobile devices required significant reconfiguration of their manufacturing and supply chain processes. Apple’s app ecosystem and digital services are examples of reconfigured capabilities that add value to their products.

Apple’s success can be attributed in part to its dynamic capabilities, allowing the company to sense changes in the market, seize opportunities like the smartphone revolution, and reconfigure its resources and capabilities to maintain a competitive edge.

Dynamic capabilities and IS

Nomological net of DC in IS research based on Steininger et al. (2022, p. 454)

IT plays multiple roles in dynamic capabilities: as enabler, embedded component, outcome, and context (Steininger et al., 2022).

Figure 1: Nomological net of DC in IS research based on Steininger et al. (2022, p. 454)

IT as context: IT shapes the context within which dynamic capabilities are developed and deployed. The digital environment creates a context that necessitates the development of dynamic capabilities to remain competitive. Environmental uncertainty and industry conditions are critical contextual factors that shape how organizations develop and deploy their capabilities.

IT as an enabler of dynamic capabilities: IT provides the tools and infrastructure necessary for developing dynamic capabilities. Advanced data analytics and cloud computing enable organizations to quickly process and analyze large volumes of data, facilitating better decision-making and faster responses to market changes.

IT embedded in dynamic capabilities: IT is integrated into the very fabric of dynamic capabilities. IT systems are embedded in processes such as supply chain management and customer relationship management, enhancing the organization’s ability to sense and respond to changes.

IT as an outcome of dynamic capabilities: Dynamic capabilities can lead to the development and enhancement of IT capabilities. An organization that excels in innovation may develop new IT solutions or improve existing ones as a result of its dynamic capabilities.

Key theoretical insight

This diagram illustrates that IT’s relationship to dynamic capabilities is multifaceted:

IT isn’t simply a “tool” or “resource”—it can play multiple roles simultaneously
IT enables capabilities (left side), but capabilities also create IT (right side)
From external factor → tool → component → output shows deepening IT-organization fusion

Practical implications

Don’t think of IT as just infrastructure (context/enabler view)
Recognize when IT becomes inseparable from your competitive advantage (embedded view)
Understand that developing new IT capabilities is itself a strategic outcome (outcome view)

SWOT framework

Overview

The Strengths-Weaknesses-Opportunities-Threats (SWOT) framework integrates internal and external analysis to develop four types of strategies.

The environment reveals external opportunities and threats. The resource-based view emphasizes the significance of internal resources and capabilities in achieving competitive advantage. Dynamic capabilities represent an organization’s ability to adapt and reconfigure its resource base over time.

When combined, these concepts offer a comprehensive framework for strategic management. The SWOT framework offers a starting point to develop and think through a strategy, particularly four types of strategies:

SO strategies (strengths-opportunities — matching): using a firm’s internal strengths to take advantage of external opportunities
WO strategies (weaknesses-opportunities — conversion): improving internal weaknesses by taking advantage of external opportunities
ST strategies (strengths-threats — neutralization): using a firm’s strengths to avoid or reduce the impact of external threats
WT strategies (weaknesses-threats — defense): defensive tactics directed at reducing internal weakness and avoiding external threats

SWOT matrix structure

Figure 2: SWOT matrix

SO Strategies (Matching): Use internal strengths to take advantage of external opportunities - Leverage core competencies to exploit market opportunities - Build on competitive advantages to capture growth potential

WO Strategies (Conversion): Improve internal weaknesses by taking advantage of external opportunities - Address capability gaps to pursue opportunities - Use market opportunities to justify investments in weak areas

ST Strategies (Neutralization): Use internal strengths to avoid or reduce impact of external threats - Leverage competitive advantages to defend against threats - Apply strengths to minimize vulnerability to external risks

WT Strategies (Defense): Minimize internal weaknesses and avoid external threats - Defensive tactics to reduce exposure to threats - Consider divestiture or strategic restructuring

Process for SWOT development

Steps in using the SWOT framework:

Perform an external audit to identify opportunities and threats
Perform an internal audit to identify strengths and weaknesses
Allocate internal and external factors in the matrix
Review whether allocation to (one) box is correct
Structure the points in each box (i.e. group under headline, structure in sub-levels)
Review potential relevance (and disregard as appropriate)
Test whether statement is true and quantify where possible
Review, prioritize
Develop strategies based on the analysis

Exercise

Building on the Five Forces analysis of the GenAI industry, now analyze ONE company’s strategic position using SWOT analysis.

Select ONE company: OpenAI, Anthropic, Meta, Google (DeepMind), or Mistral

Identify 3-4 key strengths (internal) that give your company competitive advantage
Identify 3-4 key weaknesses (internal) or limitations your company faces
Select 3-4 opportunities (external) in the environment that you could exploit (see Five Forces)
Select 3-4 threats (external) that could harm your company (see Five Forces)
Discuss which strategic combination (SO, WO, ST, WT) is most critical for your company:
Propose a specific strategic action for your chosen combination.

Key takeaways

Internal audit focuses on identifying strengths and weaknesses across functional business areas
Resource-based view emphasizes that internal resources are more critical than environment for competitive advantage
VRIO framework provides systematic approach to evaluating resources for sustainable competitive advantage
Dynamic capabilities enable firms to sense, seize, and transform in rapidly changing environments
Culture integration is crucial - culture can enable or constrain strategy execution
SWOT analysis provides comprehensive framework integrating internal and external factors
IT plays multiple roles in dynamic capabilities as enabler, embedded component, outcome, and context
Limits to competition both ex-ante and ex-post are necessary for sustaining competitive advantages

Review and consolidation

The following questions are designed to review and consolidate what you have learned and are a good starting point for preparing for the exam.

Do you agree or disagree with the resource-based view (RBV) theorists that internal resources are more important for a firm than external factors in achieving and sustaining competitive advantage? Explain your and their position.
What makes a resource valuable to a company? Give specific examples.
Explain the concept of resource heterogeneity. Why is it considered a crucial factor in determining competitive advantage according to the RBV?
How does resource immobility relate to the sustainability of competitive advantage?
How do dynamic capabilities enable firms to adapt and innovate over time?
What is the relationship between a firm’s resources, competitive advantage, and value creation for customers?
How does the RBV contribute to our understanding of why some firms consistently outperform others in the marketplace?
Give examples for the different ways IT/IS relates to dynamic capabilities.
Listen to the decoder episode featuring Josh Miller, the cofounder and CEO of The Browser Company, and subsequently create a SWOT matrix based on the insights provided in the interview.
Why do you think the SWOT Matrix is the most widely used of all strategy matrices?
What other strategy matrices do you know? Name and explain one and compare it to the SWOT matrix.
Think of limitations of the SWOT matrix and related analysis. Name three limitations and relate them to the concept of dynamic capabilities.
Perform a SWOT analysis for Spotify [Netflix, OpenAI, NVidia …].

Homework

Read Mintzberg (1978) and make notes on following questions:

Why and how does Mintzberg challenge the prevailing view of strategic planning as the primary approach to strategy formation?
How does Mintzberg propose to think of strategy formation instead?
Which patterns of strategy formation has Mintzberg identified?
Choose a real organization and identify which pattern(s) it follows. What evidence supports your assessment?
What practical implications can you draw from Mintzberg’s insights for strategic management practices?
How has this reading changed your thinking about strategy?

Reading tip: Create a concept map while reading to visualize the relationships between different patterns and concepts.

Do some casual research on Netflix’s strategic journey.

Q&A

Literature

Barney, J. B. (1995). Looking inside for competitive advantage. Academy of Management Perspectives, 9(4), 49–61.

David, F. R., & David, F. R. (2016). Strategic management: A competitive advantage approach, concepts and cases, global edition. Pearson Education.

Drucker, P. F. et al. (1988). The coming of the new organization.

Mintzberg, H. (1978). Patterns in strategy formation. Management Science, 24(9), 934–948.

Peteraf, M. A. (1993). The cornerstones of competitive advantage: A resource-based view. Strategic Management Journal, 14(3), 179–191.

Steininger, D. M., Mikalef, P., Pateli, A., & Ortiz-de-Guinea, A. (2022). Dynamic capabilities in information systems research: A critical review, synthesis of current knowledge, and recommendations for future research. Journal of the Association for Information Systems, 23(2), 447–490.

Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7), 509–533.