The individual firm (strategic actions)
                       Overview of Chapter 3
 a) Strategic traits
     –   Strategic competences
     –   Strategic rigidities
     –   Reform (modifying strategic traits)
     –   From strategic traits to strategic actions
 b) Differentiation
 c) Coordination
 d) Confrontation
 e) Review (integrating the course’s components)
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                           Strategic traits
                Moving beyond environment…
 • Fighting over a slice of the Value Pool pie
     – Environment determines the portion of the VP that is allocated to 
        market participants (firm + rivals)
     – Strategic actions increase firm’s portion of VP by improving the 
        environment for the firm
         • If rivals could employ the same strategic
           actions, firms would offset each other
         • Therefore, strategic actions rely on firm’s
           strategic traits, which rivals don’t have
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                            Strategic traits
                     What are strategic traits?
 • A strategic trait has two aspects:
     – Positive aspect: strategic competence
         • Often called “core competence” or “firm-specific resource”
         • This is the “strengths” part of the SWOT analysis
     – Negative aspect: strategic rigidity
         • Possessing a strategic competence is always a trade-off: limits firm’s 
           ability or incentive to take certain strategic actions or to develop 
           certain new strategic competences
         • This is the “weaknesses” part of the SWOT analysis
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                Strategic competences
     Elements of a strategic competence (VRIO)
 • Value [facilitates a strategic act that exploits an opportunity/neutralizes a threat]
    – A benefit that facilitates a strategic act
       • For differentiation: value to customers (one of the bases of competition)
       • For confrontation: ability to impose costs on rivals
       • For coordination: low coordination costs
       • Value through benefitting others
          – Competence that benefits another firm can facilitate coordination w/that firm
          – Competence  that  benefits  politicians  or  their  constituents  can  facilitate 
            regulation (for the purposes of confrontation, coordination or differentiation)
    – Benefit must be competitively superior (difficult for rivals to substitute)
 • Rarity [unavailable to rivals]
    – Competence is scarce (currently available only to one/few competing firms)
    – Competence is difficult to imitate (rivals face cost/disadvantage to acquire/develop it)
 • Organization [firm is able to capture the value of the competence]
    – Value must be appropriable (i.e., firm can capture the value)
    – Firm’s policies & procedures must support exploitation of the competence
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                   Strategic competences
            Strategic competence: organization
 •  Organization element involves support on the following dimensions
     – Skills/knowledge of individual employees
     – Technical systems (proprietary processes & information)
     – Managerial systems (firm policies on employee incentives)
     – Values/norms
 •  Example: supporting a competence in handling US-China M&A
     – Skills/knowledge: e.g., attorneys who can speak both English & Chinese and 
       who know both US & Chinese corporate law
     – Technical systems: e.g., timetables, procedures and templates for antitrust 
       review in both US & China
     – Managerial systems: policies that encourage temporary assignments in China; 
       policies that facilitate hiring foreign-trained lawyers
     – Values: e.g., foreign attorneys not disadvantaged in making partner
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