Ducati OrgnCritique

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DUCATI

Organisational Critique

Contents

Page

1 Theoretical Review

2
A: International strategy analysis
2A: 1 SWOT
2A: 2 PESTEL

5
5
6

3 Resources and strategic capability analysis


B: 1 Resource Based View (RBV)

7
7

4 Conclusions

5 References

6 Bibliography

14

7 Appendices

18

Appendix A
Appendix B
Appendix C
Appendix D
Appendix E
Appendix F
Appendix G
Appendix H
Appendix I
Appendix J

Author: Daniel Bye (2010). University of


2 Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

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1 Theoretical Review
Ducati has manufactured its core products in Bologna, Italy since 1926 (Lerro &
Schiuma, 2005); however, Ducati habituates a global market; therefore, it is logical to
analyse Ducati utilising analytical frameworks that consider Ducatis situation: (1)
Resources and strategic capability analysis; (2) international strategy analysis.
Scholars determine that strategic approaches to organisational analysis belong to
schools of strategy (Mintzberg et al. 1998; Whittington, 1993; White, 2004).
Mintzberg et al.s (1998) Ten Schools of Strategy (appendix A) detail that theoretical
schools of study should be considered when undertaking organisational analysis.
Mintzberg et al. (1998) expanded the model further by grouping the ten schools into
two sub schools (appendix B): Prescriptive schools that focuses on hard processes
where analytical outcomes are predictable; Descriptive schools that concentrate on
the more unpredictable soft socio cultural influences on the internal and external
organisation.
Ward & Rivani, (2005) argued that the results achieved through application of
conceptual models are influenced not only by the outcomes of the models applied, but
also by the personal experiences of the analyst.
Considering these findings the resultant strategies will be subjectively determined by
the models applied and by the person performing the analysis. Intrinsically, according
to Ward & Rivani (2005) the strategic conclusions drawn from this study will
therefore be driven by the same values.
The analysis of Ducati will use aspects of Mintzberg et al.s (1998) theoretical
approach to scrutinise the resources and strategic capability of Ducati in detail;
however, alternative models will be used to consider international strategy analysis
within the macro environment that Ducati habituates.
SWOT (Humphrey, 2004; Appendix C); PESTEL (J & S quoted by, Mswaka, 2012;
appendix D) and Porters five forces (2008; appendix E) will be employed to gain
perspective on the macro environment; however, the models are not without criticism:
Agyapong and kwamena (2011) found the SWOT model superficial due to a lack of
detailed analysis; whereas, Hill and Westbrook (1997) concluded the model merely
facilitated discussion on strategic awareness without delivering worthwhile outcomes.
Prahalad and Hamel (quoted by Kodama, 2006) determined that Porters five forces
(2008) works well in stable market conditions, but is not reactive to market dynamics.
In addition Kodama (2006) continued to state that Porters five forces (2008) is
incomplete in the sense that the model has gaps. Kodama (2006) argues that the
model fails to adequately consider organisational resources and capabilities; therefore
the model is better employed in conjunction with the resource based view (RBV;
Amoo, 2012; appendix F) defined as spanning the 'culture school' and the Learning
school' (Hurtado, 2008).

Author: Daniel Bye (2010). University of


3 Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

The Greiner Curve (Greiner, 1972; appendix H) will be used to reference Ducatis
evolutionary growth and Ansoffs Product Market Grid (1957; appendix I) will be
used to determine the strategic options open to Ducati.
The RBV concentrates upon the particular resources organisations own that gain
competitive advantage by focusing internally and testing for core competencies within
the organisation that achieve value for customers and lead to differentiation from
competitors; whereas, SWOT; PESTEL and Five Forces focus on market positioning
and the environment (Anon, 2012). According to Barney (1991; 102, quoted by Foss
and Ishikawa, 2006) competitive advantage is achieved through the implementation
of value creating strategies unique to the individual firm and unavailable to
competitors.
The value chain (Porter, 1985; appendix G) will be employed to study Ducatis:
operations; procurement; technological developments and infrastructure, in
conjunction with the VRIN model (Barney, 1991)
Statistics will underpin the study and further scrutiny should uncover transformation
dynamics and emergent strategies; a concise examination of the organisational: type;
structure and leadership will be incorporated.
Using the models should provide foundations for performing strategic analysis on
hard and soft organisational factors. Secondary research will aim to define
Ducatis: purpose; aims; objectives and strategy in the short and long term futures.

Author: Daniel Bye (2010). University of


4 Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

2 A: International strategy analysis


The next section of the paper applies theoretical models to frame research on Ducati
from dual perspectives (A; B) laying the foundations for conclusions to be made.
Section A of the case study will analyse Ducatis international market positioning and
strategy through the application of PESTEL and Five Forces combined; Section B
will concentrate on the knowledge management and operations from the cognitive and
learning schools (Mintzberg et al., 1998; appendix A).
2A: 1 SWOT
In the late nineties Ducati was near bankruptcy until the acquisition of Ducati by the
Texas Pacific Group (Lerro & Schiuma, 2005). A radical change of strategy was led
by a situational leader (Schermerhorn, 2004), Federico Minoli. A functional
organisational structure (Webber, 1922) was employed, turning around Ducatis crisis
situation, making Ducati into world beaters again on and off the race track (Lerro &
Schiuma, 2005).
Strengths
Ducatis recent sporting pedigree is second to none; since 1990 Ducati has won 14
world superbike championships and one Moto GP world title as well as numerous
global domestic championship crowns (WorldSBK.com, 2012; motogp.com, 2012);
this has earned Ducati strong brand loyalty.
5 Forces; appendix E: 4: Geographically, Ducati is situated within a high
concentration of suppliers with which Ducati employs short term contracts; this:
drives costs down; increases bargaining power with suppliers and increasing access to
knowledge while delivering stability in the resource chain.
Weaknesses
Ducats primary product targets a narrow target audience (Anon, 2012); in hand with
social trends and the pace of technological change each product has a short lifecycle.
5 Forces; appendix E: 3: Ducati operates in a niche sports market built around the
Ducati Community, collectors and a loyal following; therefore, Ducati does not
enjoy high economies of scale. Ducatis pricing strategy is influenced by exchange
rates which impacts pricing (Enrico D'Onofrio, quoted by (Bertacche & Ebhardt,
2010). Particularly in the US market; this factor along with the cheaper prices of the
large volume competition increases the bargaining power of buyers.
Opportunities
Ducati operates in the sports section of the world motorcycle market; in evolutionary
terms, Ducati is at phase five of the Greiner curve, growth through collaboration
(see appendix H). Ducati has considered engaging the highly profitable sports cruiser
market; an option that remains open (Andrea, 2012.)
At the point of transformation several strategic directions were available to Ducati
(Ansoff, 1957); Using Ansoffs Product/ Market Grid (1957) Ducati chose to pursue
every product strategy in new and existing markets (see appendix I.).

Author: Daniel Bye (2010). University of


5 Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

Ducati proceeded to implement a user led knowledge based strategy built upon an
innovative internet platform that saw Ducati the MH900e become the first motorcycle
sold over the internet; the MH900e sold out in 31 minutes (Jelassi & Leenen, 2003).
Partnerships were forged with complimentary brands (Oakley; DKNY) leading to new
merchandising opportunities.
Threats
5 Forces; appendix E: 5: Ducats principal competitive rivals in the sports bike sector
are: Honda, Yamaha and Suzuki. Each enjoys large economies of scale compared to
Ducati and therefore incurs lower production and logistical costs that are reflected in
end user prices; however, Ducati enjoys superior brand loyalty (Gavetti, 2204).
5 Forces; appendix E: 1 & 2: With regard to threat of new entrants: the sports bike
market is competitive; however, Ducati has established brand loyalty, racing pedigree
and a sound production and sales platform; therefore, entry to the market is difficult
as is product substitution.
2A: 2 PESTEL
Using PESTEL (appendix D) the environment that Ducati operates within will
become clearer.
A: 2.1 Political
The financial markets did not react well to recent turmoil regarding the status of the
ex Italian Prime Minister Silvio Berluscon (Faris, 2011); interest rates rose which
impacted organisational operating costs and profits; the resulting weak euro against
the US dollar exchange rate (mdn.mainichi.jp, 2012) leaves Ducats global marketing
strategy vulnerable; Ducats largest presence is in the USA (motorcycle.com, 2012).
A: 3.3 Economic
In response to the political situation, inherent increased operating costs and falling
sales in the US Ducati had to increase prices by 6% (Bertacche & Ebhardt, 2010);
Ducatis chief financial officer commented The euro's strength against the dollar is a
real worry (Enrico D'Onofrio, quoted by (Bertacche & Ebhardt, 2010).
A: 3.3 Social
Motorcycles are enjoying a golden era. On television the number of dedicated sports
and enthusiast programmes are rising; spectators numbers at race tracks are growing,
as is merchandising (britishsuperbike.com, 2012).
Ducati facilitated the growth of Ducatis online dedicated community Ducatisti;
linking the external with the internal community and creating new alliances with
customers and enthusiasts leading to new knowledge and increased brand loyalty
(Lerro & Schiuma, 2005).
A: 3.4 Technological
Ducatis racing DNA is fundamental to technical progression and brand success;
however, lack of on track success could deteriorate the Ducatis association with
winning and negatively impact brand image.

Author: Daniel Bye (2010). University of


6 Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

Integrating customers into design through online communities has led to market
success and built a detailed insight into customers needs. Ducati has exploited
integrated web based technologies to directly link Ducati with dealers, suppliers and
customers to deliver added value in the resource chain, at the point of sale and in after
sales service, strengthening the relationship with customers; but making Ducati reliant
on IT (Lerro & Schiuma, 2005).
A: 3.5 Environmental
The low road taxation charges reflect that motorcycles are greener options than cars;
however, it cannot be ignored that accident death rates on motorcycles compared to
cars across all sources are higher.
A: 3.6 Legal
Motor highway control is increasingly regulated; Ducatis competitive advantage lies
in performance (Coffman and Odlyzko, 1998); therefore, further regulation could be a
concern.

3 Resources and strategic capability analysis


B: 1 RBV
The resource based view of resources and strategic capability analysis determines that
two strategy schools should be engaged in the study: learning school; culture school
(appendix F). To facilitate further analysis the RBV approach has been adapted to
focusing on Ducatis resources and strategic capability through the period of
turnaround.
B: 1.1 Learning School
Buchanan and Huczinski (2004) defined that organisational change should be
supported with internal processes change. Through turnaround Ducati management
recognised that knowledge would be a critical resource and lever on successful
financial results (Lerro & Schiuma, 2005).
Focusing on the value chain (Porter, 1985) to underpin strategy Ducati developed
online relationships with suppliers, dealers and customers including feedback loops
providing Ducati with valuable access to customers needs and behavioural data
allowing Ducati to predict change fast; this soon became an emergent strategy.
Author: Daniel Bye (2010). University of
7 Huddersfield: Corporate Business
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Ducati used LEAN six sigma business process reengineering (BPR) to ingrain best
practice and quality into the hard aspects of production (Lerro & Schiuma, 2005).
Ducati embarked upon divestiture as opposed to backward vertical integration through
outsourcing production of non core components passing R&D onto the supplier
(themanufacturer.com, 2012). Fulfilment was handed over to dealers at 1%
commission rates as Ducati performed all the marketing and production; two suppliers
for each component was sourced increasing the knowledge pool and reducing the
need for warehousing to deliver just in time products (Lerro & Schiuma, 2005).
B: 1.2 Culture School
Transformational management (Schermerhorn, 2004) embedded new ideas and
behaviors into the culture of producing motorcycles at Ducati. Transformational
change embodied in Ducati World synthesised the vision and innovated change and
developed organisational knowledge as Ducati was brought closer to suppliers and
users through a new software platform.
Ducatis expansion in merchandising through partnerships with fashionable brands
like Oakley and DKNY ensures valuable merchandising R&D knowledge is gained,
keeping the brand merchandise on vogue.

4 Conclusions
The application of SWOT; PESTEL and Porters 5 Forces (2008) to analyse the
industry environment determined that Ducati is vulnerable to two major threats: large
volume competition and Ducatis own success.
Using The Greiner Curve (1972: appendix H) for reference most stages of growth
open to Ducati have been explored; intangible resources such as knowledge gained
through the online community and relationships with the race team and dealer
network leading to innovation remain Ducatis key assets.
A dealer and supplier network that had grown to support Ducati had become over
burdening. From the late nineties management began has turned around Ducatis
fortunes; Ducati embraced change to recover performance and market share; Ducati is
back to a position of strength.
Growth in all product ranges increased net profit for 2009 by 63%; North America
and the Far-East sales increased by 64%; market share is 8.6% and registrations
increased by 5% in 2010 (Del Torchio, 2012); Ducati is growing in all markets.
The global economic instability has stripped Ducatis prime sports market sector by
12.1% since 2008; however, Ducati sales and profits were up at home (Del Torchio,
2012) and in emergent markets like Asia and North America Ducati sold 63% more
bikes in a deflated market (Bureau, 2011; webbikeworld, 2012).
Ducati sales Assets have decreased over the same period however, adding perspective
(robotdough.com, 2012); as have Ducati stocks (Ducti Motor Holding S.p.A., 2012).
Competitive advantage in the sports bike sector remains strong through.

Author: Daniel Bye (2010). University of


8 Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

A continuing commitment to the world sports bike championships and attainment of


world titles has driven product differentiation and provided strong branding; although,
exchange rates still continue to impact profits. Keeping Ducati strong against the
threat high volume producers in this sector remains critical. Technological and racing
pedigree gives strategic direction to Ducati; this must be maintained and capitalised
upon.
The internet reduced barriers to entry for Ducati enabling Ducati to move from a
product to market focus. Ducatis expansion into merchandising through partnerships
with fashionable brands like Oakley and DKNY ensures valuable merchandising
R&D expertise is maintained at no cost. This activity keeps the brand merchandise in
fashion through clever use of the brand.
Ducati could exploit openings in the cruiser market; however, this would not be
recommended until global growth in the key cruiser markets increases and end users
have more disposable income as the global economic situation stabilises.
Ducati should continue to exploit cleverly outsourced R&D and supply chains.
Continuous feedback from Ducatis online community adds value and drives product
development forward creating new growth through innovation and process
effectiveness; this should be continued.
Ducati are better concentrating on the internet market as well as the dealer networks;
return on profits from manufacture to the point of sale on internet marketed products
is dramatically increased due to low dealer commissions paid.
In spite of the economic climate Ducati has increased sales from 12, 000 units in 2001
(Lerro & Schiuma, 2005) to a record 40,761 units in 2010 (Bertacche & Ebhardt,
2010).
Ducati should continue to gather knowledge on users through online communities to
aid production design and sales. Further exploitation of Ducatis encompassing
software platform should be explored; as should opportunities in branded
merchandise.

Author: Daniel Bye (2010). University of


9 Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

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Author: Daniel Bye (2010). University12


of Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

Author: Daniel Bye (2010). University13


of Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

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of Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

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of Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

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Strategy; Computing in Business course 2010/11

41. Castonguay, G. & Mandala, A. (2008). UPDATE 2-Italys Ducati aims for
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Guided Tour Through

Author: Daniel Bye (2010). University17


of Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

7 Appendices
Appendix A
Ten Schools of Strategy (Mintzberg et al, 2009)
1. Design - A process of conception
2. Planning - a formal process
3. Positioning - an analytical process
4. Entrepreneurial - a visionary process
5. Cognitive - a mental process
6. Learning - an emergent process
7. Power - a process of negotiation
8. Culture - a social process rooted in culture
9. Environmental - a reactive process
10. Configuration - a process of transformation
Appendix B
Prescriptive schools (3):

Design

Planning

Positioning

Descriptive schools (7):

Entrepreneurial

Cognitive

Learning

Power

Cultural

Environmental

Configuration

(Ward and Rivani, 2005)

Author: Daniel Bye (2010). University18


of Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

Appendix C:
Definition of SWOT
A process generates information that is helpful in matching an organization or groups
goals, programs, and capacities to the social environment in which it operates. Note
that in itself is only a data capture the analysis follows:
Strengths
Positive tangible and intangible attributes, internal to an organization.
They are within the organizations control.
.
Weakness
Factors that are within an organizations control that detract from its ability to
attain the desired goal.
Which areas might the organization improve?
.
Opportunities
External attractive factors that represent the reason for an organization to exist
and develop.
What opportunities exist in the environment, which will propel the
organization?
Identify them by their time frames
.
Threats
External factors, beyond an organizations control, which could place the
organization mission or operation at risk.
The organization may benefit by having contingency plans to address them if
they should occur.
Classify them by their seriousness and probability of occurrence.

Humphrey, A., S. (2004) quoted by Morrison, M. (2011) SWOT analysis (TOWS


matrix) Made Simple. RapidBI. [Online]. Available from:
http://rapidbi.com/created/swotanalysis/. [Accessed: 6 January 2012].

Author: Daniel Bye (2010). University19


of Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

Appendix D:
The PESTEL framework (1)
The PESTEL framework categorises environmental influences into six main types:
Political
Economic
Social
Technological
Environmental
Legal
Thus PESTEL provides a comprehensive list of influences on the possible success or
failure of particular strategies J & S (2011)

The PESTEL framework (2)


Political Factors: For example, Government policies, taxation changes, foreign trade
regulations, political risk in foreign markets, changes in trade blocks (EU).
Economic Factors: For example, business cycles, interest rates, personal disposable
income, exchange rates, unemployment rates, GDP trends.
Socio-cultural Factors: For example, population changes, income distribution,
lifestyle changes, consumerism, changes in culture and fashion.
The PESTEL framework (3)
Technological Factors: For example, new discoveries and technology
developments, ICT innovations, rates of obsolescence, increased spending on R&D.
Environmental (Green) Factors: For example, environmental protection
regulations, energy consumption, global warming, waste disposal and re-cycling.
Legal Factors: For example, competition laws, health and safety laws, employment
laws, licensing laws etc.

Author: Daniel Bye (2010). University20


of Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

Appendix E:

5 Forces Analysis (Porter, 1978)

Porter, ME 2008, 'THE FIVE COMPETITIVE FORCES THAT SHAPE


STRATEGY', Harvard Business Review, 86, 1, pp. 78-93, Business Source Complete,
EBSCOhost, viewed 5 January 2012.
1. Porter, John (1998) 5 Forces quoted by Quarmby, 2009. External Analysis,
BIO 0038, Management, University of Huddersfield Business School,
Huddersfield.

Porters five forces framework; Porters five forces framework helps identify the
attractiveness of an industry in terms of five competitive forces:
1.
2.
3.
4.
5.

The threat of entry,


The threat of substitutes,
The bargaining power of buyers,
The bargaining power of suppliers and
The extent of rivalry between competitors.

J & S (2011) quoted by, Mswaka, Walter. PhD. (2012 Environmental analysis for
strategic decisions: LECTURE 4- NEEDSLEC 4 TITLE ADDING. Lecture 3,
BHS0007 Corporate Business Strategy: University of Huddersfield Business School,
Huddersfield.

Author: Daniel Bye (2010). University21


of Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

Appendix F:

Resource based view (RBV)


Fairy recent approach
Originated from the Chicago School
Associated with the work of Prahalad and Hamel
Superior performance over competitors can be achieved by better use of resources
Focus is innovation, creativity, value chains, knowledge and dynamic capabilities
Strategy Lenses
Design
Ideas
Experience
Application of strategy schools Approach to
strategy formation
Dynamic capability
Resource based theory
Soft techniques
Constructionism
Chaos and evolutionary theory
Institutional theory
Entrepreneurship (venturing)
Revolutionary change
Negotiated strategy
Strategic manoeuvring

School
Design, Learning
Cultural, Learning
Planning, Learning or Power
Cognitive, Cultural
Learning, Environmental
Environmental, Power or Cognitive
Environmental, Entrepreneurial
Configuration, Entrepreneurial
Power, Positioning
Positioning, Power

Amoo, Nii. PhD. The Resource-Based View (RBV) of the Firm: Analysing Resources
& Strategic Capabilities, Lecture 5, BHS0007 Corporate Business Strategy:
University of Huddersfield Business School, Huddersfield.

Author: Daniel Bye (2010). University22


of Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

Appendix G:

Porter's Value Chain

The idea of the value chain is based on the process view of organisations, the idea of
seeing a manufacturing (or service) organisation as a system, made up of subsystems
each with inputs, transformation processes and outputs. Inputs, transformation
processes, and outputs involve the acquisition and consumption of resources - money,
labour, materials, equipment, buildings, land, administration and management. How
value chain activities are carried out determines costs and affects profits.
Most organisations engage in hundreds, even thousands, of activities in the process of
converting inputs to outputs. These activities can be classified generally as either
primary or support activities that all businesses must undertake in some form.
According to Porter (1985), the primary activities are:
1. Inbound Logistics - involve relationships with suppliers and include all the
activities required to receive, store, and disseminate inputs.
2. Operations - are all the activities required to transform inputs into outputs
(products and services).
3. Outbound Logistics - include all the activities required to collect, store, and
distribute the output.
4. Marketing and Sales - activities inform buyers about products and services,
induce buyers to purchase them, and facilitate their purchase.
5. Service - includes all the activities required to keep the product or service
working effectively for the buyer after it is sold and delivered.
Secondary activities are:
1. Procurement - is the acquisition of inputs, or resources, for the firm.
2. Human Resource management - consists of all activities involved in
recruiting, hiring, training, developing, compensating and (if necessary)
dismissing or laying off personnel.
3. Technological Development - pertains to the equipment, hardware, software,
procedures and technical knowledge brought to bear in the firm's
transformation of inputs into outputs.
Author: Daniel Bye (2010). University23
of Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

4. Infrastructure - serves the company's needs and ties its various parts
together, it consists of functions or departments such as accounting, legal,
finance, planning, public affairs, government relations, quality assurance and
general management
Porter, M.E. (1985) Porters Value Chain. Institute for Manufacturing; University of
Cambridge. [Online]. Available from:
http://www.ifm.eng.cam.ac.uk/dstools/paradigm/valuch.html. [Accessed: 6 January
2012].

Author: Daniel Bye (2010). University24


of Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

Appendix H: The Greiner Curve (Greiner, 1972)

Greiner, L. "Evolution and Revolution as Organizations Grow," Harvard Business


Review. July-August 1972.
Greiner, L. (1972) quoted by Anon (n.d.). Greiner Curve - Surviving the crises of growth Strategy Tools training from MindTools.com. [Online]. Available from:
http://www.mindtools.com/pages/article/newLDR_87.htm. [Accessed: 6 January
2012].

Author: Daniel Bye (2010). University25


of Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

Appendix I:

Ansoffs Product - Market Grid (Ansoff, 1957)

Ansoff, I. H. (1957), Ansoffs Product - Market Grid, Strategies for diversification,


Harvard Business Review, Vol. 35, No. 2, p. 114.

Author: Daniel Bye (2010). University26


of Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

Appendix J:
VRIN Model
The four key criteria by which capabilities can
be assessed in terms of providing
a basis for
achieving sustainable competitive advantage
are:
value,
rarity,
inimitability and
non-substitutability
Journal of

Jay Barney: Firm resources and sustained competitive advantage,


Management, vol. 17 (1991), no. 1, pp. 99120.
*****************
VRIN (1)
V Value of strategic capabilities
Strategic capabilities are of value when they:

take advantage of opportunities and neutralise


provide value to customers
provide potential competitive advantage
at a cost that allows an organisation to realise
of return

threats,

acceptable levels

VRIN (2)
R Rarity

Rare capabilities are those possessed uniquely by one organisation or by a few


others only. (E.g. a company may have patented products, have supremely
talented people or a powerful brand.)
Rarity could be temporary.
(Eg: Patents expire, key individuals can leave or brands can be de-valued by
adverse publicity.)
VRIN (3)
I Inimitability
Inimitable capabilities are those that competitors find difficult to imitate or obtain.

Competitive advantage can be built on unique


resources (a key
individual or IT system) but these may not be sustainable (key people
leave or others acquire the same systems).

Sustainable advantage is more often found in


competences (the
way resources are
managed, developed and deployed) and the way
competences are linked together and integrated.

Author: Daniel Bye (2010). University27


of Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

VRIN (4)
N - Non-substitutability
Competitive advantage may not be sustainable if there is a threat of substitution.
Product or service substitution from a different industry/market. For example,
postal services partly substituted by e-mail.
Competence substitution. For example, a skill substituted by expert systems or
IT solutions

Amoo, Nii. PhD. The Resource-Based View (RBV) of the Firm: Analysing
Resources & Strategic Capabilities, Lecture 6 (2); 6-11. BHS0007 Corporate
Business Strategy: University of Huddersfield Business School, Huddersfield.

Author: Daniel Bye (2010). University28


of Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11

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