A Resource-Based Approach

to Strategy Analysis in
Small-Medium Sized Enterprises Andrea Rangone

ABSTRACT. Few articles have been published that specifi- In the last decade, literature on strategic mana-
cally deal with how to support strategic analysis and man- gement has paid considerable attention to the
agement in small-medium sized enterprises (SMEs). In the last
decade, however, literature on strategic management has paid
resource-based theory (e.g., Grant, 1991; Collis
considerable attention to the resource-based theory, which and Montgomery, 1995; Barney, 1991; Mahoney
seems to fit well the needs of owners and executives of SMEs. and Pandian, 1992; Amit and Shoemaker, 1993;
The objective of this article is twofold: (i) to present a Sanchez et al., 1995; Peteraf, 1993), which seems
resource-based view of an SME’s sustainable competitive to fit well the needs of owners and executives of
advantage; (ii) to propose an approach to strategy analysis
based on such a view.
SMEs.
The objective of this article, which is supported
by empirical research based on 14 case studies, is
Introduction twofold:

The literature on management of small-medium • to present a resource-based view of an SME’s

sized enterprises (SMEs) includes many articles sustainable competitive advantage;
dealing with strategic planning, most of which • to propose an approach to strategy analysis
report empirical studies aimed at: based on such a view.
• showing the presence or the absence of strategic This article is divided into three major sections.
analysis and planning practices in SMEs (e.g., The first briefly reports some basic concepts of the
Sexton and Van Auken, 1985; Shuman et al., resource-based theory. In the second section a
1985); resource-based view of a SME’s sustainable com-
• demonstrating the effectiveness of such prac- petitive advantage is proposed. Finally, the third
tices in terms of positive impact on a com- section describes the suggested approach to
pany’s performance (e.g., Aram and Cowen, strategic analysis, using an example case derived
1990; Orpen, 1994; Bracker et al., 1988; from the empirical research.
Schwenk and Shrader, 1993; Lyles et al., 1993;
Risseeuw and Masurel, 1994; Piest, 1994;
Olson and Bokor, 1995). 1. The resource-based theory
In contrast, little attention has been paid to how According to the resource-based theory, which has
to support the entrepreneurial and managerial team its roots in economic theory (e.g., Penrose, 1959)
in strategy analysis (e.g., Quinn, 1980; Ansoff, and early strategy theory (Selznick, 1957; Ansoff,
1984; Curtis, 1993). 1965; Andrews, 1971), the long-term competi-
tiveness of a company depends on its endowment
Final version accepted on August 26, 1998 of resources that differentiate it from its competi-
tors, that are durable and, that are difficult to
Department of Economics and Production
Politecnico di Milano imitate and substitute (e.g., Grant, 1991; Peteraf,
Piazza L. Da Vinci, 32-20133 Milano, Italy 1993; Collis and Montgomery, 1995; Mahoney
E-mail: andrea.rangone@polimi.it and Pandian, 1992; Barney, 1991; Prahalad and

Small Business Economics 12: 233–248, 1999.

 1999 Kluwer Academic Publishers. Printed in the Netherlands.
234 Andrea Rangone

Hamel, 1990 and 1994; Stalk et al., 1992, Amit resources, i.e. those that are the basis of the
and Shoemaker, 1993; Porter, 1991). company’s sustainable competitive advantage. To
Various definitions and classifications of determine such resources, various authors have
resources have been proposed in the literature. The proposed a number of “tests” (see also Barney,
most important in the context of this article are 1991; Wernefelt, 1989; Zahara and Das, 1993;
briefly described here. Amit and Shoemaker, 1993; Collis and
Montgomery, 1995; Mohoney and Pandian, 1992;
• A number of authors divide resources into
Porter, 1991; Grant, 1991; Prahalad and Hamel,
homogeneous classes, such as, financial
1994), the most important of which are:
resources, physical resources (plant, machine,
equipment, etc.), human resources, technologi- • competitive superiority test, which evaluates if
cal resources, reputation, and organisational and to what extent the resource contributes to
resources (e.g., control management system, differentiating the company from its competi-
organisational climate, internal relationships) tors;
(e.g., Grant, 1991; Azzone et al., 1996). • imitability test, which analyses actual and
• Others classify resources as tangible, such as potential competitors’ difficulty in imitating the
human, financial or physical resources, and resource, due, for example, to its physical
intangible, such as reputation, organisation, uniqueness, path dependency, casual ambiguity
know-how or patents (e.g., Hall, 1992; Zahara or economic deterrence;
and Das, 1993; Collis and Montgomery, 1995). • duration test, which measures if the resource’s
• Some contributions introduce the distinction benefits will also be generated in the long term;
between assets, something a firm possesses • appropriability test, that verifies if the com-
(e.g., brand, retail location), and skills, some- pany owning the resource is able to exploit
thing a firm is able to do (e.g., advertising, the generated advantages generated in the
efficient manufacturing) (Aaker, 1989; Hall, market;
1992). In particular Hall (1992) refers to intan- • substitutability test, which assesses how diffi-
gible resources as assets and competencies: the cult it is for competitors to replace the resource
former are divided into legal assets (e.g., con- with an alternative that gives the same advan-
tracts, licences, patents, trade marks, copyright, tages.
etc.) and non-legal assets (e.g., reputation,
supplier network, databases), and the latter into Starting from these basic concepts, some
know-how (possessed not only by employees authors have proposed frameworks and approaches
and managers but also by the other stake- to support strategy analysis and planning (Hall,
holders) and organisational culture (e.g., the 1993; Amit and Shoemaker, 1993; Aaker, 1989;
company’s attitude to quality and learning Zahara and Das, 1993; Williamson and Verdin,
ability). 1992; Quinn and Hilmer, 1994; Wernefelt, 1989;
• A number of authors have taken the concepts Peteraf, 1993; Collis and Montgomery, 1995;
of competence and capability further, seeing Grant, 1991; Prahalad and Hamel, 1994; Stalk
these as a body of resources (technologies, et al., 1992). However, such contributions gener-
skills, organisational resources, etc.) and as a ally refer to large firms. This paper proposes
company’s ability to manage, leverage and a resource-based approach to strategy analysis
exploit them within the market (Prahalad and suitable for SMEs. The main features are that
Hamel, 1989, 1994; Stalk et al., 1992; Meyer it:
and Utterback, 1993; Azzone and Rangone,
• is not too complex or time consuming,
1996; Amit and Shoemaker, 1993; Grant, 1991;
“forcing” the entrepreneurial and managerial
Sanchez et al., 1995; Verdin and Williamson,
team to pay attention to just a few variables
1994).
with a major impact on long-term competitive
However, the resource-based theory does not advantage;
consider all resources possessed by a company, • does not require specialist skills in strategic
but focuses rather only on critical (or strategic) analysis or sophisticated information systems.
 A Resource-Based Approach to Strategy Analysis in Small-Medium Sized Enterprises 235

The approach derives from a resource-based capabilities. Hence, there are two extreme cases
view of an SME’s sustainable competitive advan- and a range of intermediate situations. The
tage described in the next section. extreme cases are:
• SMEs that have a “mono-dimensional” strategic
2. A resource-based view of an SME’s intent, i.e. their strategic attention is focused on
2. competitive advantage just a single capability. For instance, Company
1 (see Table I) views itself as a “production
Empirical research based on 14 case studies of system”, working only as a subcontractor, and,
SMEs in different industries (see Table I for data thus, attributes very little importance to capa-
about the size and the products/services of the bilities in innovation and market management;
companies in the sample) has produced a model • SMEs that pay strategic attention to all three
of an SME’s sustainable competitive advantage basic capabilities. Company 9 (Table I), for
based on three basic capabilities: instance, bases its competitiveness especially
on production and marketing capabilities, but
• innovation capability: that is a company’ ability also considers innovation critical.
to develop new products and processes, and
achieve superior technological and/or manage- The extent to which a company possesses each
ment performance (e.g., development cost, of these capabilities depends on its specific
time-to-market, etc.); strategic focus, which moulds its deliberate (i.e.
• production capability: that is the ability to explicitly planned) or emergent (i.e. the result of
produce and deliver products to customers, a set of local choices that together define a con-
while ensuring competitive priorities, such as sistent pattern of action) strategies (Mintzberg and
quality, flexibility, lead time, cost, dependa- Waters, 1985).
bility, etc.; The basic capabilities are founded, in turn, on
• market management capability: that is a com- a company’s endowment of critical resources, that
pany’s ability to market and sell its products are those resources that meet the five tests reported
effectively and efficiently. in Section 1 (competitive superiority, imitability,
duration, appropriability and substitutability). In
According to this model, an SME explicitly or this article, critical resources include: financial
implicitly, consciously or unconsciously, puts its resources (internally generated funds), physical
strategic focus on one or more of the above basic assets, human resources, organisational resources

TABLE I
The companies in the sample

Companies* Size (turnover and employees) Product services

01 0.7 million pounds, 15 employees Made-to-order components in rubber and plastic

02 100 million pounds, 1200 employees Disk braking systems for motor-cycles, cars and industrial vehicles
03 3.5 million pounds, 50 employees Made-to-order pressed components in zinc
04 2 million pounds, 30 employees Low, medium and high voltage electronic apparatus
05 5 million pounds, 100 employees Small aluminium tubes for pharmaceutical products
06 0.8 million pounds, 20 employees Written-to-order text for publishing houses
07 2 million pounds, 30 employees Spring structures for mattresses
08 1.7 million pounds, 20 employees Trade fair services
09 43 million pounds, 300 employees Built-in domestic appliances
10 0.7 million pounds, 15 employees Tooling machines
11 7 million pounds, 75 employees Doors and windows for industrial and commercial vehicles
12 7 million pounds, 50 employees Polyethylene film for packaging
13 10 million pounds, 200 employees Super-rapid steel tools for tooling machines
14 20 million pounds, 200 employees Cacao-based food-stuffs

* For reasons of confidentiality, the names of the sample companies are replaced by numbers.
236 Andrea Rangone

(including external relationship networks), skills, Figure 1 summarizes the above considerations
know-how and competencies, brand and reputa- in a tree structure (referred to as “resource tree”)
tion (see also Grant, 1991; Ackers, 1989; Hall, showing the links between basic capabilities, key
1992; Azzone et al., 1996). performances and critical resources.
To make the links between basic capabilities Figures 2 and 3 show the resource trees of com-
and critical resources operational, it is necessary panies 1 and 9, respectively.
to consider the company’s key performances, It should be noted that the three basic capabil-
which themselves depend on the industry’s key ities can be strictly related to each other. In
success factors (Porter, 1980; De Vasconcellos and particular, a given critical resource can act on
Hambrick, 1989; Hax and Majluf, 1985; Grant, more than one capability. For instance, Company
1991) and on the core customer benefits the 9’s customer relationship network affects both its
company wants to address (Prahalad and Hamel, market management capability and its innovation
1989 and 1994). Only critical resources that affect capability (customers are effectively involved in
key performances should be considered. the new product development process) (Figure 3),
Key performances can be divided into three while the service centres network acts on both
categories, depending on the capability to which production capability and market management
they are principally related: (i) manufacturing capability (in terms of service support).
performances (e.g., quality, dependability, cost, According to this model, an SME’s competitive
etc.), which in literature on operations manage- advantage depends on critical resources possessed
ment are usually referred to as manufacturing by the company and their alignment with the
competitive priorities (e.g., Anderson et al., 1989; company’s strategic intent (and thus key perfor-
Krajewski and Ritzman, 1990; Kim and Arnold, mances). The model does not say anything about
1992; Vickery et al., 1991; Azzone and Rangone, how the single firm exploits such a competitive
1996); (ii) new product development perfor- advantage on the market: to grow or to increase
mances, which include both technological and profitability. A company that has a sustainable
managerial performance (e.g., development cost, competitive advantage relative to its competitors,
time to market); (iii) marketing performances, due to an adequate endowment of critical
such as brand awareness, brand reputation, resources, can in fact pursue a growth strategy or
customer loyalty, etc. a high margin strategy: according to the first

COMPETITIVE
ADVANTAGE

INNOVATION PRODUCTION MARKET MANAG.

CAPABILITY CAPABILITY CAPABILITY

key new product key production key marketing

development performances performances performances

CRITICAL RESOURCES

Figure 1. The resource tree.

 A Resource-Based Approach to Strategy Analysis in Small-Medium Sized Enterprises 237

Figure 2. Company 1’s resource tree.

strategy, the firm exploits its competitive advan- 3. A resource-based approach to strategic
tage to increase sales, by, for instance, selling 2. analysis
products with performance superior to competi-
The approach to strategy analysis in SMEs
tors’ at the same price; following the second
proposed in this article involves the following
strategy, the firm exploits its competitive advan-
major steps:
tage to increase profitability/unit margin, by, for
instance, making customers pay a premium price 1. define the company’s strategic intent and key
for the superior performance of its products. A performances;
firm can of course pursue both those strategy 2. identify the company’s resources influencing
simultaneously. key performances;
It should be noted, however, that the endow- 3. assess the strategic value of resources, i.e. their
ment of critical resources cannot be directly ability to create and sustain a long term com-
related to a company’s financial performance, as petitive advantage;
the latter also depends on the specific structure and 4. assess the strategic consistency of resources in
attractiveness of the industry in which the contributing to the achievement of the strategic
company acts, and on the ability of the company intent;
to translate resources into capabilities and, subse- 5. generating strategic options.
quently, competitive advantage. With regards to
this last point, a fundamental role is played by the
Step 1. Defining the strategic intent and key
entrepreneur(s), who can be seen as a “special”
performances
resource supporting all the others.
The first step in the approach involves the defini-
tion of the company’s strategic intent by the
entrepreneurial and managerial team. According
238 Andrea Rangone

SUSTAINABLE COMPETITIVE ADVANTAGE

INNOVATION PRODUCTION MARKET MANAG.

CAPABILITY CAPABILITY CAPABILITY

customer loyalty
small size shape and design conformity quality customer service lead time
(miniaturisation) support

customer service centres market knowledge

relationship network network

material quality system quality reputation

competence

laboratory rolled steel marketing skills

specialists processing machines

R&D laboratory work force in

assemply depart.

CAD system production

management system

designers

Figure 3. Company 9’s resource tree.

to the model of sustainable competitive advantage entrepreneur and executives are given in Figure 4.
described in the previous section, this implies two, This company considers all three basic capa-
strictly related, levels of choices: bilities to be strategic (even if no specific key
marketing performance is defined).
• definition of the basic capabilities on which the
firm will rely. This means focusing on a single
capability or pursuing two or all three basic Step 2. Identifying resources influencing key
capabilities; performances
• definition of the key perfomances to achieve,
In this step, resources that can influence key per-
on the basis of the industry’s key success
formances have to be identified (at this point of
factors and the core benefits the company wants
the approach, the attention has to be paid to all
to ensure to its customers.
relevant resources, as it is not yet possible to
Let us consider, as an example, Company 13 determine which are critical and which are not).
(Table I), which operates in the super rapid steel To this end, a process-based approach can be
tools sector. The key performances defined by the followed: for each key performance, the major
 A Resource-Based Approach to Strategy Analysis in Small-Medium Sized Enterprises 239

SUSTAINABLE COMPETITIVE ADVANTAGE

INNOVATION PRODUCTION MARKET MANAG.

CAPABILITY CAPABILITY CAPABILITY

surface heat customization product range conformity to

toughness resistance specifications

mechanical
resilience

Figure 4. Company 13’s key perfomances.

activities acting on it are analysed so that the gives an example based on a scoring method of
resources necessary to carry out these activities how to analytically calculate the strategic value
and to link them each other can be determined. of resources. For further details of other multi-
This approach could lead to process reengineering attribute decision making techniques, see, for
(Hammer and Champy, 1993; Davenport, 1993; instance, Rangone (1998).
Hall et al., 1993; Edwards and Peppard, 1994), in As already pointed out in Section 1, in the
which case, the resources that have to be con- resource-based theory, only resources with a
sidered are those related to the activities included “good” strategic value can be considered critical
in the reengineered process. and, thus, able to provide competitive advantage.
Figure 5 reports resources deriving from this
procedure for Company 13. TABLE II
An example of the application of the tests to one of
Company 13’s resources (customer relationship network)
Step 3. Assessing the strategic value of
resources Tests Resource: customer relationship network

According to the resource-based theory, the Competitive The customer portfolio of the company
strategic value of a resource, i.e. its ability to superiority includes some important and large cus-
create and sustain a long term competitive advan- tomers, even though most do not have an
exclusive relationship with the company
tage, depends on the results of the five tests given and are also served by major competitors.
in the first section of this article: competitive
Imitability It is not easy to sell for the first time to
superiority, imitability, duration, appropriability the major customers in the market, but
and substitutability. Table II shows an example of most important competitors already sell to
how a resource (Company 13’s customer rela- such customers.
tionship network) can be assessed with these tests. Duration Customer loyalty, particularly of the most
With such evaluations, the entrepreneur and important clients, is not very high, hence
executives can assess the strategic value of each customer relationships are expected to be
resource qualitatively. Table III reports linguistic medium-term.
evaluations of the value of Company 13’s Appropriability The company is able to exploit the cus-
resources, expressed on the following scale: “low; tomer relationship network, so reducing,
for example, the unpredictability of
medium; high”. This step can be supported by demand.
more sophisticated analytical tools, such as any
Sustitutability The customer relationship network cannot
multi-attribute decision making techniques, to be replaced by another resource.
arrive at more precise assessments. The Appendix
240 Andrea Rangone

SUSTAINABLE COMPETITIVE ADVANTAGE

INNOVATION PRODUCTION MARKET MANAG.

CAPABILITY CAPABILITY CAPABILITY

surface heat customization product range

toughness resistance

mechanical conformity to
resilience specifications

designers manufacturing market knowledge

systems

competence in material surface reputation

materials processing

laboratory net organisation

specialists

laboratory manufacturing
equipment workforce

supplier network
customer
relationship network

Figure 5. Company 13’s resources.

TABLE III indeed only potentially able to provide long-term

Company 13’s qualitative assessments of strategic value of competitive advantage, as they must also be con-
resources
sistent with a company’s strategic intent, and, thus,
Resources Strategic value with key performances. In other words, in order
to create and sustain a competitive advantage over
Customer relationship network Medium the long-term, there must be consistency between
Quality reputation High a company’s strategic intent and its endowment of
Market knowledge High
Supplier relationship network Low
critical resources. The next step assesses this
Competence in materials High strategic consistency by calculating the importance
Laboratory specialists Low of each resource in contributing to the achieve-
Designers Low ment of the company’s strategic intent.
Laboratory equipment Medium
Manufacturing system Medium
Material surface processing machinery Medium Step 4. Assessing the strategic consistency of
Organisation High resources
Manufacturing workforce Medium
A resource’s strategic value measures its poten-
tial ability to generate and sustain a firm’s
In this case, resources scoring high or medium are long-term competitive advantage, but it says
taken as critical. nothing about the resource’s consistency with the
It should be noted that critical resources are company’s strategic objectives, i.e. its ability to
 A Resource-Based Approach to Strategy Analysis in Small-Medium Sized Enterprises 241

contribute to the achievement of the company’s TABLE IV

strategic intent. We will refer to such an ability Company 13’s qualitative assessments of the strategic
consistency of resources
as strategic consistency, since it measures the
resource’s alignment with the company’s strategic Resources Strategic consistency
objectives.
In order to assess the strategic consistency of Customer relationship network Medium
resources, the following steps have to be carried Reputation Medium
Market knowledge Low
out: Supplier relationship network Low
Competence in materials Medium
1. determine the relative priorities of the basic Laboratory specialists High
capabilities and the relative importance of key Designers High
perfomances, for each capability; Laboratory equipment High
2. determine the impact of each resource on key Manufacturing system High
performances (as highlighted in Section 2, a Material surface processing
machinery Low
single resource can act on more than one Organisation Medium
performance); Manufacturing work-force High
3. assess the strategic consistency of resources by
integrating the relative priorities of capabilities
and key performances (step 1) with the Figure 7 shows the map of Company 13’s
resources’ impact on performances (step 2). resources in the “strategic consistency/strategic
Even if the above steps can be qualitatively value” matrix.
carried out by a company’s entrepreneurs and By analysing the map of a company’s resources
executives, an analytical tool can be still used, as in the “strategic consistency/strategic value”
shown in the Appendix. matrix, an SME’s entrepreneurs and executives
Table IV shows the qualitative output of this can deduce guidelines for company strategy. Such
phase: the strategic consistency of resources is guidelines can be divided into two different levels:
assessed using a linguistic scale (low, medium, • the first level refers to the overall alignment
high). between the company’s strategic objectives and
its critical resources;
Step 5. Generating strategic options • the second level is concerned with the “most
suitable” strategies for the different resource
Depending on their strategic value and consis- classes.
tency, a company’s resources can be mapped in a
matrix similar to that reported in Figure 6 which With respect to the first level, the matrix
allocates the resources to one of four squares: verifies the level of consistency of the company’s
endowment of resources with its strategic intent:
• resources with high consistency and high value
• if most resources fall into squares 1 and 2,
are coherent with the company’s strategic
consistency is ensured, but
objectives and can generate a sustainable com-
• if many resources are in square 3 (high value
petitive advantage (square 1);
• resources with high consistency but low value
are aligned with the company’s strategic objec-
Strategic consistency
tives, but are not able to support long term LOW HIGH
competitive advantage (square 2); Strategic value
• resources with low consistency but high value
could be critical under a resource-based per- LOW Not significant 2
spective, but are not aligned with the
HIGH 3 1
company’s strategic objectives (square 3);
• resources with low consistency and low value
are not relevant. Figure 6. The “strategic consistency/strategic value” matrix.
242 Andrea Rangone

Strategic consistency
LOW MEDIUM MEDIUM HIGH
Strategic value

LOW h Supplier network h Material surface h Laboratory specialists

processing machinery h Designers
MEDIUM h Customer relation h Laboratory equipment
network h Manufacturing system
MEDIUM h Manufacturing workforce
HIGH h Market knowledge h Reputation
h Competence in materials
h Organisation

Figure 7. Mapping Company 13’s resources in the “strategic consistency/strategic value” matrix.

and low consistency), there is significant incon- • resources in square 2 (low value and high
sistency. consistency) should be developed through
specific investments, in order to increase their
In the latter case, a revision of the company’s
value;
strategic intent should be considered, with a view
• resources in square 3 (high value and low
to a better explanation of critical resources. Such
consistency) should be exploited without
a revision evidently must consider external vari-
further investment and, if possible, converted
ables and, in particular, the industry’s key success
to support other key performances;
factors (see step 1).
• resources in square 1 (high value and high
With respect to the second level, i.e. using the
consistency) should be exploited as before to
map to identify the “most suitable” strategies for
support key performances and nurtured to avoid
the different resources, the following guidelines
any loss of value.
can be highlighted:

Appendix – Analytical support of the resource-based approach

An example of how the resource-based approach to strategic analysis can be supported analytically is
given. The example is based on a scoring method, a multi-attribute technique with the great advantage
of being mathematically trivial and simple to implement (e.g., Buss, 1983; Canada, 1986). The example
is derived from the case study of Company 13.
Using a scoring method, the strategic value of a resource can be calculated as follows:
• the suitability rating of each resource with respect to the five tests is expressed by integer numbers
from 1 to 10 (let SRij be the suitability rating of the i-th resource with respect to the j-th test);
• the strategic value (SVi) of each resource is obtained by multiplying the above ratings and, thus, cal-
culating the root to the power 5:

√
5 5
SVi = ∏ SRij
j=1
 A Resource-Based Approach to Strategy Analysis in Small-Medium Sized Enterprises 243

TABLE A1
Numeric assessments of Company 13’s resources with respect to the five tests and their resulting strategic value*

Resources Competitive Imitability Duration Appro- Substituta- Strategic

superiority priability bility value

Customer relationship network 06 5 6 08 10 6.8

Reputation 10 7 9 10 07 8.5
Market knowledge 10 8 8 09 08 8.5
Supplier relationship network 04 2 2 06 04 3.3
Competence in materials 09 9 8 07 07 7.8
Laboratory specialists 02 6 4 04 04 3.8
Designers 02 6 4 04 04 3.8
Laboratory equipment 08 4 8 08 06 6.6
Manufacturing system 08 6 8 06 04 6.2
Material surface processing machinery 06 6 8 08 04 6.2
Organisation 10 8 8 08 08 8.4
Manufacturing workforce 06 6 6 06 06 6

* The correspondence between the scoring reported in the last column of Table A1 and the qualitative assessment of the strategic
value of Company 13’s resources shown in Table III can be established on the basis of the following relationships: scores below
5 are judged “low”; scores between 5.1 and 7.5 are considered “medium”; scores above 7.6 are judged “high”.

As far as the calculation of the strategic consistency of resources is concerned, the application of the
scoring method requires the following steps:
• the relative priorities of the basic capabilities and of key performances for each capability are defined
by numeric weightings expressed as real numbers from 0 to 1, whose sum is equal to 1 (let Rck be the
relative priority of the k-th basic capability and Rkl the relative priority of the l-th key performance
acting on the k-th basic capability);
• the assessment of the impact of each resource on key performances is made using the same scale as
in the previous step (let Iilk be the impact rating of the i-th resource with respect to the l-th key
performance of the k-th basic capability);
• the strategic consistency of each resource (SC i) is calculated by averaging its score with respect to
every key performance with the corresponding weighting:

SCi = ∑ RckRklIilk
k, l

Tables A2, A3 and A4 report the numeric weightings of the basic capabilities and key performances.

TABLE A2
Weightings of Company 13’s basic capabilities

Basic capabilities Weightings (Rck)

Innovation capability 0.4

Production capability 0.4
Market management capability 0.2
244 Andrea Rangone

TABLE A3
Weightings of Company 13’s key performances relevant to production capability

Key performances Weightings (Rkl with k = production capability)

Conformity to specificatons 0.3

Customisation 0.5
Product range 0.2

TABLE A4
Weightings of Company 13’s key performances relevant to innovation capability

Key performances Weightings (Rkl with k = innovation capability)

Surface toughness 0.4

Head resistance 0.2
Mechanical resilence 0.3

Tables A5–A11 report the scoring attributed to the resources impact on key performances and on market
management capability.

TABLE A5
Scores for the impact of Company 13’s resources on conformity to specifications

Resources Scores (Iilk with l = conformity to specifications and

k = production capability)

Manufacturing systems 0.2

Material surface processing machinery 0.2
Network organisation 0.1
Manufacturing workforce 0.5

TABLE A6
Scores for the impact of Company 13’s resources on customisation

Resources Scores (Iilk with l = customisation and

k = production capability)

Manufacturing systems 0.2

Material surface processing machinery 0.1
Network organisation 0.2
Manufacturing workforce 0.1
Laboratory specialists 0.2
Laboratory equipment 0.1
Designers 0.1
 A Resource-Based Approach to Strategy Analysis in Small-Medium Sized Enterprises 245

TABLE A7
Scores for the impact of Company 13’s resources on product range

Resources Scores (Iilk with l = product range and

k = production capability)

Manufacturing systems 0.3

Material surface processing machinery 0.1
Organisation 0.2
Manufacturing workforce 0.1
Laboratory specialists 0.1
Laboratory equipment 0.1
Designers 0.1

TABLE A8
Scores for the impact of Company 13’s resources on surface toughness

Resources Scores (Iilk with l = surface toughness and

k = innovation capability)

Supplier relationship network 0.1

Material competence 0.3
Laboratory specialists 0.4
Laboratory equipment 0.2

TABLE A9
Scores for the impact of Company 13’s resources on mechanical resilience

Resources Scores (Iilk with l = mechanical resilience and

k = innovation capability)

Supplier relationship network 0.2

Competence in materials 0.2
Laboratory specialists 0.2
Laboratory equipment 0.4

TABLE A10
Scores for the impact of Company 13’s resources on head resistance

Resources Scores (Iilk with l = heat resistance and

k = innovation capability)

Supplier relationship network 0.1

Competence in materials 0.3
Laboratory specialists 0.2
Laboratory equipment 0.1
Designers 0.3
246 Andrea Rangone

TABLE A11
Scores for the impact of Company 13’s resources on market management capability

Resources Scores (Iilk with l = market management capability)

Customer relationship network 0.3

Market knowledge 0.2
Reputation 0.5

Finally, Table A12 shows the overall strategic consistency of each resource.

TABLE A12
Numeric assessments of resources’ strategic consistency*

Resources Strategic consistency (SCi)

Customer relationship network 0.06

Reputation 0.08
Market knowledge 0.04
Supplier relationship network 0.04
Competence in materials 0.088
Laboratory specialists 0.144
Designers 0.052
Laboratory equipment 0.1
Manufacturing system 0.088
Material surface processing machinery 0.052
Organisation 0.068
Manufacturing workforce 0.88

* The correspondence between the scoring reported in Table A12 and the qualitative assessment of the strategic value of Company
13’s resources shown in Table IV can be established on the basis of the following relationships: scores between 0.045 are judged
“low”; scores between 0.046 and 0.08 are considered “medium”; scores above 0.081 are judged “high”.

On the basis of the numeric values calculated above, it is possible to map resources in the “strategic
value/strategic consistency” matrix more precisely.

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