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' Academy al Managemsnl Executive, 1998, Vol. 12, No.

Competitive advantage and

internal organizational
W. Jack Duncan, Peter M. Gintei, and Linda E. Swayne

Executive Overview
It is generally agreed in the strategic management literature that internal
organizational assessment is less developed theoretically and practically than other
areas of situation analysis. This paper presents a four stage approach to analyzing a
firm's internal strengths and weaknesses and illustrates how the technique can facilitate
strategy formulation through the integration of value chain concepts and the
incorporation of the most recent findings on internal resources and capabilities. A case
example is used to illustrate how the approach can be applied by strategic decision
makers as a tool for exploring the potential of their companies for sustained competitive

Jay Barney observed that "the development of tools threat bias, or the tendency to iocus on the things
for analyzing environmental opportunities and that can do harm to organizations. Adaptability, fit,
threats has proceeded much more rapidly than the understanding externally imposed rules of suc-
development of tools for analyzing a firm's internal cess, and competitive forces, however, are only
strengths and weaknesses."' Indeed, discussions part of the formula for achieving competitive ad-
of strategic management comfortably refer to stra- vantage.
tegic issue diagnosis, scenarios, Porter's industry Strategic decision makers need a systematic
attractiveness analysis, and a multitude of other technique for scanning their internal organization.
techniques designed to examine potentially impor- By paring down long lists of strengths and weak-
tant strategic factors outside the organization.^ nesses and determining which ones are competi-
Discussions of internal organizational assess- tively relevant, they can understand precisely how
ment, by contrast, are more often functional as- each competitively relevant strength and weak-
sessments of financial, human resource, informa- ness has the potential for adding or subtracting
tion systems, and marketing strengths and value. On the basis of this information, they can
weaknesses, rather than attempts to identify the develop an array of generic strategies that will
present and potential competitive advantages of most likely lead to sustained competitive advan-
the firm. Effective strategic management requires tage. Even though the process can be easily
an understanding of organizational resources and adapted to the corporate level, our objective is to
competencies as well as how each contributes to provide a business level technique for systemati-
the formation of organizational strengths and ulti- cally assessing the relationship between internal
mately to the development of a competitive advan- strengths and weaknesses and sustained compet-
tage. itive advantage. This technique takes existing
Focusing on the uncontrollable external environ- ideas and assembles and integrates them into a
ment highlights the importance of adapting to four-stage decision process that can be easily and
change, fitting organizations to the larger environ- efficiently used by strategic decision makers. The
ment, and understanding that the rules of success recommended approach uses the primary and sup-
are written outside individual business firms. The port activities in value-chain analysis as the do-
relatively more sophisticated status of external en- main for searching out strengths and weaknesses,
vironmental analysis may reflect little more than examines each strength and weakness in terms of
1998 Duncan, Ginter, and Swayne

its ability to create or reduce competitive advan- ination. It also requires much more systematic
tage, and suggests specific ways firms may analysis than it has received in the past."
achieve a more competitive position in their mar-
ket places. Assessing the Potential for Competitive
A Closer Look at Competitive Advantage External environmental analysis is accomplished
Understanding competitive advantage is an on- by scanning, monitoring, forecasting, and assess-
going challenge for decision makers. Histori- ing. These successively more detailed environ-
cally, competitive advantage was thought of as a mental sweeps help ensure that genuinely impor-
matter of position, where firms occupied a com- tant opportunities and threats in the external
petitive space and built and defended market environment are not overlooked. Internal organiza-
share. Competitive advantage depended on tional analysis should take place in much the
where the business was located and where it same way, through the successively detailed
chose to provide services. Stable environments stages of surveying, categorizing, investigating,
allowed this strategy to be successful, particu- and evaluating. Although the terms are arbitrary,
larly for large and dominant organizations in they are meant to convey the idea of successively
mature industries. more detailed sweeps of the internal organization.
The ability to develop a sustained competitive Each stage in the process achieves a critically
advantage today is increasingly rare. A compet- important task that is highlighted in the discus-
itive advantage laboriously achieved can be sion.
quickly lost. Organizations sustain a competitive Figure 1 provides an overview of these four
advantage only so long as the services they de- stages. The entire process will be illustrated by a
liver and the manner in which they deliver them case study of Ingram Micro, a leading worldwide
have attributes that correspond to the key buying wholesale distributor of microcomputer products
criteria of a substantial number of customers. as a case study.^ A brief description of Ingram
Sustained competitive advantage is the result of Micro is provided in Figure 2.
an enduring value differential between the prod-
ucts or services of one organization and those of
its competitors in the minds of customers. There- Stage One: Surveying Potential Strengths and
fore, organizations must consider more than the Weaknesses
fit between the external environment and their Identifying an organization's strengths and weak-
present internal characteristics. They must an- nesses is difficult because characteristics that ap-
ticipate what the rapidly changing environment pear as one or the other may, on closer exami-
will be like, and change their structures, cul- nation, possess little or no significance for
tures, and other relevant factors so as to reap the competitive advantage or disadvantage. The list of
benefits of changing times. Sustained competi- strengths and weaknesses generated by conven-
tive advantage has become more of a matter of tional techniques is usually little more than an
movement and ability to change than of location initial impression of what a firm does well and
or position.^ where it needs improvement. The list is usually
long, not very concrete, and agreed on by only a
relatively few people.
Organizations sustain a competitive However, even a superficial list of possible
advantage only so iong as the services strengths and weaknesses is important to initiate
they deliver and the manner in which strategic thinking and to focus thinking on areas
they deliver them have attributes that where the firm can actually add or lose value.^
This approach requires a survey of infrastructure,
correspond to the key buying criteria of a human resources, technology development, pro-
substantial number of customers. curement, inbound and outbound logistics, opera-
tions, marketing and sales, and service activities.
The question of an enduring value differential Accomplishing the initial survey is a matter of
raises the issue of why a firm is able to achieve a looking at financial statements, staffing stan-
competitive advantage. To answer this, it is neces- dards, information resources, organization charts,
sary to examine why and how organizations differ and customer and employee surveys and inter-
in a strategic sense. Identifying strengths and views. The findings are then compared with indus-
weaknesses requires introspection and self-exam- try standards and historical trends, and judgments
Academy o! Management Executive August

Stage 1; Stage 2: Stage 3: Stage 4:

Surveying Categorizing Investigating Evaluating

Determine where,
along the firm's
value chain,
Reconceptualize potential
Generate long- long-list in competitive Choose the
list of strengths terms of advantage lies. appropriate
and weaknesses resources and Look at each generic strategy
from primary and capabilities and competitively for the firm —
support activities complete deeper relevant resource cost leadership
ol the firm's inspection with the and or
value chain application of capability relative differentiation
^See Figure 3} key questions to its potential as a
fSee Figure 4) cost or
uniqueness driver
fSee Table 1)

Internal Environmental Analysis Process

Ingram Micro is a leading worldwide wholesale other entities in the Ingram family of businesses
distributor of microcomputer products. Located in for financing, cash management, tax and pay-
Santa Ana, California, Ingram markets microcom- roll administration, insurance, and administra-
puter hardware, networking equipment, and soft- tive services. In 1996, Ingram Micro engaged in a
ware products to more than 100,000 reseller cus- public offering to raise the capital necessary to
tomers in more than 120 countries. Ingram's more accomplish a split-off, but planned to continue
than 1,100 suppliers include Apple Computer, to rely on the larger company for selected ser-
Cisco Systems, Compaq, Hewlett-Packard, IBM, vices.
Intel, Toshiba, and U.S. Robotics. Some of its major Ingram Micro has grown rapidly since 1991
customers include CompUSA, Micro Warehouse, and increased net sales and net income from
Sam's Club, and GE Capital Technologies. It of- $2.0 billion and $30.2 million to more than $9,0
fers one-stop shopping through an inventory of billion and $85.0 million respectively. Over 30
over 36,000 products. percent of its net sales are generated interna-
The company began as part of Ingram Indus- tionally. In 1994, it formed the Ingram Alliance
tries and has relied throughout its history on Reseller Company, a master reseller business.

A Profile of Ingram Micro

are made as to whether the organization's perfor- Stage Two: Categorizing Organizational
mance represents strengths or weaknesses rela- Differences
tive to others in the strategic group/
In the case of Ingram Micro, as illustrated in The second stage of internal organizational anal-
Figure 3, potential strengths included the experi- ysis involves more detailed categorization of the
ence of the management team, administrative and strengths and weaknesses highlighted by the ini-
financial support from Ingram Industries, and tial survey. The critical task in this stage is to
leading-edge information and inventory control understand precisely what types of strengths and
models. Potential weaknesses included extremely weaknesses a firm possesses in an absolute sense
high debt and financial leveraging, dependency and relative to competitors.^ Do the organization's
on a relatively few and powerful suppliers, and strengths and weaknesses lie in tangible or intan-
potentially excessive family control.^ gible resources or both? Are they represented pri-
1998 Duncan, Gintei. and Swayne

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10 Academy oi Management Executive August

marily by the presence or absence of the skills and organization, capabilities relate to putting things
experiences of employees relative to doing the ac- together in unique and innovative ways. Capabil-
tual work of the organization? Do they lie in man- ities involve the integration of primary value ac-
agers' and employees' ability or inability to inte- tivities, support activities, and/or primary and sup-
grate and coordinate resources and skills? This port value activities.
reframing requires that one understand real and Capabilities, therefore, may be thought of as
potential differences relative to competitors. architectural abilities or bonding mechanisms
In stage two, potential strengths and weak- whereby resources are combined in new and inno-
nesses are categorized as strategic resources or vative ways. As a result, they accomplish learning,
capabilities, and more specific measures are de- change, and ongoing renewal for individuals and
veloped for each. This is important because it is organizations.^^ Capabilities, or the linking activi-
these resources and capabilities, along with a ties in the value chain, represent the collective
firm's purpose and aspirations, that ultimately learning in organizations, coordinating diverse op-
make it different and suggest the path or paths to erational skills and integrating multiple streams
sustained competitive advantage. of technologies.^^ Sustained competitive advan-
The resource-based view argues that the key to tage is based on the acquisition of resources that
sustained competitive advantage are those factors possess a unique relationship to the external en-
available for use in producing goods and services vironment and are integrated in innovative ways.
that are valuable and costly to copy.'o Resources, An important element in judging sustained com-
as we use the term, may be tangible or intangible petitive advantage is understanding precisely
human assets. Human resources are often skill what are our tangible and intangible resources,
based and involve expertise in designing, produc- what skills and experiences do our employees pos-
ing, distributing, and/or servicing the products or sess, and how good are we at coordinating re-
services of the firm. They relate to skillfulness in sources and skills. An important question is how
accomplishing tasks required by one or more of the competitively relevant are our resources, compe-
primary value activities. Tangible resources in- tencies, and skills?
clude things such as land or location, while intan-
gible resources include such things as goodwill.
The basic assumption is that resources are un- Deeper Inspection
evenly distributed and developed across firms,
and explain, to some extent, the ability of an orga- ASSIST Analysis (an acronym for assessment of
nization to effectively compete. Organizations with internal factors for strategic advantage) is useful
marginal resources break even, those with inferior for systematically determining the competitive rel-
resources disappear, and those with superior re- evancy of our resources and capabilities. This
sources make profits.ii One writer noted: "Basing technique is an attempt to more effectively inte-
strategy on the [resource] differences between grate into the strategy formulation equation inter-
firms should be automatic rather than notewor- nal factors leading to competitive advantage.
thy."'2 As illustrated in Figure 4, the first step in ASSIST
analysis begins after the reframing of each poten-
tial strength and weakness as a resource or capa-
Organizations with marginal resources bility. In the second stage, each strength and
weakness is then subjected to a series of questions
break even, those with inferior resources
to better understand whether or not it represents a
disappear, and those with superior real or potential competitive advantage or disad-
resources make profits. vantage. The questions

1. Question of Value. Does the resource or capabil-

Yet another potential source of sustained com- ity represent something of worth to customers?
petitive advantage is the "purposeful coordination Do competitors have something oi worth to cus-
of resources."'^ An organization's ability to deploy tomers that the organization does not possess?
and integrate to produce desired results is defined 2. Question of Raieness. How many competitors
as a capability.'" Unfortunately, "there are almost possess the resource or capability? If it is rare
as many definitions of organizational capabilities and others do not possess it, it is a strength. If it
as there are authors on the subject."'^ We will use is rare, and competitors possess it, but the orga-
the term to describe the ability to integrate or link nization does not, it is a weakness.
skills and resources. Whereas human resources 3. Question of Imitability. If competitors do not
relate to expertise in actually doing the work of the possess the means of obtaining the resource or
1998 Duncan, Gintei, and Swayne 11


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12 Academy of Management Executive August

capability, it is a strength. If the organization number of distinctive or competitive ratings must

does not possess the resource or capability, and be obtained. To be a competitively relevant weak-
has no means of obtaining it, it is a weakness. nesses, a substantial number of inadequate and
4. Question of SustainabiUty. How able will the noncompetitive ratings must be obtained.
organization be to maintain the value, rareness,
and lack of imitability of the resource or capa-
bility? Can the competitors sustain their advan- Stage Three: Investigating the Source of
tage? Competitive Advantage
Competitive advantage is ultimately built and
Assessing the Extent of Competitive Advantage maintained by adding value to customers.'^ Value
is added by cost leadership, i.e., offering equal
The third step is to assess the extent of the com- quality products or services at a lower cost than
petitive advantage or disadvantage possessed by competitors, or by differentiation, i.e., offering
each of the identified strategic resources and ca- products or services that are perceived to be
pabilities. Alternative values are assigned accord- unique relative to some important characteristic.
ing to the following definitions: Understanding how each competitively relevant
• Inadequate. The resource or capability is below resource and capability affects costs and unique-
the minimum required to be in the business. ness is an important aspect of understanding how,
• Adequate. The resource or capability is the min- or if, each adds value to the services provided.
imum required to be in this business or to min-
imally compete.
• Attractive. The resource oi capability is better Competitive advantage is ultimately
than the minimum required to compete but does built and maintained by adding value to
not represent a particular advantage (or disad- customersJ^
vantage in the case of a weakness). It will
merely get the attention of appropriate individ-
uals. Once strategic strengths and weaknesses have
• Potential. The resource or capability is sufficient been translated into terms of resources and capa-
to attract attention and represents an important bilities and the potential for creating competitive
strategic consideration. advantage is accomplished through systematic
• Competitive. The resource or capability repre- categorization, it is important to investigate
sents a clear competitive advantage/disadvan- deeper relationships and determine how and
tage relative to members of the strategic group. where these factors actually add value. This is the
• Distinctive. The resource or capability cannot be critical task of stage three—pinpointing the pri-
duplicated by competitors. mary or support value activity that possesses the
potential for building or losing competitive advan-
Figure 4 illustrates how the potential strengths tage. Porter's modified value-chain (Figure 3) is
and weaknesses of Ingram Micro were "catego- useful again for breaking the organization "into its
rized." This more detailed categorization and the strategically relevant activities in order to under-
corresponding appraisal of each resource and ca- stand the behavior of costs and the existing and
pability reduced the number of competitively rele- potential sources of differentiation."^f^ Understand-
vant strengths and weaknesses to six resources ing the value-chain enables decision makers to
(financial resources development, information re- better understand and control the primary cost
sources, trademarks and service marks, highly drivers and differentiate their services by capital-
trained associates, proprietary information sys- izing on their uniqueness drivers.
tems, and experience of top management team) In the case of Ingram Micro, each competitively
and three capabilities (a seamless distribution relevant resource and capability that emerged
system, joint ventures with suppliers, and joint from the ASSIST process is evaluated below in
ventures with global partners). In addition, there terms of its ability to contribute to competitive ad-
were three strategically relevant disadvantages vantage either as a cost or uniqueness driver. Note
(narrow financial margins, questionable ability to that only those strengths and weaknesses that
retain management team, and geographically di- were identified as competitively relevant are sub-
verse markets). The competitive relevancy of each jected to more probing investigation. This deeper
strength and weakness was determined by its rat- investigation is conducted to determine where
ings on the four questions in Figure 4. In order to be along the modified value chain the strength or
competitively relevant strength, a substantial weakness adds or subtracts value and if the stra-
1998 Duncan, Gintei, and Swayne 13

tegic implication lies in its ability to enable cost Strategic Challenge

leadership or develop perceived uniqueness. The The technique outlined in this paper is an efficient
summary investigation is shown in Table 1. and effective aid for assessing an internal organi-
zation and relating strengths and weaknesses to
achieving competitive advantage. Admittedly, its
Stage Four: Evaluating Competitive Advantage focus on the modified value chain does not over-
come the possibility of long and superficial lists of
Evaluating competitively relevant resources and
organizational characteristics. It does, however,
capabilities in terms of possible generic strategies
encourage thinking about strengths and weak-
is the critical task of stage four. The evaluation
nesses in terms of their strategic relevance, rather
suggests that Ingram Micro possesses potential
competitive advantages because of uniqueness than merely auditing functional subsystems of the
drivers located throughout the modified value firm.
chain—inbound and outbound logistics, opera- The strategic challenge for any organization
tions, marketing and sales, as well as organiza- does not end with the evaluation of strategically
tional infrastructure and technology development. relevant strengths and weaknesses. In fact, strate-
This evaluation indicates that differentiation strat- gically relevant strengths and weaknesses provide
egies are the firm's most promising means to com- decision makers with only one of several important
petitive advantage. The competitive nature of this parts of the strategy puzzle. The challenge is to
industry and the narrow margins of all competitors integrate the understanding of strengths and
underscore the need for cost controls. However, weaknesses with the opportunities and threats fac-
cost control is essentially a requirement to com- ing the organization and with the strategic prefer-
pete in the industry and provides no genuine com- ences provided by a clear, understood, and shared
petitive advantage. The strategic implications of sense of mission and vision.
the internal organizational analysis is provided in Ingram Micro is a leader in a growing and de-
Table 2. veloping industry. Microcomputers will, no doubt,
The summary in Table 2 leads us to the conclu- continue to be the hardware of choice for individ-
sion that Ingram Micro possesses resource driven uals and businesses in the foreseeable future.
opportunities for differentiation with regard to or- There are, of course, significant threats. Opportu-
ganizational infrastructure, name identity, access nities attract competitors and evolving technolo-
to capital markets (although its debt load is be- gies possess the potential of redefining how both
coming extremely large}. These resources, in turn, hardware and software are marketed, dissemi-
allow Ingram to leverage its marketing and sales nated, and delivered. Splitting off from the parent
expertise. Ingram also has substantial ability to company means stepping out into a dangerous
differentiate itself in the areas of technology de- competitive environment without the financial and
velopment, managerial expertise, customer ser- managerial support of a concerned and sympa-
vice, and the promise of a seamless sales and thetic parent. However, independence creates the
service system. Its worldwide marketing, sales, opportunity to innovate, invent, and experiment in
and technology support network provides it with ways that are rarely possible for subsidiary oper-
clear integrative capabilities that represent oppor- ations,
tunities for sustained competitive advantage. The greatest strategic potential for Ingram Micro
Although Ingram possesses numerous unique- lies in a differentiation strategy. There is a system-
ness drivers, it also possesses competitive disad- atic way of arriving at this conclusion. Costs are
vantages relative to costs and uniqueness. In 1996, not unimportant but primarily represent a con-
for example, Ingram Micro entered the equity mar- straint. The competitive nature of the industry de-
ket to acquire the resources necessary to split off mands cost efficiency. Strategic success for Ingram
from Ingram Industries. While this split-off would Micro, however, lies along the path of differentia-
reduce some of the risk factors associated with tion through the provision of distinctive services
being a subsidiary of another firm, it would also and support. For another company with different
entail the loss of funding through intracompany strengths and weaknesses in another industry, this
transfers, infrastructure economies, and related analysis could have suggested another strategy.
factors. As a result, the increasing cost of capital This paper is not intended as an analysis of
represents the potential strategic weakness of Ingram Micro. It is meant instead as an illustration
even smaller gross margins. Moreover, the coordi- of a technique for internal organizational assess-
nation issues inherent in global operations present ment that can be used along with other techniques
dangers to cost control and service quality. for external environmental assessment. It ad-
14 Academy of Management Executive August

Table 1
Strengths and Weaknesses As Potential Sources of Competitive Advantage and Disadvantage
Potential Source
ol Competitive
Advantage/ Location on Modiiied
Strength/Weakness Description Disadvantage Value Chain
Si Resource Capacity to rapidly develop financial resources with Uniqueness Driver Organizational
growth rates ol more than 40 percent and almost 30 Infrastructure
percent in net sales and net income respectively.
Sj Resource Industry leader relative to investments in iniorraation Cost Driver Organizational
resources, warehousing systems, and administrative Infrastructure
infrastructure. In the past five years, Ingram has
reduced its general and administrative expenses by
more than a percent through the use ol leading-edge
iniormation technologies.
S3 Resource Ability to otfer special promotions and incentives. Not Competitively Organizational
Relevant (See Infrastructure
Figure 4)
S4 Resource Company possesses a number of trademarks and Uniqueness Driver Organizational
service marks that are visible and respected Infrastructure
throughout the world.
S^ Resource Highly trained associates that receive training through Uniqueness Driver Human Resources
the company's extensive in-house training system.
Sg Resource Only wholesale distributor of microcomputers with a Uniqueness Driver Technology
centralized global iniormation expertise illustrated by Development
its Impulse system. On a typical business day the
company's systems handle 12 million on-line
transactions, 26.000 orders, and 37,000 shipments.
S, Resource Expertise in final assembly. Not Competitively Operations
Relevant (See
Figure 4)
Sg Resource Top management team with experience in number ol Uniqueness Driver Human Resources
industries relevant to company's operations. Members
of the team have substantial international experience
in software development, telecommunications,
transportation, and shipping.
Sg Capability Ability to offer reseller customers a "seamless" supply Uniqueness Driver Marketing and Sates
system oi one-stop shopping.
S,o Capability Joint ventures with suppliers that allow many ol the Cost Driver Inbound Logistics
effects of vertical integration while avoiding the most
significant risks.
Sii Capability Joint ventures and strategic alliances with firms outside Uniqueness Driver Inbound and
the United States leverage company's international Outbound
management expertise. In addition to the United Logistics
States, Ingram has almost twenty locations in Europe,
three in Canada, seven in Mexico, and three in Asia.
More than 100.000 reseller customers are serviced in
more than 120 countries worldwide. Over 30 percent
ol net sales are derived from operations outside the
United States.
Wj Resource Narrow margins accentuated by downward trend. Gross Cost Driver Organizational
margin has declined from a little over eight percent Inirastructure
to about 6.8 percent over the past three years.
Wj Resource Dependent on company's ability to retain and motivate Uniqueness Driver Organizational
current executive team. Infrastructure
W3 Resource Dependence on information system and risk of Not Competitively Technological
downtime. Relevant (See Development
Figure 4)
W^ Capability Over reliance on a few suppliers. Not Competitively Inbound Logistics
Relevant (See
Figure 4)
Capability Geographical diversity of operations and markets Uniqueness Driver Inbound and
makes effective coordination a challenge even in Outbound
light of state-of-the art information system. Logistics
1998 Duncan, Ginter. and Swayne 15

Table 2
Strategic Implications and Competitive Advantage
Strategic Strength/Weakness Strategic Implication

51 Resource-Uniqueness Driver- Ingram Micro's ability to generate financial resources in an industry characterized by low
Organizational Infrastructure margins in association with the name recognition it possesses because of its
52 Resource-Cost trademarks and service marks provide significant opportunties for further
Driver-Organizational differentiation its services and deeper market penetrations
53 Resource-Uniqueness Driver- Ingram Micro's resources in the areas of state-of-the-art information systems, highly
Technology Development trained sales associates, and experienced management team offers the opportunity ior
54 Resource-Uniqueness Driver- differentiation through the continual introduction ol market relevant service
Organizational Infrastructure innovations, technical assistance, after service sales, and a seamless distribution
Si Resource-Uniqueness Driver- system.
Human Resources
Ingram Micro's financial resources, managerial expertise, and sales resources in
Se Resource-Uniqueness Driver-
combination with its worldwide network of suppliers and strategic alliances along with
Technology Development
the information system that can link them provides a unparalleled opportunity for
Se Resource-Uniqueness Driver-
service differentiation in a highly competitive industry where cost advantage is difficult
to achieve.
Sg Capability-Uniqueness Driver-
Marketing and Sales
S,o Capability-Cost
Driver-Inbound Logistics
S|, Capability-Uniqueness
Driver-Inbound and Outbound
W, Resource-Cost Ingram Micro's narrow margins and downward trend in margin underscores the difficulty
Driver-Organizational of obtaining a competitive advantage in the industry though cost leadership. Cost
Infrastructure control is essential to survival but cost leadership is not a viable path to competitive
W2 Resource-Uniqueness Driver- advantage for the company.
Organizational Infrastructure
Ingram Micro's need to maintain the management team and focus on coordination of
W3 Capability-Uniqueness
internationally diverse operations are potential issues that could erode the opportunity
Driver-Inbound and Outbound
for competitive advantage through service differentiation.

dresses Jay Barney's lament about tools ior analyz- tant, even critical, for systematic strategic decision
ing strengths and weaknesses. However, it is im- making. This understanding, however, should not
portant to emphasize that just as external blind us to opportunities or make us timid in think-
environmental threats should be used as warning ing of new and innovative ways of overcoming
signs and never as excuses to ignore opportuni- limitations.22
ties, so it is with internal weaknesses.
Although organizations possess cost advantages
and may successfully differentiate their products Endnotes
and services, resources and capabilities should ' Barney. lay B. 1995. Looking inside for competitive advan-
not be looked on as absolute determinants of com- tage. Academy of Management Executive. 9: 49-61.
petitive abilities. Even the most oppressive re- ^Schwartz, Peter. 1991. The ait of the long view. New York:
source and capability limitations can be overcome Currency Doubleday. Porter. Michael E. 1980. Corporafe strat-
egy: Techniques for anaiyzing industries and competitors. New
by innovative leaders and heroic employees. In York: The Free Press; and Fahey, Liam & Narayanan, V. K. 1986.
fact, it has been argued that the essential charac- Macroenvironmen(ai anaiysis hi stiategic managemenf. St.
ter of new directions in strategic thinking is the Paul, MN: West Publishing Company.
acceptance of "an aspiration that creates, by de- ^ Stalk, George, Evans, Philip. & Shulman, Lawrence. 1992.
sign, a chasm between ambitions and resources." Competing on capabilities: The new rules of corporate strategy.
It is further argued that creating this stretch or Haivaid Business Review. 70 (2): 57-69.
•'Denison, Daniel R. 1990. Corporate culture and organiza-
chasm "is the single most important task senior tional effectiveness. New York: Wiley and Denison, Daniel R, &
management faces."^^ Understanding competi- Mishra, Aneil K. 1995. Toward a theory of organizational effec-
tively relevant resources and capabilities is impor- tiveness. Organizaliona] Science, 6: 204-223. See also Hall,
16 Academy of Management Executive August

Richard. 1993. A framework for Unking intangible resources and Organizational capability: Creating competitive advantage.
capabilities to sustainable competitive advantage. Sfrategic Academy of Management Executive. 5: 77-85.
Management Journal. 14: 607-618. Henderson & Cockburn, Measuring competence, 66 and
^ Information on Ingram Micro obtained from Prospectus for Amit & Schoemaker, Strategic assets and organizational rent,
issuance of Class A Common Stock. September 9. 1996. 35.
^ Porter, Michael. Competitive advantage: Creating and sus- "Black, Janice A. & Boal. Kimberly B. 1994. Strategic re-
taining superior perfoimance. New York: Free Press. Chapter 2. sources: Traits, configurations, and paths to sustainable com-
See also Porter, Michael E. Porter. 1991. Toward a dynamic petitive advantage. Strategic Management Journal 15: 131-148.
theory of strategy. Stiategic Management Journal 12: 95-117. '^Barney. Looking inside for competitive advantage. Note
''Carroll, Glen R. 1993. A sociological view on why firms that the "question of organization" was not included because of
differ. Strafegic Management Journal 14: 237-249 and Azzone, its similarity with our definition of capability.
Giovanni & Bertele. Umberto. 1995. Measuring resources for '^ Prahalad, C. K. & Hamel. Gary. 1990. The core competency
supporting resource-based competencies. Management Deci- of the corporation. Harvard Business Review 68 (3): 82 and
sion 33: 57-58. Markides, Constantinos C. Markides & Williamson. Peter J. 1994.
Information was collected by two independent readers who "Related diversification, core competencies, and corporate per-
were familiar with the historical development of the resource formance," Strategic Management/ournai. 15: 149-165.
based view of competitive advantage. Both readers had been ^° Porter, Competitive advantage: Creating and sustaining
involved in discussions regarding the need for more precise superior performance. Chapter 2 and Porter, Toward a dynamic
definitions of resources and capabilities and the role each theory of strategy, 95-117.
might play in achieving sustained competitive advantage. The '•' Hamel, Gary & Prahalad, C. K. 1993. Strategy as stretch and
readers developed lists of strengths and weaknesses through leverage. Harvard Business Review. 71 (3): 75-84.
independent readings of the Prospectus of Ingram Micro. Con- ^^This discussion has been adapted from Hamel, Gary &
sensus discussions were held and agreement was obtained on Prahalad. C. K. 1994. Competing for the future. Boston, MA:
proper classifications. The same evaluators developed consen- Harvard Business School Press. Chapter 7 and Hamel, Gary &
sus on the appraisals of the four questions in the ASSIST model. Prahalad, C. K. 1996. "Competing in the new economy: Manag-
It is important to note that the researchers limited their use of ing out of bounds," Strategic Management Journal, 17: 237-242.
information to those sources easily obtained by any executive
decision maker in order to illustrate how systematic internal
assessment of an organization can be conducted using the About the Authors
recommended approach without large investments in informa- I

tion search and research. W. Jack Duncan is professor and university scholar at the
^ Barney, Jay B. 1991. Firm resources and sustained competi- School of Business/Graduate School of Management, University
tive advantage. Journal of Management. 17: 99-120; Barney, Jay of Alabama at Birmingham. He is a fellow of the Academy of
B. & Hansen. Mark H. Hansen. 1994. Trustworthiness as a source Management and a fellow of the International Academy of
of competitive advantage. Strafegic Management Journal. 15: Management. Duncan is past president of the Southern Man-
175-190; and Brumagim, Alan L. 1994. A hierarchy of corporate agement Association and the Southwest Division of the Acad-
resources. In Paul Shrivastava. Anne S. Huff, and Jane E. Dutton emy of Management. His articles have been published in the
{Eds.). Advances in strategic management: Resource-based Academy of Management Executive, Academy of Management
view of the firm: 81-112. Greenwich, CT: JAI Press. Joumal, Academy of Management Review, Management Sci-
'"Hart. Stuart L. 1995. A natural-resource-based view oi the ence, Journa} of Management, and others.
firm. Academy of Management Review. 20: 986-1014.
Peter M. Ginter is professor and chair oi Health Care Organi-
" Peteraf. Margaret A. 1993. The cornerstones of competitive
zation and Policy, School of Public Health, University of Ala-
advantage: A resource-based view. Strafegic Management Jour-
bama at Birmingham. He is past president of the Southwest
nal 14: 179-191.
Federation of Administrative Disciplines. Ginter is the author of
'^ Wemerfelt, Birger. 1995. The resource-based view of the
numerous books, cases, and articles on management and
firm: Ten years after. Strategic Management Journal. 16: 173.
health care issues. His articles have been published in the
Insert added.
Academy of Management Review, California Management Re-
'^Henderson, Rebecca & Cockburn, Ian. 1994. Measuring
view, Journal of Management Studies, Management Interna-
competence? Exploring firm effects in pharmaceutical research.
tional Review, Health Care Management Review, and others.
Strategic Management Journal. Special Issue. 15: 63-84 and
Marino, Kenneth E. 1996. Developing consensus on firm compe- Linda E. Swayne is professor and chair of marketing in the Belk
tencies and capabilities. Academy of Management Executive. College of Business Administration, and coordinator of the Phy-
10: 40-51. sicians' Institute at the University of North Carolina at Char-
"Amit, Raphael & Schoemaker. Paul J. H. 1993. Strategic lotte. She has served as the executive director of the Carolinas
assets and organizational rent. Strategic Management 7ournai. Task Force on Health Care and is the author of numerous books.
14: 33-46. cases, and articles on marketing and health care issues.
'^Collis, David J. 1994. Research note: How valuable are Swayne is past president of the Southwest Federation of Ad-
organizational capabilities. Strategic Management Journal 15: ministrative Disciplines and the Southern Marketing Associa-
143-152. See, for example, Ulrich. David & Lake, Dale. 1991. tion.