Is the firm able to exploit an opportunity or neutralize an external threat with the resource/capability?
- Sustainable Advantage
Once you’ve looked at your industry from a macro level, it’s time to examine it close up.
Start with a USP Analysis
. What can you do to build and sustain a USP? Next, explore the competencies
that you’ll need, and think about how to develop and sustain these.
Then think about how easy it will be for your competitors to duplicate your product or service.
Also, what resources do you possess that your competitors don’t? Do a VRIO Analysis
to answer this question, and then look at your competitors’ resources. What do they have that you don’t? This could include patents, established processes, and finances. How will these affect your ability to compete?
To succeed in business, you not only have to build an advantage over your competition, but you also have to be able to sustain that advantage in the long run. What can you do to make sure that your competition doesn’t catch up to you – or pass you – in short order? If you are going to develop a unique selling proposition that allows you to stand out from the crowd, is there any way that you can maintain that advantage going forward? If you are quickly going to be copied by a bunch of competitors as soon as you start to have success, it might not be worth entering the market in the first place.
- Do you require proprietary elements – patents, trade secrets and so on – that other firms cannot likely duplicate or imitate?
- Can your business develop and employ superior organizational processes, capabilities or resources that others would have difficulty in duplicating or imitating?
- Is your business model economically viable i.e. can you show that your company won’t run out of cash quickly? That depends upon the answers to these questions related to working capital cycle:
- Will your revenue be adequate in relation to the capital investment you need and the margins you get?
- How much will it cost you to acquire and retain customers?
- How long will it take to attract customers?
- Will your gross margins be adequate to cover your necessary cost structure?
- How much cash must be tied up in working capital (inventory or other) for how long?
- How quickly will customers pay?
- How slowly will suppliers and employees be paid?
- The Question of Value:“Is the firm able to exploit an opportunity or neutralize an external threat with the resource/capability?”
- The Question of Rarity:“Is control of the resource/capability in the hands of a relative few?”
- The Question of Imitability:“Is it difficult to imitate, and will there be significant cost disadvantage to a firm trying to obtain, develop, or duplicate the resource/capability?”
- The Question of Organization:“Is the firm organized, ready, and able to exploit the resource/capability?” “Is the firm organized to capture value
