Looking Inward: Value Chain, Resources & Capabilities (RBV), and SWOT
Two airlines face the very same five forces, in the exact same industry — yet one profits and the other bleeds. The difference isn't outside but inside: in what each firm holds and knows how to do. In this lesson we turn the spotlight inward — break the firm down with the value chain, weigh its reso
Industry analysis tells you if the arena is attractive; firm analysis tells you if you're good. The value chain breaks down what you do, RBV tests which resources give a lasting advantage (the VRIN test), and SWOT links internal strengths/weaknesses with external opportunities/threats.
- value chain
- Breaking the firm into the chain of value-creating activities — primary and support — that add up to the profit margin.
- primary activities
- The activities that make, sell and service the product: inbound logistics, operations, outbound logistics, marketing & sales, and service.
- support activities
- Activities that enable the primary ones: procurement, technology/R&D, human-resource management, and firm infrastructure.
- Resource-Based View (RBV)
- A view that locates the source of competitive advantage in the firm's internal resources and capabilities, not just the external environment.
- core competence
- An activity the firm performs better than its other internal capabilities; usually each firm has one central one.
- distinctive capability
- An activity the firm performs better than its rivals — a potential source of competitive advantage.
- VRIN test
- Four conditions a resource must meet for a sustainable advantage: Valuable, Rare, Inimitable, and Non-substitutable.
- SWOT analysis
- A framework linking internal strengths and weaknesses with external opportunities and threats, to derive strategic moves.
