Resources and capabilities

Resources and capabilities - explained simply

What is module 3 about?

In modules 1 and 2 you looked outward: the environment (PESTEL) and the industry (Five Forces). In module 3 you look inward. The question is: why does company A do better than company B when they are in the same industry? The answer of the resource-based view: because they have different resources and capabilities.

Think of cooking. Resources are the ingredients. Capabilities are the cooking itself. Good ingredients with bad cooking still give a bad meal.

Resources and capabilities

• Resources are things you have, or have access to. Factories, patents, money, people, but also a strong network of suppliers. There are three kinds: physical, financial and human. So the word is broader than money.
• Capabilities are things you do well. How you combine people, IT and machines into a smart logistics process. They are verbs.

A memory aid from the lecturer: resources are what we really have, capabilities are what we do well. Sometimes you doubt whether something is one or the other. That is fine. Briefly explain why you classify it the way you do.

Threshold and distinctive

Not everything has to be unique.

• Threshold: the minimum to be allowed to compete. You then perform as well as the average competitor: parity. Example: a small entrepreneur who must have the bookkeeping in order. Without it you go bankrupt, but with only that you win nothing.
• Distinctive: what you do better than others. With this you become the cost leader or differentiated. This is where the competitive advantage lies.

Note: here too you think outside-in. A resource is not “unique” in a vacuum. Unique for which customers, which market and which competitors?

VRIO: is the advantage lasting?

VRIO is a list of four questions. You ask them in order and stop at the first “no”.

1. Valuable: does it deliver value to customers, or help seize opportunities or ward off threats? Being expensive on the balance sheet is not the same as being valuable. It must also not cost too much to produce.
2. Rarity: does almost nobody else have it? Think of patents, a unique team or a location that only one company can get.
3. Inimitability: can a competitor not copy it, or only at great cost?
4. Organisational support: is the organisation set up so that you really turn it into money?

What you get per step:

Why is something hard to copy?

• Complexity: many linkages inside and outside the company. Capabilities are by definition more complex than resources, so harder to copy. Competitors can buy the same technology, but not the skill to use it well.
• Causal ambiguity: nobody knows exactly why it works. With characteristic ambiguity you do not know what to copy. With linkage ambiguity you do know, but not in which order and configuration everything is connected.
• Culture and history: it lives in the people and is taken for granted by them. It grew out of a unique past: path dependency.

Dynamic capabilities

What if you notice you are missing something? Then you have to change. And changing is itself a skill. That skill is called dynamic capabilities: renewing and recreating resources and capabilities.

Why does it matter? Sustained advantage does not last for ever. In fast markets advantage is transient. Then you need a pipeline of new initiatives, and dynamic capabilities fill that pipeline.

The book (Teece) names three kinds:

• Sensing: scanning the environment and seeing that you must react.
• Seizing: deciding what you will do and grasping the opportunity.
• Reconfiguring: adapting the organisation so that you can do it at scale.

Beware: the lecturer says the list is often mentioned, but that it actually describes outcomes and stays abstract. That is why Eisenhardt and Martin are on the reading list. They say: dynamic capabilities are specific, recognisable routines. Examples: product development at Toyota, or the acquisition routine at Cisco (about ten acquisitions per year). So it is not one-off luck, but something that happens again and again.

Eisenhardt and Martin also criticise earlier literature: it is conceptually vague and tautological. “This company is successful, so it has good dynamic capabilities, and we see the dynamic capabilities from the success.” That is a circle. Better: name the concrete routine, for example how partners in an alliance share information.

Test for yourself: is this a one-off trick, or can the company make this kind of change again and again? Only in the second case do you have a dynamic capability.

SWOT

SWOT is a confrontation between internal (strengths and weaknesses) and external (opportunities and threats). So it is not a long list, but a step towards strategic choice: which options do we come up with? Which strengths do we use, which weaknesses must we overcome? In the book the elaboration is called the TOWS matrix. SWOT is a summary and not a replacement for the real analyses (PESTEL, Five Forces, VRIO).

Amazon versus Walmart in brief

In the lecture you discussed two giants. Amazon: AWS, the network effect of the Marketplace, fine-grained distribution. Walmart: scale, buying power, more than 4000 stores. Lecturer: capabilities are usually harder to imitate than resources (complexity, ambiguity, path dependency), but some resources cannot be copied either. Both companies also have a dynamic capability: making and integrating acquisitions.

What to remember

1. Resources are what you have, capabilities what you do well.
2. Threshold gives parity, distinctive gives advantage.
3. VRIO: four criteria, all four needed for sustained competitive advantage.
4. Dynamic capabilities are routines that make change possible. Not “skills that change”, that is too vague.
5. The lecturer often sets an exam question on dynamic capabilities.

Resources and capabilities - exam level

Sources: Whittington et al. (2023) chapter 4 and Eisenhardt and Martin (2000), first five pages. Exam format: Dutch-language with English terms. Keep to the word limit and use the terms literally.

Resource-based view, resources and capabilities

Definition. The resource-based view (RBV) states that the competitive advantage and superior performance of an organisation are explained by its distinctive resources and capabilities. Organisations are heterogeneous and it is hard for one to obtain or imitate the resources and capabilities of another.

Components.

• Resources: what we have (nouns). Physical (machines, buildings, patents, systems), financial (balance sheet, cash flow, financiers) and human (managers, employees, partners, suppliers, customers). Access counts too: a strong supplier network that you do not own but can reach.
• Capabilities (also: competences): what we do well (verbs). The way resources are deployed and combined: efficiency, flexibility, raising money and managing cash flow, building knowledge and innovating.

When to apply. When the question is why two companies in the same environment perform differently. Analogy from the book: resources are ingredients, capabilities is the cooking.

Pitfalls. Resources are often equated with money; the term is broader. The line between resource and capability is sometimes debatable (the lecturer admits this). Justify your classification briefly: “a network we are part of is a resource, the ability to build and maintain such a network a capability”.

Link. Capabilities make Porter’s generic strategies possible (module 2): cost leadership or differentiation requires distinctive resources and capabilities.

Threshold and distinctive

Definition. Threshold resources and capabilities are needed to be allowed to compete in a market (qualifiers, “to compete at all”). They lead to parity. Distinctive resources and capabilities are the winners: they are valuable to customers and hard to imitate, and form the source of competitive advantage.

Examples. Threshold: administration and financial management in the Dutch small business sector (a price that is too low or fixed costs that are too high sends many small businesses bankrupt). Distinctive: Apple’s design and insight into consumer behaviour; AWS at Amazon.

Pitfalls.

• The threshold level shifts: demands of buyers on suppliers rise (IT and logistics). What was distinctive yesterday can be threshold today.
• Outside-in: “unique” only exists relative to a context. Always ask: unique for which customers, which market, which competitors? As with the Five Forces you must define industry boundaries sharply.

VRIO

Definition. Four criteria to test whether a resource or capability yields a sustained competitive advantage. Each criterion is necessary; together they are sufficient. The effect is additive.

Components.

1. Valuable: delivers value to customers and exploits opportunities or neutralises threats, without costs eating up that value. An expensive item on the balance sheet is not automatically valuable. A capability that is unique but not valued by customers is not either.
2. Rarity: only one or a few organisations have it (patent, brand, unique location, unique team). Be careful: rarity does not last by itself.
3. Inimitability: competitors cannot imitate, obtain or substitute it, or only at high cost (see below).
4. Organisational support: structure, processes and systems let the organisation actually exploit the potential. Example from the lecture: an excellent design process does not help if sales and marketing do not bring the new products to market effectively; then organisational support is at “no”.

When to apply. Per resource or capability, not per company as a whole. When in doubt choose a smaller part (product design instead of “production”). Begin at the step where the answer becomes “no” and read off the outcome.

Pitfalls. Forgetting to stop at the first “no”; confusing temporary with sustained; forgetting support (many students stop after inimitability).

Sources of inimitability

• Complexity: internal linkages (interrelated activities, such as IKEA and Ryanair) and external interconnectedness (dependence on customers or partners, such as Apple and app developers). Capabilities are usually more complex than resources.
• Causal ambiguity: characteristic ambiguity (we do not know what to imitate; it is in culture or tacit knowledge) and linkage ambiguity (we do not know which activities are connected in which configuration).
• Culture and history: taken-for-granted activities and path dependency. Only those who have been through the same history can equal it.

Exam fact. Tangible resources can usually be bought or imitated, but exceptions exist (a historic shop building, a geographic location). Capabilities are usually harder to imitate than resources. In the formative test both statements were correct.

Dynamic capabilities

Definition (book, Teece). The ability of an organisation to renew and recreate its resources and capabilities for the needs of a changing environment (“to renew and recreate resources and capabilities”).

Why. Resources and capabilities that brought success can be imitated, become commonplace or become redundant. In fast environments competitive advantage is transient. Then a portfolio with a pipeline of new initiatives is needed, and dynamic capabilities fill that pipeline.

Components.

• Sensing: continuously scanning and exploring opportunities in markets and technology (R&D, market research). A market-pull approach, listening to users, is mainly sensing.
• Seizing: addressing opportunities with new products, processes and activities.
• Reconfiguring: renewing and rearranging capabilities and investments to be able to work at scale.
• Example from the book: Microsoft, from PC software to cloud (Azure). Also: Nokia could sense and seize, but not reconfigure further.

Eisenhardt and Martin. They call the literature conceptually vague and tautological: success is explained by good dynamic capabilities, and these are derived from the success. Their answer: dynamic capabilities are specific, identifiable routines, such as product development (Toyota), acquisition routines (Cisco), strategic decision-making and alliance processes. They are learning processes that add new resources. Definition: “the firm’s processes that use resources to match and even create market change”.

When to apply. For questions about change, innovation, acquisitions and alliances. Making and integrating acquisitions, alliance formation and corporate venturing are examples of dynamic capabilities, but also typical corporate strategy topics (modules 4 and 5).

Pitfalls (exam!).

• Describing dynamic capabilities as “skills that change”: too tautological, does not touch the core.
• Only listing sensing, seizing and reconfiguring without explaining what they are. According to the lecturer they are actually outcomes; fine, but abstract. Deepen with a concrete routine.
• Labelling a one-off adjustment as a dynamic capability. The test: is it a skill, specific to the organisation and repeatedly deployable, or a one-off trick?
• Naming the example as “the skill to do xyz”, so with a name.
• Dynamic capabilities are no guarantee: ordinary capabilities can become rigidities.

SWOT and TOWS matrix

Definition. SWOT summarises the strengths and weaknesses from the analysis of resources and capabilities together with the opportunities and threats from the environmental analysis. It is a confrontation of internal and external.

Purpose. Not a long list, but generating strategic options. The TOWS matrix links combinations (strengths x opportunities, and so on) to options. This makes SWOT the moment of transition from analysis to strategic choice: generic strategy, growth, internationalisation, M&A or alliance.

Pitfalls.

• Listing: lists that are too long. Prioritise, look relative to competitors, and draw concrete conclusions.
• A summary, not a replacement: without underlying analysis (PESTEL, Five Forces, VRIO) SWOT relies on prejudice and vagueness.
• SWOT provides no input for a PESTEL; it is the other way round (formative test).
• Strengths and weaknesses can partly be influenced, opportunities and threats much less.

Link. The same logic is in the BCG matrix: a confrontation of internal (market share) and external (market growth) that directly yields advice (module 4).

Application: Amazon versus Walmart

Use the step plan: (1) threshold and distinctive, (2) VRIO per chosen item, (3) advice.

• Amazon: AWS and the network effects of the Marketplace as resources; fine-grained distribution network, Prime Hubs and cloud expertise; the capability to find, acquire and integrate small companies with knowledge and technology.
• Walmart: scale (more than 4000 stores), concentration and buying power, systems for inventory tracking and loading; capability in purchasing and distribution.
• Inimitability here: complexity (ecosystem), causal ambiguity (how do they exploit all their systems?), path dependency (different history, different reputation with consumers). The lecturer: saying that something is “never” imitable is too strong; “extremely difficult” is better.
• Advice: build on your own distinctive capabilities, choose where you do and do not engage in rivalry (Amazon internationally against, for example, Alibaba, not physically against Walmart on its home market), and remember that the case is about retail while AWS is a completely different business (the limit of the case).

Value chain, activity systems and benchmarking

Value chain (section 4.4.2, Porter). The organisation as a set of activities. Primary activities: inbound logistics, operations, outbound logistics, marketing and sales, and service. Support activities (among them procurement and technology development) improve their effectiveness or efficiency. An organisation rarely does everything itself and is therefore part of a value system: the inter-organisational links needed to create a product or service. Nuance: the lecturer skipped the value chain in Lecture 3, but it is book material (also in the key takeaways); know at least the basics.

Activity systems. Linked activities that together deliver customer value. Such a system is hard to imitate because of complexity and interlinkages (IKEA, Ryanair), even if a competitor has the map of the system.

Benchmarking. The book names benchmarking, next to VRIO, the value chain and activity systems, as a tool for diagnosing resources and capabilities: compare your own resources and capabilities with those of other organisations.

Connection with other modules

• Module 1: SWOT is the core moment in the rational analytic view of strategy (analysis to choice).
• Module 2: generic strategies need distinctive resources and capabilities; Five Forces requires sharp industry boundaries, just like the outside-in view in VRIO.
• Module 4: acquisitions, corporate venturing and alliances are dynamic capabilities; parenting advantage requires capabilities of the corporate centre.
• Module 5: entry modes (buy, ally, DIY) depend on soft capabilities.

Resources and capabilities - as the lecturer says it

The quotes are given literally, in the original language (Dutch), as they appear in the transcripts, including spoken language and spelling or recognition errors of the automatic transcription. Under each quote is what it means for you, in English.

The exam signal: dynamic capabilities

Gezegd door Jurriaan Nijholt in College 3 (18-09-2026), minuut 74:38:

Ik stel best wel vaak een tentamenvraag over dynamic capabilities.

This is the strongest signal of the module. Expect a question in which you must define, recognise or apply dynamic capabilities.

Gezegd door Jurriaan Nijholt in College 3 (18-09-2026), minuut 74:38:

Dynamic capabilities zijn vaardigheden die veranderen. Dat is niet waar het om draait. Dat raakt niet de kern.

So this is the answer you must not give. He calls it “tautological”: you explain the concept with itself.

Gezegd door Jurriaan Nijholt in College 3 (18-09-2026), minuut 74:38:

Mensen zijn super dol op dat rijtje. Sensing, seizing en reconfiguring.

The list is well known, but according to him these are “outcomes”: things that must happen if you want to change. Mention the list, but add concrete routines.

Gezegd door Jurriaan Nijholt in College 3 (18-09-2026), minuut 75:42:

Het zijn die dingen die bedrijven doen waardoor ze nieuwe resources tot zich nemen.

Gezegd door Jurriaan Nijholt in College 3 (18-09-2026), minuut 75:42:

Dus het gaat altijd om leren. Het gaat om dingen veranderen.

Gezegd door Jurriaan Nijholt in College 3 (18-09-2026), minuut 76:43:

Het goed zijn in het doen van overnames is 100% dynamic capability.

Acquisitions are the lecturer’s example. It is about being able to find, execute and integrate, not about a single acquisition.

Gezegd door Jurriaan Nijholt in College 3 (18-09-2026), minuut 77:45:

The firms processes that use resources to match and even create market change.

This is his “precise definition” from Eisenhardt and Martin. Learn it by heart.

Gezegd door Jurriaan Nijholt in College 3 (18-09-2026), minuut 77:45:

Zie dynamic capabilities gewoon als routines.

Gezegd door Jurriaan Nijholt in College 3 (18-09-2026), minuut 78:45:

Wat is dan een eenmalig trucje. Of kan het bedrijf iets. Waardoor ze dit soort veranderingen vaker kunnen doen.

This is the test you apply in the assignment on the workplace example. A one-off adjustment is not a dynamic capability.

Gezegd door Jurriaan Nijholt in College 3 (18-09-2026), minuut 101:09:

De meeste organisaties kunnen wel eens een keer een aanpassing doen. Maar er zijn ook routines om aan te passen.

Gezegd door Jurriaan Nijholt in College 3 (18-09-2026), minuut 103:11:

Met name M&A en alliantievorming zijn niet alleen voorbeelden van onderwerpen. Die super typisch geassocieerd zijn met het onderwerp corporate strategy. Maar dus ook voorbeelden van dynamic capabilities.

This is the bridge to modules 4 and 5.

Gezegd door Jurriaan Nijholt in Video 3.3 (18-09-2026), minuut 00:10:

Het is een beetje meta misschien, maar op zichzelf is het dus ook een vaardigheid, een capability om je te ontwikkelen, te leren en te veranderen.

Gezegd door Jurriaan Nijholt in Video 3.3 (18-09-2026), minuut 01:15:

Nee, je moet accepteren dat concurrentievoordeel transient is, dus tijdelijk.

Hence a portfolio and a pipeline: dynamic capabilities fill that pipeline.

Gezegd door Jurriaan Nijholt in Video 3.3 (18-09-2026), minuut 05:25:

Dat is echt een routine. Want ze doen regelmatig 10 acquisities per jaar.

This is about Cisco. It is the Eisenhardt and Martin example that shows that dynamic capabilities are not abstract.

Gezegd door Jurriaan Nijholt in Video 3.3 (18-09-2026), minuut 06:27:

En we geloven dat ze goede dynamic capabilities hebben omdat de organisatie goed is in verandering.

The tautology in one sentence: cause and effect are the same.

Resources, capabilities, threshold and distinctive

Gezegd door Jurriaan Nijholt in College 3 (18-09-2026), minuut 07:40:

resources zijn dingen die we echt hebben capabilities zijn de dingen die we goed doen

Gezegd door Jurriaan Nijholt in Video 3.2 (18-09-2026), minuut 00:15:

En capabilities zijn de vaardigheden die je hebt waarmee je die middelen inzet en configureert om iets te doen.

Gezegd door Jurriaan Nijholt in Video 3.2 (18-09-2026), minuut 01:04:

Op een vergelijkbaar niveau presteren noemen we parity of pariteit.

Gezegd door Jurriaan Nijholt in Video 3.2 (18-09-2026), minuut 02:12:

Dat zijn typisch capabilities die je op threshold niveau moet hebben om te overleven, om mee te mogen doen.

Gezegd door Jurriaan Nijholt in College 3 (18-09-2026), minuut 08:52:

het ook hier nog steeds de bedoeling is dat je aan outside in denken doet

Gezegd door Jurriaan Nijholt in College 3 (18-09-2026), minuut 08:52:

dan is het nog steeds de vraag uniek voor welke context

VRIO and inimitability

Gezegd door Jurriaan Nijholt in Video 3.2 (18-09-2026), minuut 03:16:

Elk van die criteria zijn noodzakelijk. En samen zijn ze voldoende voor duurzaam concurrentievoordeel.

Gezegd door Jurriaan Nijholt in Video 3.2 (18-09-2026), minuut 04:19:

Het verkrijgen, ontwerpen of uitnutten van die resources en capabilities mag ook niet te veel kosten.

This is the cost side of valuable.

Gezegd door Jurriaan Nijholt in Video 3.2 (18-09-2026), minuut 05:14:

Als je resources hebt die waardevol en zeldzaam zijn. Dan heb je in ieder geval al ingrediënten voor concurrentievoordeel. Alleen het is maar tijdelijk.

Gezegd door Jurriaan Nijholt in Video 3.2 (18-09-2026), minuut 05:45:

Dus over het algemeen zijn capabilities complexer dan resources. En dus moeilijker te imiteren.

Gezegd door Jurriaan Nijholt in Video 3.2 (18-09-2026), minuut 06:52:

Met andere woorden, we weten eigenlijk niet eens wat we moeten imiteren.

This is characteristic ambiguity.

Gezegd door Jurriaan Nijholt in Video 3.2 (18-09-2026), minuut 07:56:

En dat noemen we path dependency.

Gezegd door Jurriaan Nijholt in Video 3.2 (18-09-2026), minuut 08:16:

Maar er is nog één noodzakelijke voorwaarde die moet bestaan om de vruchten te plukken van die resource. En dat is organizational support.

Gezegd door Jurriaan Nijholt in Video 3.2 (18-09-2026), minuut 10:19:

Als het daar niet goed georganiseerd is, dan levert die capability nog steeds geen concurrentievoordeel op omdat organizational support hier dan op NO zou staan.

Gezegd door Jurriaan Nijholt in College 3 (18-09-2026), minuut 73:35:

Dus ook resources, zeker weten, zijn inimitable.

So it is not true that only capabilities can be inimitable. The example was the size of Walmart.

Gezegd door Jurriaan Nijholt in College 3 (18-09-2026), minuut 70:19:

Simpelweg omdat ze een hele andere geschiedenis hebben gehad.

SWOT and the basic model

Gezegd door Jurriaan Nijholt in Video 3.1 (18-09-2026), minuut 00:00:

SWOT is een samenvatting van of beter gezegd een confrontatie tussen externe en interne inzichten.

Gezegd door Jurriaan Nijholt in Video 3.1 (18-09-2026), minuut 02:51:

Het einddoel van SWOT is juist strategische opties voor het bedrijf te bedenken, te creëren.

Gezegd door Jurriaan Nijholt in Video 3.1 (18-09-2026), minuut 03:43:

Dus de SWOT-analyse, ook al is die een beetje weggestopt, is wel het punt waarop je overstapt van analyse van je positie naar keuze.

Gezegd door Jurriaan Nijholt in College 3 (18-09-2026), minuut 04:10:

Er is altijd een interne analyse. Er is altijd een externe analyse.

What is not exam material

Gezegd door Jurriaan Nijholt in College 3 (18-09-2026), minuut 05:12:

In het boek zelf staat de interne waardeketen analyse van Michael Porter. Waarvan ik ook besloten heb om die over te slaan.

Gezegd door Jurriaan Nijholt in College 3 (18-09-2026), minuut 104:12:

Dat is geen tentamenstof. Daar ga ik geen tentamenvragen over stellen.

This is about the extra material. So the signal is: leave the extra material alone, the formative test is not exam preparation and the exam covers the book material plus Eisenhardt and Martin.

Showing: slides

Dia 20 uit Slides - Video Module 3: Sensing is “constantly scanning and exploring new opportunities across markets and technologies”. Seizing is “addressing opportunities through new products, processes and activities”. Re-configuring means that new products and processes require renewal of capabilities and investment in new technology.

Dia 11 uit Slides - Video Module 3: the VRIO table. Competitive implications: disadvantage, parity, temporary competitive advantage, sustained competitive advantage. Economic performance: below normal, normal, above normal, above normal.