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Resource-Based Global Operations Strategy

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Resource and Competitive Advantage
To obtain competitive advantage, a resource should have at least two
attributes:
• First, the resource must be “valuable” in seizing an opportunity for a firm,
neutralizing threats, or shielding the firm against the threat.
• Second, the resource must be “rare” in the current and potential
competition.
To further get a sustained competitive advantage, the relevant resources
• must be “non-imitable” or “costly to imitate”, namely competitors cannot
acquire or accumulate resources with the desired attributes.
• must be “non-substitutable” or “costly to substitute”, namely competitors
cannot access the resources to implement the same strategy.

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Barney’s resource-based theory

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VRIO framework (Barney and Hesterly 2010)

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 Peteraf’s resource-based theory

Peteraf (1993) argues that to gain a sustained competitive advantage all of the following
four conditions must be met (see Fig. 5.2). The first condition is the heterogeneity of
resources, under which condition a firm may generate a differential profit. The
remaining three are “ex ante limits” to competition, “ex post limits” to competition, and
resource immobility. 7
Resource strength–strategic importance
matrix (Based on Grant 2009)

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Resource-Based Global Operations Strategy
Two types of resources:

(1) resources that can be acquired in factor market or external systems

(2) resources developed inside the firm. If the resource is non-imitable,

resources can be employed to contribute positively to performance and confer
competitive advantage

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Global Resource Size Management
• Global resource sizing problems determine the capacity level by
considering key trade-offs between the cost of global excess capacity
and the opportunity cost of global capacity shortage.
• For example, Apple was struggling to respond to the demand for its
iPad 2 since its supply chain had capacity problems. This capacity
issue resulted in delays and lost sales, as many competitors released
similar products such as Samsung’s Galaxy Tab and Blackberry’s
Playbook. As a consequence, Apple and its major supplier Foxconn
jointly announced that a new plant in Brazil would start assembling
iPads in addition to its plants in China from December 2011.

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Common ways to alleviate capacity problems
• The opportunity cost of capacity shortages can be mitigated by such
capacity expansion as well as by tactical countermeasures such as
raising prices, putting customers on a waiting list, building inventory
in advance, or subcontracting.
• The cost of excess capacity can be alleviated by contracting capacity
as well as by countermeasures such as sales promotions.

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Global Resource Type Management
“Resource flexibility” is characterized by three dimensions:
• Range: a resource can be applied to a range of alternative objectives
or subjects. For example, it can be used to develop, produce, distribute,
and ship a range of different products.
• Cost: the low cost of efforts to switch from one use of a resource to
an alternative use.
• Time: the shorter time of switching from one use of a resource to an
alternative use.

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Resource Flexibility in Production Input
• Material flexibility (Gerwin 1993), which is the ability to handle
unexpected uncertainties in production input and can improve
product quality and increase productivity.
• There are two dimensions of material flexibility: 1- the scope of materials and
2- the time to make an adjustment.
• Input flexibility is an intangible resource.
• The first type of flexibility is suppliers themselves, as it depends on suppliers’
capacities to respond to changing demand from downstream producers.
• The second type is based on the relationship between a producer and its
upstream suppliers, which can establish contract flexibility or build flexible
relationships into the delivery of input flexibility.

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Resource Flexibility in Production Capacity:
Single Facility

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Resource Flexibility in Production Capacity:
Networks

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Product Flexibility: Scope Aspect

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Product Flexibility: Time Aspect

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Types of Postponement
• “Time postponement” : postponing the delivery of the products until
after customer orders arrive.
• “Form postponement” : delaying the differentiation of products until
later operational stages.
• such a postponement strategy will be influenced by
• production location,
• international logistics,
• transportation
• costs, and
• customs tariffs

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Global Location Strategy
• A global location strategy is a plan to determine the optimal location
for a company by identifying its strategic objectives and searching for
locations to achieve them.
• Location decisions can be made at different levels:
• Business strategy,
• Operations strategy,
• Operations management

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Location Decisions at the Corporate and Business
Strategy level
• Dunning’s OLI (Ownership-Location-Internalization) framework or
“eclectic” approach Location Theory

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Location Strategy in Global Manufacturing: Single
Factory versus Manufacturing Networks

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Location Strategy in Global Sourcing

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Locations Strategy in Global Value Chains
In a global value chain, a location portfolio needs to consider the following factors:
• Location attractions such as tax policy or industry policy,
• Distribution of labor, land, finance capital, and natural resources,
• Local market structure and customer differences,
• Spatial transaction costs in the global value chain,
• Geographical dispersion of created assets such as intellectual capital, organizational
expertise, entrepreneurship, and interactive learning,
• The difficulty of coordinating global value chain activities,
• The benefits of forging alliances with foreign firms,
• The knowledge spillover at locations and the influence of knowledge spillover on value
creation, and
• Human infrastructure, macroeconomic environment, and institutional differences among
locations and countries.

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Location Strategy in Global Service Operations

If a firm outsources its core service to foreign locations, it risks negatively

influencing its core competency.
On the contrary, if a service firm provides a supplementary service internally,
it risks a reduction in operational flexibility.

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Location Strategy in Global R&D
Two types of R&D:
• The “home-based augmenting”, which aims to extract knowledge
from local competitors and universities around the world. In such
cases, information flows from foreign laboratories to a centralized lab
unit in the home country are of essential importance.
• The “home-based exploiting”, which is established to hold up
manufacturing facilities in foreign countries or to adapt standard
products to demand. Information flows from the central lab at home
to foreign laboratories around the world are of key significance

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Location Strategy in Sustainable Global
Operations
• Selecting Environmentally Friendly Locations
• For example, Olam, headquartered in Singapore, is a processor of agricultural
products and food, sourcing 20 products in 65 countries. It opened local
processing plants in Africa to reduce shipping costs and carbon emissions
from Africa to other countries.
• Selecting Locations for Social Value
• For example, VisionSpring chooses locations in the developing world to sell
affordable eyeglasses, while the Grameen Bank chooses rural areas and
villages to provide small loans to the impoverished and women.
• Developing Local Social Value
• For example, Nestle´ built new agricultural and logistics firms in coffee regions
to improve location production and development.

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