InstructorManualtoMikePeng&KlausMeyer(2011):InternationalBusiness,CengageLearning.
Instructor Manual
Chapter 4: Competitiveness and Growth
to accompany Mike Peng & Klaus Meyer: International Business, Cengage Learning
Prepared by Klaus Meyer
version February 2011
Introduction to the Topic
Learning Objectives
1. explain what firms’ resources are
2. assess the resources of a firm using the VRIO framework
General Teaching Suggestions
Some students may feel that organizations, especially large MNE’s, are abstract and cannot
relate to them thus it may help to personalize concepts. Once the student can see how the
concept applies to him or her, the student may then apply it to large groups of people – i.e.
Opening Case Discussion Guide
The Opening case outlines the case of SAP< one of the most successful young firms in
Germany, founded in the 1970s, with a focus on how they developed their resources over
time, especially on the international stage. The key questions to raise here are: how did this
company succeed? What is it that enabled SAP to compete and grow against stiff competition
from the USA (Oracle, like most big players in software, has its roots in California)? The
answers point to resources and capabilities.
InstructorManualtoMikePeng&KlausMeyer(2011):InternationalBusiness,CengageLearning.
Finally, this case is tied to Chapter 4 in an entirely different way: The product that SAP
produces actually helps other companies to manage their resources. In an MBA class it is
worthwhile to ask if anyone has practical experience with SAP software, and ask them to
explain what they use it for, and how they use it.
Case Updates: Despite the somewhat pessimistic tone of the Opening Case, SAP recovered soon after
the case was written – at least in terms of the stock market performance as the share price recovered
considerably over the year 2010.
Chapter Outline, Section by Section
Section 1: Identifying Resources
Key Ideas
The first challenge for any analysis of a firm (and hence for any strategy assignment) is to
assess the resources and capabilities of the firm. Since they take so many different forms and
shapes, this section provides a few different ways of categorizing resources. The aim of this
section thus is to help students structure the ‘resource inventory’ they draw up before
engaging in any strategy type project.
Key Concepts
InstructorManualtoMikePeng&KlausMeyer(2011):InternationalBusiness,CengageLearning.
Firm-specific abilities to use resources to achieve organizational objectives.
tangible assets
Assets that are observable and easily quantified.
intangible assets
Assets that are hard to observe and difficult (or sometimes impossible) to quantify.
Section 2: Appraising Resources: The VRIO Framework
Key Ideas
The most popular framework in the scholarly literature to analyse resources is Jay Barney’s
VRIO framework. A VRIO framework suggests that only resources and capabilities that are
valuable, rare, inimitable, and organizationally embedded will generate sustainable
competitive advantage.
Key Concepts
VRIO framework
The resource-based framework that focuses on the value creation (V), rarity (R), imitability (I), and
organizational (O) aspects of resources.
causal ambiguity
The difficulty of identifying the causal determinants of successful firm performance.
InstructorManualtoMikePeng&KlausMeyer(2011):InternationalBusiness,CengageLearning.
Section 3: Applying Resource Analysis: Benchmarking
Key Ideas
This section introduces benchmarking as a key analytical tool used to compare the operations
of a company (or a specific unit or function within a company) against and appropriate other
Key Concepts
benchmarking
An examination of resources to perform a particular activity compared against competitors.
outsourcing
Turning over an organizational activity to an outside supplier that will perform it on behalf of the firm.
offshoring
Moving an activity to a location abroad
offshore outsourcing
Outsourcing to another firm doing the activity abroad
Section 4: Debates and Extensions
Key Ideas
The first debate issue concerns the possible long-term consequences of offshoring for the
company, further illustrated by a Chinese perspective in In Focus 4.4.
InstructorManualtoMikePeng&KlausMeyer(2011):InternationalBusiness,CengageLearning.
The second debate issue introduces the concept of ‘dynamic capabilities’, which is currently a
very ‘hot topic’ in strategic management research (see any recent issue of Strategic
Management Journal), though its practical usefulness for strategic analysis is yet to be
proven.
Key Concepts
original equipment manufacturer (OEM)
A firm that executes the design blueprints provided by other firms and manufactures such products.
Section 5: Implications for Practice
Key Ideas
The implications sections stresses the importance of building and exploiting resources for a
firm, and hence the importance of resource analysis for any strategic analysis assignment.
Review Questions
Review questions are provided to students on the website accompanying the book. They
directly ask to summarize the material provided in the text. Instructors may also use the
questions to structure their lectures or review sessions.
Review Questions
(as provided to students on the website)
Material in the Book
1. In the resource based view, what are resources?
2. What is the difference between tangible and
Page 100
Page 101-102
InstructorManualtoMikePeng&KlausMeyer(2011):InternationalBusiness,CengageLearning.
intangible assets?
3. What are reputational resources?
6. Name some examples of capabilities that may
enhance firms competitiveness!
7. Explain why resources need to fulfil the VRIO
criteria to enable firms to attain sustained
competitive advantage!
8. How can firms make their capabilities inimitable?
12. Explain the offshoring and outsourcing terminology!
13. What are the possible positive and negative long-
term implications of offshoring?
Page 102
Page 101-105, especially
Table 4.2, In Focus 4.1 & 4.2
Page 106, 108
Page 109-111
Page 114-116
Page 116-117
Critical Discussion Questions
At the end the chapter, we provide discussion questions that aim to stimulate students
thinking beyond memorizing the material learned in the chapter. They are designed to be
used at a basis for in-class discussions, group work, or individual assignments. Below, I
provide some indicative answers of issues that may be raised in response to these questions.
Discussion Questions
(as provided in the book)
Indicative Responses
1. Pick any pair of rivals (such as
1. This is a question in which the
InstructorManualtoMikePeng&KlausMeyer(2011):InternationalBusiness,CengageLearning.
2. Conduct a VRIO analysis of your
business school or university in terms
of (1) perceived reputation (such as
rankings), (2) faculty strength, (3)
student quality, (4) administrative
efficiency, (5) IT, and (6) building
maintenance relative to the top-three
rival schools/universities. If you were
4. Since firms read information posted on
competitors’ websites, is it ethical to
provide misleading information on
resources on corporate websites? Do
the benefits outweigh the costs?
their ability to use benchmark
analysis and VRIO framework.=
2. This is a question in which the
answer is not as important as the
thought process and the ability to
clearly articulate. Students’ answers
must address value, rarity,
imitability, and organization.
4. This is a question in which the
answer is not as important as the
thought process and the ability to
clearly articulate. However, some
may note that in the process of
Closing Case
The closing case provides further opportunities to apply ideas and concepts learned in this
chapter in a real world setting. The Closing Case for this Chapter is “Avon: perfects direct
selling” and focuses on resources in a sales oriented organization. Below are some indicative
responses to the case discussion questions.
InstructorManualtoMikePeng&KlausMeyer(2011):InternationalBusiness,CengageLearning.
Case Discussion Questions
(as provided in the book)
Indicative Responses
1. Applying the VRIO
framework, what are the sources
of Avon’s success?
1. Students ought to list a long list of resources and
capabilities. The most important likely is the capability of
managing a direct-sales organization with independent
depend on the social and legal acceptability of the direct
sales model. Thus, if the brand or the sales model go out
of fashion, Avon may suffer. But as its sales force are not
employees but independents trading on own account, it
will find downsizing easier than others.
3. According to the case, Avon benefited from more
people looking for a second or even first job and thus
Further Learning Activities
In addition to the cases and discussion questions provided in the book, instructors may want
to use any of the following activities to further engage students with the material.
1. Currently, your firm has manufacturing and logistics units in the Russian cities of
Moscow and Saint Petersburg, which provide access to Russia’s vast country-wide
market. However, recent business regulations have discouraged growth in specific
InstructorManualtoMikePeng&KlausMeyer(2011):InternationalBusiness,CengageLearning.
2. The technology company that you work for wants to enter a foreign market for the
first time. The objective is for the firm to make a sustainable international investment
that can create long-term competitive advantages and allow it to be recognized as
important in the industry. Evaluate the opportunities available to your company by
assessing the national conditions among leading emerging economies.
One resource which can be used is “Vale Columbia School on Sustainable
International Investment: Emerging Market Global Players”. This website can be
Errors and Corrections
Apologies to Sunny Li Sun. We greatly appreciate your helpful discussions with Mike Peng.
Only by accident you were named as the author of the In Focus 4.1. We did not intend to
suggest that any of the views expressed were yours.
Further Readings
At the end the chapter, suggested further readings are provided. The primary aim is to
provide students a starting point for further work, for example when preparing a class
InstructorManualtoMikePeng&KlausMeyer(2011):InternationalBusiness,CengageLearning.
assignment or dissertation. These references also are recommended for instructors not
familiar with the topic and wishing to ‘get ahead of the students’ before lecturing on a topic.
J. Barney, 1991, Firm resources and sustained competitive advantage, JM, 17: 99–120 – the original paper
that explained and popularized the resource-based view.
R. Grant, 2010, Contemporary strategy analysis, 7th ed., Oxford: Blackwell – a strategy textbook that is
grounded in the resource-based view, see especially chapters 5 and 6.