PGPM 2026–27

Session 05 1.5 hours Analysis

Internal Analysis & Resource-Based View

What Patagonia has that a rival cannot buy

Industry analysis explains why some industries earn more than others. It cannot explain why two firms facing the same industry earn different returns. This session opens the firm: what it has, what it has learned to do, which of those things a rival could not simply buy or copy, where in its activities the difference is made, and how the inside meets the outside in a SWOT.

Session 4 drew the game around a firm: Brandenburger and Nalebuff’s value net, in which no player can take away more than its added value, and Courtney, Kirkland and Viguerie’s levels of uncertainty. It left a question open: why does one player bring more added value to the game than another? The answer sits inside the firm, in resources and competences built over years. Patagonia’s 2011 Black Friday ad, “Don’t Buy This Jacket”, is today’s test. A rival could print the same words. It could not print the forty years behind them.

Start with question 1 Readings & preparation Learning outcomes & visual lab

The four questions

01What does a firm have, and what can it do?
02Which of its resources can sustain an advantage?
03Where in its activities is the difference made?
04Where do the inside and the outside meet?

Each question belongs to one reading or framework. Prahalad and Hamel answer the first with core competence, and Collis and Montgomery give the market tests for the second. Porter’s value chain answers the third, and SWOT, which Collis and Montgomery trace back to Andrews, the fourth. The Patagonia case is where all four get argued out loud.

Start here · Session 5

Learning outcomes

By the end of this session, students should be able to:

Distinguish resources, capabilities and core competencies, and test a proposed competence for transfer and customer value. Classify resources and capabilities.
Apply VRIO and the reading’s market tests to a specific resource relative to named rivals and substitutes. Audit a resource claim.
Explain how imitation, substitution, depreciation and value appropriation can weaken an apparent advantage. Investigate an isolating mechanism.
Map value-chain links and distinguish an internal strength or weakness from an external opportunity or threat. Build and audit the SWOT.
Defend a Patagonia recommendation using case evidence, a resource-development mechanism and a falsifiable rival comparison. Test the claim against the case exhibits.

Start the existing session · Try the visual practice lab · Prepare with the assigned readings

The activities help you practise these outcomes. Browser feedback supports learning; formal assessment follows the course outline and instructor guidance.

Recall → connect → carry forward · Sessions 1–4

The strategy story so far: Sessions 1–4

The course has followed a decision from position and purpose into industry structure, then into the relationships and uncertainty surrounding it. We can now describe a promising move, but we have not established why this firm could execute it better than another. In the continuing fictional Indian Nila Foods story, the proposed collection-point pilot makes that internal question concrete.

One continuing classroom story. Nila Foods is a fictional Indian meal-service for working adults. Follow its choices from Session 1; later expansion ideas are proposals to test.

Session 1 · What is strategy?
Operational effectiveness improves similar activities; strategy requires positioning, trade-offs and fit. State objective, scope and advantage, then compare intended plans with emergent action using evidence.
Nila Foods: Nila proposes preordered weekday meals on clustered routes, declines instant citywide delivery and studies actual customer behaviour.
Session 2 · Framework for Strategic Analysis
Purpose and values guide what endures, while a quantified ambition opens a same-date gap from the baseline; closing that gap requires external and internal evidence.
Nila Foods: Nila separated easing meal burdens and honest food-safety disclosure from its growth target, then compared that target with its projected baseline.
Session 3 · Industry Analysis: The Fundamentals
Industry boundaries, PESTEL and five forces connect external change to price, cost and investment; complements and possible responses then raise questions about the wider game.
Nila Foods: Nila traced ingredient-price pressure, supplier bargaining, lunch substitutes and easy entry before asking whether a neighbouring seller could also help it.
Session 4 · Beyond the Five Forces
Value nets and PARTS show how co-opetition changes added value, while uncertainty shapes commitments; credible moves therefore require examining internal strengths.
Nila Foods: Nila considered sharing a collection point with a rival and testing the rules through a limited pilot while demand remained uncertain.

Why this leads to Session 5

Sharing a collection point could help several meal services, so the opportunity alone does not explain Nila’s advantage. Its kitchen routines, route coordination and customer trust must be examined against named rivals and substitutes, with attention to imitation and who captures the benefit. Session 5 opens the firm to test which resources and capabilities make the proposed move credible, and where its weaknesses remain.

Retrieve it before moving on

Before approving the collection-point pilot, how would you connect Nila’s first four lessons to an internal-analysis question?

Compare your reasoning with a model answer

Check whether the pilot reinforces the focused activity system (Session 1) and serves the purpose, values and target gap (Session 2). Trace its effects on the competitive forces (Session 3), then specify roles, rules, rival responses and a learning trigger (Session 4). Next ask which Nila capabilities make it work better than an alternative provider, and whether rivals could copy or replace them.

Question 01 · Prahalad & Hamel (1990)

What does a firm have, and what can it do?

Prahalad and Hamel open with two companies that began the 1980s with comparable portfolios. In 1980 GTE had sales of $9.98 billion and NEC $3.8 billion. By 1988 NEC’s sales, $21.89 billion, had passed GTE’s $16.46 billion. Their explanation is that NEC conceived of itself in terms of core competencies and GTE did not: one was a portfolio of competencies, the other a portfolio of businesses (Prahalad & Hamel, 1990, pp. 79–80).

So internal analysis asks two things. What does the firm have: its resources, tangible and intangible? And what has it learned to do with them: its capabilities, and the few core competencies that differ from a rival’s? The second question is the harder one, because the answer is not on the balance sheet and is often invisible to the firm itself.

“Core competencies are the collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies.”

Prahalad & Hamel (1990), p. 81

Unlike a physical asset, a competence does not wear out with use: it grows as it is applied and shared. It still has to be nurtured, because knowledge fades if it is not used (p. 81).

Why look inside at all · Rothaermel (2024), Exhibit 3.2

The industry explains a fifth; the firm explains up to half

In the studies Rothaermel reports, industry effects explain roughly 20% of overall firm performance and firm effects up to 55%; business cycles and unexplained variance account for the remaining 25% or so (Rothaermel, 2024, pp. 90–91, 131). Session 3’s five forces explain the first slice: why some industries are more profitable on average. They are silent on the second. If the industry decided everything, firms in it would earn the same. They do not.

Redrawn from Rothaermel (2024), Exhibit 3.2. The shares are the textbook’s summary of several studies, not one measurement.

Four nested terms

Get them straight first, because most weak internal analyses come from mixing them up: a building is listed next to a reputation and a skill as if they were the same kind of thing.

1 · Resources

What the firm can draw on

Any asset the firm can use to form and carry out a strategy. Tangible resources have physical form: labour, capital, land, buildings, plant, equipment. Intangible ones do not: culture, knowledge, brand equity, reputation, intellectual property (Rothaermel, 2024, pp. 137–139).

2 · Capabilities

What it can do with them

The organisational and managerial skills needed to orchestrate resources and deploy them. Capabilities are intangible by nature and show up in the firm’s structure, routines and culture (p. 137). The test: is it something the firm does, rather than something it has?

3 · Core competencies

The few that really differ

Unique strengths embedded deep in the firm that let it offer more value than rivals, or comparable value at lower cost (Rothaermel, 2024, p. 132). For Prahalad and Hamel they are collective learning, and few firms build world leadership in more than five or six (1990, p. 83).

4 · Activities

Where they become visible

Distinct, fine-grained processes such as taking orders, delivering products or invoicing (Rothaermel, 2024, p. 137). Competencies are deployed through activities, which is why the value chain is question 3.

How the pieces connect · redrawn from Rothaermel (2024), Exhibit 4.4

Resources + capabilities

resources reinforce, capabilities orchestrate

Core competencies

the few that really differ

Activities

competencies leveraged

Competitive advantage

superior performance

← Profits are reinvested to hone and upgrade the resources and capabilities, or the competencies decay.

From the earlier deck · three terms side by side

	Resources	Capabilities	Core competencies
What	Assets and inputs, tangible or intangible: what the firm has	The ability to bundle, manage and deploy resources: what the firm does	Unique strengths embedded deep in the firm that set its products apart
Nature	Often visible; many can be bought	Intangible, in processes, routines and culture	Emerge over time from many interactions, so hard to copy
Role	The inputs to activities	How the inputs are used well	Why customers choose the firm over rivals

Collis & Montgomery (1995) · one retailer’s inventory

Marks & Spencer in Britain

Tangible Freehold store locations: occupancy costs of 1% against an industry average of 3% to 9%.
Intangible Brand reputation: customer recognition with minimal advertising, and no promotional sales.
Capabilities Employee loyalty (lower turnover; labour costs of 8.7% against 10% to 20%), the supplier chain (lower cost, higher quality) and managerial judgment (fewer layers of hierarchy).

Redrawn as a list from Collis & Montgomery’s exhibit (1995, p. 123). Notice that every resource is tied to an observable cost or customer effect.

The two assumptions behind the RBV

Heterogeneity: resource bundles differ across firms, even within one strategic group. Immobility: resources are “sticky” and do not move easily between firms, so the differences last. Rothaermel’s example: Continental and Delta tried to copy Southwest with Continental Lite and Song, and neither reproduced the bundle. Under perfect competition both assumptions fail, and so does any lasting advantage (Rothaermel, 2024, pp. 140–141).

Why intangibles carry more weight

Anyone with cash can buy buildings or servers on the open market. A brand or a reputation has to be built, usually over a long period. Rothaermel concludes that competitive advantage is more likely to come from intangible resources than tangible ones (2024, p. 139). Collis and Montgomery agree: the best resources “are often intangible, not physical” (1995, p. 124). Patagonia’s most important assets do not appear on a balance sheet.

Stocks and flows: the bathtub

An intangible resource is a stock, like water in a bathtub. Investments are the flows from the taps, and leakage through turnover or forgetting drains it. You cannot fill the tub faster by opening every tap on the last day; it fills over time (Rothaermel, 2024, pp. 152–153, after Dierickx & Cool, 1989). The Patagonia case is a record of flows.

“Core competencies that are not continuously nourished will lose their ability to yield a competitive advantage.” Rothaermel (2024, p. 138)

Activity · sort Patagonia’s inventory

Tangible resource, intangible resource, or capability?

Eight items from the case. Classify each one. The test for a capability: is it something the firm does, by coordinating several resources, rather than something it has?

The two articles

One question each

Prahalad and Hamel answer what a firm has learned to do: its core competencies. Collis and Montgomery answer which resources survive the market: five tests a resource must pass before it can carry a strategy. Each tab rebuilds the article’s central diagram so you can work it rather than read it. The third tab sets the two against each other.

The firm as a tree

Prahalad and Hamel picture the diversified firm as a tree. The end products are the leaves, flowers and fruit; the business units are the smaller branches; the trunk and major limbs are core products; the root system is the core competence. Look only at the fruit and you miss the strength of the tree (1990, p. 81).

Core products are the components that carry a competence into many end products. Canon was reputed to hold an 84% world manufacturing share in desktop laser-printer engines while its brand share of laser printers was minuscule (p. 85).

Three tests for a core competence (p. 83)

1. Access: it opens potential access to a wide variety of markets.
2. Customer benefit: it contributes significantly to the benefits customers perceive in the end product.
3. Hard to imitate: it is a complex harmonisation of technologies and skills a rival cannot assemble piece by piece.

What it is not

Not outspending rivals on R&D: Canon passed Xerox in copier unit share in 1983 on a fraction of its reprographics budget. Not shared costs, and not vertical integration (p. 83).

How it is lost

By outsourcing what looks like a cost centre. Chrysler’s outsourced engines rose from 252,000 to 382,000 between 1985 and 1987, while Honda kept engines in-house. Such skills cannot be “rented in” (p. 84).

Activity · draw the tree

Pick a firm from the article, read its tree from the roots up, then try Patagonia.

Tiers after Prahalad & Hamel’s tree (1990, pp. 81–82), redrawn for this session. Firm entries are from the article’s pages as cited; the Patagonia tree is yours to build.

Reading task · bring this to class

Start with a repairable Patagonia garment. Work backwards to the material, design, service and knowledge-sharing routines needed to keep it useful. Then name a second product where those routines might help, and one where they might not. This session uses the article for core competence as an internal resource; Session 6 returns to it, with Ghemawat and Rivkin, to ask how a competence becomes a competitive advantage.

Value is set in the market, not in the firm

Collis and Montgomery present the resource-based view as the bridge between two swings of the pendulum: industry analysis, which looked outside, and core competence, which looked inside. A resource cannot be valued in isolation; its value is set where three market forces meet: demand, scarcity and appropriability (1995, pp. 119–121). Nobody has managed to brand lobsters, and a brand that once mattered in personal computers no longer did, as IBM found at great cost (p. 120).

1. Inimitability. Is it hard to copy? IBP’s automated beef plants earned it returns of 1.3% in the 1970s; once ConAgra and Cargill replicated them, returns fell to 0.4% (pp. 120–121).
2. Durability. How fast does it depreciate? Disney’s brand survived two decades of neglect; know-how in semiconductor memories wastes fast (p. 122).
3. Appropriability. Who captures the value? The banking contacts of leveraged-buyout firms sat with the individuals, who left and took the profits (pp. 122–123).
4. Substitutability. Can a different resource trump it? The majors could not copy People Express’s no-frills system, so they matched its fares with reservation systems and yield management (p. 123).
5. Competitive superiority. Whose resource is really better? Judge it against rivals, not against the firm’s other activities (p. 123).

“Core competence has too often become a ‘feel good’ exercise that no one fails.” Collis & Montgomery (1995), p. 123

The diagram, in words

Three market forces, five tests

Demand

Does it meet customers’ needs, and is it competitively superior? → test 5

Scarcity

Is it inimitable, non-substitutable and durable? → tests 1, 2 and 4

Appropriability

Who owns the profits? → test 3

Value-creation zone

Only a resource that passes all three sits where they overlap.

After Collis & Montgomery’s exhibit “What Makes a Resource Valuable?” (1995, pp. 120–121). The diagram itself is worked as an activity in question 2, with the article’s cases and two of your own.

Disaggregate, or the test is empty

“Consumer marketing skills” is too broad to test. Break it into brand management, then into product-line extensions or cost-effective couponing, and you can measure who is better. A maker of diagnostic equipment found that its claimed competence, “instrumentation”, was really the design of the interface between machine and user; it hired ergonomists and moved into doctors’ offices (pp. 123–124).

Reading task · bring this to class

Call a Patagonia resource “valuable” only after naming the customer benefit or cost effect, the rival you compare it with, and the case evidence. Then ask who keeps the returns, and what could make the resource obsolete. Which of the five tests has no counterpart in VRIO (question 2)?

Resource inventory → competence → strategic choice

A trademark is an asset. A repeatable ability to coordinate design, materials and repair is a capability, and calling it a core competence is a hypothesis. A strong product line does not prove that the learning behind it transfers anywhere else. Use Collis and Montgomery’s tests to challenge the capability, then Prahalad and Hamel’s tests to challenge the market you propose to take it into.

Where they agree

Both put the valuable thing inside the firm and both expect it to need investment. Collis and Montgomery credit core competence with making the corporate office the guardian of the firm’s “crown jewels” (1995, p. 125); Prahalad and Hamel warn that competencies fade if not used (1990, p. 81).

Where they part

Prahalad and Hamel judge a competence by what it lets the firm do next. Collis and Montgomery insist on the market: a competence nobody fails is no test, and investing in one without asking how attractive the industry is can waste it. Masco built real skill in metalworking and took it into industries with price-sensitive buyers, low entry barriers and powerful suppliers; returns disappointed (1995, pp. 123, 126).

A shared discipline: keep the list short

A firm that lists 20 to 30 capabilities has probably not produced a list of core competencies (Prahalad & Hamel, 1990, p. 83). Disaggregate until each item can be compared with a rival’s (Collis & Montgomery, 1995, p. 123).

Bring one claim that fails. The learning value of internal analysis often lies in finding where an apparent strength stops being useful. The tree above tests “our best-selling jacket” as a competence; the market-forces diagram tests a designer who could leave with the customers.

Worksheet · build a competence map

Visible benefit, with case evidence Routines that make it repeatable A plausible second application An application to refuse

Nothing you type here is saved or sent. Copy it into your notes for the studio.

From the earlier decks · core competencies in the wild

What a competence looks like from outside

A competence is invisible; its traces are not. Two textbook cases show the traces: a list of things the firm does, and a longer list of things it refuses to do. “Strategy is as much about deciding to do things differently from competitors as it is about choosing not to do certain things at all” (Rothaermel, 2024, p. 132).

Five Guys · Rothaermel (2024), ChapterCase 4

“Make the best burger. Don’t worry about cost.”

Jerry Murrell opened the first store in 1986. The family ran only five stores for 17 years while it perfected the recipe; the sons blind-tasted 16 mayonnaises and chose the most expensive, and when a hurricane nearly tripled tomato prices the company did not compromise on quality (pp. 129–130). By some estimates it took half the “better burger” segment (p. 130).

Does

Fresh, never-frozen beef; Idaho potatoes cut by hand; burgers made to order with free toppings (pp. 132–133).

Refuses

Menu bloat, drive-throughs, delivery, WiFi, a place to linger, and marketing. Even former President Obama waited in line (p. 133).

Yeti · Rothaermel (2024), Strategy Highlight 4.1

Making quality cool

Founded in 2006 by two brothers frustrated with coolers that caved in, Yeti used rotational moulding to make a near-indestructible cooler that sold for $250 to $1,300, more than ten times an ordinary one. Drinkware took it from $150 million of revenue in 2014 to over $1 billion in 2020; in 2022 sales were $1.5 billion and net income $215 million (pp. 134–135).

Rothaermel names two competencies: superior quality and performance, and a “coolness factor” built through about 130 brand ambassadors rather than paid influencers. Success then drew cheaper imitators (p. 135). Which of the two competencies did they copy, and which could they not?

The strategic flow · the earlier deck’s six firms

Resources are managed through capabilities to create a core competency. The entries are qualitative illustrations, not case findings; test each with Prahalad and Hamel’s three tests.

Firm	Resources (has)	Capabilities (does)	Core competency
Apple	Engineers, cash	Design; supply-chain management	User-friendly innovation that integrates hardware and software
Tesla	Engineers, battery know-how, factories, Supercharger network	Fast product iteration; software updates over the air; direct sales	Electric-vehicle and battery innovation
SpaceX	Aerospace engineers, reusable rocket designs, capital	A build–test–learn cycle; reusing launch vehicles	Lower-cost, reusable space transport
Nvidia	GPU designs and patents, AI talent, the CUDA platform	Full-stack design; building a developer ecosystem	Accelerated computing for AI and graphics
Yeti	Durable materials, brand, loyal outdoor users	Designing for durability; storytelling marketing	Premium ruggedness and durability
Five Guys	Fresh ingredients, simple menu, standard stores, franchises	Consistent preparation; a fresh supply chain	Consistent, customised, high-quality fast food

Nvidia, read inside out · Yoffie & von Bargen (2024)

Not “fast chips”: a platform

Resources. GPU designs, patents and AI talent; manufacturing is mostly outsourced to TSMC, so the plants are not Nvidia’s (p. 3).
The intangible that matters. CUDA, introduced in 2006: proprietary to Nvidia’s chips, with free software kits and programs shared among third-party developers (p. 4).
Capability. Building and running that developer ecosystem. It was not an instant success: downloads fell from 2010 to 2013, until AlexNet in 2012 showed what CUDA on GPUs could do for AI (p. 5).
Competency, as the earlier deck reads it. Integrating hardware, software and systems into one accelerated-computing platform. Analysts put its 2023 data-centre share at 98% (p. 6).

Nvidia is the case for Sessions 8 and 9; here it is only a second firm to test the tools on. The earlier deck’s 90:10 split between intangible and tangible resources was an illustration, not a measurement, and is not repeated.

Activity · VRIO beyond Patagonia

Predict the verdict, then compare

Nine resources from the earlier decks. Pick one, commit to a verdict, and read the reasoning. The verdicts are the decks’ readings, corrected against the sources; argue with them.

Resource or capability

Question 02 · Collis & Montgomery (1995)

Which of its resources can sustain an advantage?

A list of resources is not yet an argument. Collis and Montgomery’s harsh truth is that most firms’ resources do not pass an objective application of the market tests (1995, p. 124). The course’s working tool for applying them is VRIO, which Rothaermel takes from Jay Barney: is the resource Valuable, Rare and costly to Imitate, and is the firm Organised to capture its value? It is a decision tree, not a scorecard: the first “no” ends the test, and only four “yes” answers support a sustained advantage (Rothaermel, 2024, pp. 141–145).

NOT VALUABLE

Competitive disadvantage

It neither exploits an opportunity nor offsets a threat.

V, NOT RARE

Competitive parity

Needed to play; rivals have it too.

V + R, EASY TO COPY

Temporary advantage

A head start that imitation or substitution erodes.

V + R + I, NOT ORGANISED

Temporary at best

Xerox PARC invented the GUI and the mouse; Apple and Microsoft captured the value.

V + R + I + O

Sustained advantage

For as long as the environment and substitutes allow.

The earlier decks call the fourth box an “unexploited competitive advantage”. This page follows Rothaermel: without organisation the best case is a temporary advantage, and at Xerox not even that (2024, p. 145).

Valuable

Tied to the outside world

A resource is valuable if it helps the firm exploit an external opportunity or offset an external threat (Rothaermel, 2024, p. 141). That is the hinge to Sessions 3 and 4: value is judged against the environment, never in isolation, which is exactly Collis and Montgomery’s point about demand.

Costly to imitate

Copying, or going round

Rivals attack an advantage by direct imitation or by substitution (pp. 143–144). Copying is costly when the resource depends on history, when nobody can say exactly what causes the result, or when it lives in many interacting systems. The next section takes these isolating mechanisms one by one.

Organised

Structure that captures the value

The firm needs structure, processes and systems that let it use the resource. Xerox’s headquarters, focused on copiers and on the other side of the country from PARC, did not organise to exploit what PARC built (p. 145). A resource the firm cannot use earns nothing.

Three vocabularies for the same job

Collis and Montgomery’s five tests, Barney’s VRIO and Grant’s appraisal (2019, pp. 120–122) line up closely. The professor’s scripts use VRIN, whose “N” (non-substitutable) is Collis and Montgomery’s fourth test.

Collis & Montgomery	VRIO	Grant	What it asks
Competitive superiority	Valuable, rare	Relevance, scarcity	Do customers want it, and is it better than rivals’ version?
Inimitability	Costly to imitate	Transferability, replicability	Can rivals buy it or build it?
Substitutability	Costly to imitate (substitution); VRIN’s N	—	Can a different resource deliver the same benefit?
Durability	—	Durability	How fast does it depreciate? No VRIO equivalent.
Appropriability	Organised	Appropriability	Who keeps the returns: the firm, or its people, partners or customers?

Activity · Collis & Montgomery’s three market forces

Pick a resource. The circles it fails go pale; only a resource inside all three sits in the value-creation zone. For the last two, decide first.

After Collis & Montgomery’s exhibit “What Makes a Resource Valuable?” (1995, p. 120), redrawn. Demand asks whether customers want it and it is superior; scarcity whether it is inimitable, non-substitutable and durable; appropriability who owns the profits (p. 121).

VRIO applied · Rothaermel (2024), Strategy Highlight 4.2

The rise and fall of Groupon

Founded in 2008, Groupon turned down a $6 billion offer from Google in early 2011 and went public that November valued at more than $16 billion. A year later its share price had fallen 90%, to a market value under $1.8 billion. Its local deal-making was valuable and, at first, rare. It was not costly to imitate: it was more a sales operation than a technology, entry barriers were negligible, and hundreds of clones and the internet giants moved in (pp. 145–146). Note the link to the five forces: hard-to-imitate resources and high entry barriers are the same fact seen from two sides.

Reading task · Collis & Montgomery

01Write the five tests in your own words, each with the article’s example.
02Which test has no VRIO equivalent, and which VRIO question carries two of their tests?
03Name the Patagonia resource on which durability would change your verdict. A reputation and a product feature age at very different rates.

Activity · VRIO assessor

Score five of Patagonia’s resources

Pick a resource, read the case evidence, and answer the four questions in order. The test stops at your first “no”. Then compare your verdict with a defensible reading. Disagreeing with that reading is allowed, but you must point to evidence. Then run the same four questions, in order, on one resource of your own employer: the earlier deck’s version of this tool.

Case evidence

Resource	Your verdict	A defensible reading

Sustaining the advantage · isolating mechanisms, rigidities, dynamic capabilities

Why copying fails, and why advantages still decay

Collis and Montgomery admit that inimitability does not last forever: rivals eventually find ways to copy most valuable resources, but managers can hold them off for a while (1995, p. 121). Rothaermel calls the barriers isolating mechanisms, the business world’s “moat” (2024, p. 147). The two lists overlap but are not the same.

Rothaermel’s isolating mechanisms (pp. 147–151)	Collis & Montgomery’s sources of inimitability (pp. 121–122)	Example
Better expectations of future resource value	—	A developer buys rural land cheaply before a highway is announced (Rothaermel)
Path dependence (time cannot be compressed)	Path dependency	No marketing budget could buy the trust parents place in Gerber baby food; it was built by years of steady marketing (C&M)
Causal ambiguity	Causal ambiguity	Rivals study Rubbermaid’s recipe for innovation and still cannot duplicate its success (C&M)
Social complexity	(within causal ambiguity)	Rivals can see Southwest’s planes and gate turnarounds; its culture of fun, family, frugality and focus they cannot specify (C&M)
Intellectual property protection	Physical uniqueness	Merck’s patents, a mineral right, a great real-estate location (C&M)
—	Economic deterrence	A float-glass plant so large the market supports only one; a rival could copy it but chooses not to (C&M)

Activity · name the moat

What stops the copy?

Seven resources. Name the main barrier to imitation in each. Where both readings above apply, either is accepted and the explanation says why.

0 of 7 answered

Moats leak: rigidities, and the capability to renew

Core rigidity

A former core competency that became a liability because the firm relied on it too long without honing and upgrading it. Circuit City’s logistics and service were outflanked by Best Buy and Amazon, and it went bankrupt (Rothaermel, 2024, p. 151). Kodak, from Session 1’s fallen giants, is the course’s other example.

Dynamic capabilities

The ability to create, deploy, modify, reconfigure, upgrade or leverage resources over time (Rothaermel, 2024, p. 152). Nvidia’s path is the earlier deck’s illustration: a gaming GPU firm that bet on deep learning in 2013, met an unexpected market in crypto mining with a dedicated line in 2017, and found AI demand arrive at scale with ChatGPT (Yoffie & von Bargen, 2024, p. 5).

Invest and upgrade

Because all resources depreciate, Collis and Montgomery prescribe continual investment: Disney’s $50 million Roger Rabbit revived its animation. Upgrading adds new resources, as Intel added a brand; Sharp built from a 1964 calculator to LCDs and a Viewcam that took 20% of the Japanese market within six months of its 1992 launch. Xerox, which thought its copier capability inimitable, slept while Canon took leadership (1995, pp. 124–127).

Question 03 · Value chain analysis · Porter (1987)

Where in its activities is the difference made?

VRIO tests what the firm has. The value chain shows where it is used. Porter treats every business unit as a collection of discrete value activities, from sales to accounting, and locates advantage there: “It is at this level, not in the company as a whole, that the unit achieves competitive advantage” (Porter, 1987). He groups the activities into nine categories. Session 1 made the complementary point with Porter (1996): advantage lives in the fit among activities, which this section measures.

Five primary activities

Make it, move it, sell it, support it

Inbound logistics, operations, outbound logistics, marketing and sales, and service. They create the product, deliver and market it, and provide after-sale support.

Four support activities

The inputs and infrastructure

Firm infrastructure, human resource management, technology development and procurement. Rothaermel’s textbook relabels some of them (supply chain management, distribution, R&D, information systems, accounting and finance), but the logic is Porter’s (2024, p. 156).

The question to ask

Difference, or cost?

Every activity adds some value and some cost. Value chain analysis asks which activities generate the firm’s differentiation and which drive its costs (Rothaermel, 2024, p. 154). The professor’s 2025 deck read Patagonia’s chain as differentiation, not cost leadership; Session 7 tests that claim.

Why a corporate-strategy article supplies the tool

Porter (1987) introduces the value chain to judge diversified firms: a corporate parent can add value by transferring skills between similar value chains or by sharing activities, such as a common sales force or logistics network. Session 9 returns to that use. Today the tool is applied to a single business, which is how it starts in the article: advantage is built activity by activity, inside one unit.

Activity · why the system is the moat

Copy every activity well, and still miss

Rothaermel’s arithmetic: if a rival copies each of 25 interlocking activities with 90% accuracy, it reproduces the whole system with only about 7% accuracy, because the probabilities multiply (2024, p. 157). Move the sliders.

Interlocking activities in the system: Rival’s accuracy on each activity:

Accuracy on the whole system

Activity · map Patagonia’s value chain

Tag each activity, then mark the ones that differentiate

Ten activities from the case. For each, choose the value chain category and decide whether it makes Patagonia different from a typical apparel rival or is simply what any firm of its size has to do. Your tags fill the map as you go. Check when you have placed all ten.

The same tool on another firm · from the earlier deck

Nvidia’s value chain: where the value and the risk sit

TECHNOLOGY · OPERATIONS

Nvidia designs the GPUs; its “operations” are design, not fabrication. The design and CUDA are where its intellectual property is made (Yoffie & von Bargen, 2024, pp. 3–4).

PROCUREMENT · INBOUND

TSMC fabricates most of the chips and third parties assemble and test them. Outsourcing escapes the cost of a fab but leaves Nvidia deeply dependent on a single supplier (pp. 1, 3).

MARKETING & SALES

A direct sales force sells to OEMs such as Dell and HP and to data-centre customers such as Amazon and Microsoft (p. 3). Free software kits court developers, not just buyers (p. 4).

OUTBOUND · CUSTOMERS

Nearly half of revenue came from four large data-centre customers (p. 6), and the largest cloud providers were designing their own chips (p. 1).

Patagonia’s chain differentiates across many boxes; Nvidia’s value and its biggest risks sit in two or three. Which pattern is easier for a rival to copy?

Question 04 · SWOT analysis · Andrews (1971), via Collis & Montgomery (1995)

Where do the inside and the outside meet?

SWOT is older than any tool on this page. Collis and Montgomery trace strategy as a field to Kenneth Andrews’s The Concept of Corporate Strategy (1971), which defined strategy as the match between what a company can do, its strengths and weaknesses, and what it might do, its opportunities and threats. Managers got few ways to assess either side until Porter (1980) gave them the outside; core competence and capabilities then swung the pendulum inside; the resource-based view joins the two (1995, p. 121).

Session 2 put analysis third in Kaplan, Norton and Barrows’s sequence, under one question: what are the key issues our strategy must address? That step had three parts: external analysis, internal analysis and SWOT. Sessions 3 and 4 did the first; questions 1 to 3 did the second. This is the third.

The rule that makes a SWOT honest

Strengths and weaknesses are internal and VRIO decides which is which: a resource that is not valuable is a weakness, and one that is valuable, rare, costly to imitate and organised is a strength and a core competency. Opportunities and threats are external and come from PESTEL and the five forces (Rothaermel, 2024, p. 160). Ask of every strength: if a rival’s SWOT shows the same item, was it ever a strength?

The SWOT matrix as four questions · after Rothaermel (2024), Exhibit 4.11

Strengths × Opportunities

How can internal strengths exploit external opportunities? The “offensive” options; start here.

Strengths × Threats

How can strengths reduce the likelihood and impact of external threats?

Weaknesses × Opportunities

Which weaknesses stop the firm taking an opportunity, and how can it shore them up?

Weaknesses × Threats

Which weaknesses would turn a threat into reality? The “defensive” options.

Rothaermel, 2024, p. 161.

The caveat that matters most

One fact, two boxes

A strength can also be a weakness, and an opportunity a threat. Rothaermel’s examples: Alphabet’s Silicon Valley location brings talent and venture capital, and also high costs and earthquake risk; climate change threatens carmakers through fuel taxes and opens demand for low-emission cars. A SWOT is only as good as the external and internal analysis done before it (2024, pp. 161–162). It is a snapshot, the professor’s plan adds: it does not say how to prioritise.

Activity · SWOT builder, then an audit

Part 1 · Sort thirteen case facts into the four boxes

First ask: is this fact about Patagonia (S or W) or about its environment (O or T)? Then ask which way it cuts. Three of the facts can defensibly go in two boxes; the explanation says which.

Strengths · internal

Weaknesses · internal

Opportunities · external

Threats · external

Part 2 · Audit last year’s SWOT

Ten entries from the professor’s 2025 Patagonia deck and teaching script. For each, say whether the case backs it, whether it needs evidence the case does not give, or whether it is overstated or in the wrong box. A SWOT entry is a claim, and claims need evidence.

0 of 10 audited

Also on last year’s list, and worth the same audit: product quality and durability, and a mission-driven culture (S); supply-chain complexity (W); new markets, circular-economy leadership, partnerships and policy advocacy (O); supply-chain disruptions, rising material costs, regulatory change and consumer cynicism (T). Which of them could a rival’s SWOT list word for word?

From SWOT to options · from the professor’s 2025 Patagonia deck

Eight recommendations. Which add to the stock, and which drain it?

These options were proposed in class last year. They are arguments, not case facts. Test each one against the resource it relies on: does it use Patagonia’s credibility in a way that builds more of it, or spend it? Workshop 2 below plays out three of them.

SO · OFFENSIVE

Offer sustainability consulting to other brands
License sustainable-fabric innovations to other industries

Answer greenwashing rivals with more transparency, such as full carbon accounting
Offer a lower-priced essentials line for downturns, without lowering standards

Enter emerging markets such as India or Brazil
Work with governments and NGOs on environmental policy

WT · DEFENSIVE

Build a more resilient supply chain that lowers cost without lowering standards
Exceed future compliance standards now

The same tool on another firm · from the earlier deck

Nvidia’s SWOT ends in three questions, not a list

Strengths: the CUDA ecosystem and a data-centre share analysts put at 98% in 2023. Weaknesses: one supplier, TSMC, and four customers providing nearly half of revenue. Threat: those customers designing their own chips, and an antitrust investigation opened in 2024 (Yoffie & von Bargen, 2024, pp. 1, 6). The deck turned the matrix into questions, which is the point of the exercise:

S–T. How can the CUDA strength blunt the threat of customers’ in-house chips?
W–T. How can Nvidia reduce its dependence on TSMC, given the geopolitical risk?
W–O. Should it open CUDA to reach more of the market, or would that destroy its key strength?

The professor’s teaching plan runs the same drill on firms from other sessions, qualitatively: Tesla’s strengths in brand, battery technology, direct sales and the Supercharger network against its past production-scaling problems and reliance on one leader; Twitter’s history of inconsistent profitability; Amazon’s run of opportunities taken, from books to everything, AWS, Whole Foods and Prime Video. For practice, try a firm you know well, or the coffee shop nearest the campus: name one strength, one weakness, its primary and support activities, and one resource you think passes VRIO.

The case · Patagonia: “Earth Is Now Our Only Shareholder” (2023)

Arguing all four questions on one company

In November 2011 Patagonia ran a full-page Black Friday ad in The New York Times: a picture of its fleece jacket above the words “DON’T BUY THIS JACKET”. Black Friday traditionally opens the US holiday shopping season. The ad launched the Common Threads Initiative, which asked customers to reduce, repair, reuse, recycle and reimagine Patagonia products (Trelstad et al., 2023, p. 5). By 2022 Patagonia held the largest share of the US outdoor apparel industry, nearly 10% (p. 2). Bring the case having formed a view, not a summary.

Note on the case. “Patagonia: ‘Earth Is Now Our Only Shareholder’” (Trelstad, Hsieh, Norris & Pinckney, 2023) is a Harvard Business School case and is not reproduced here; obtain it through the course pack. For this session read pages 1–6 and Exhibits 2, 4, 5 and 9: the history, not the ownership decision. The prompts and readings below are original to this session; full references are at the end.

Against Q1

List what Patagonia has and what it has learned to do. Then draw its tree: which one or two competencies feed fleece, T-shirts, wetsuits and repairs alike? If your list has more than six, Prahalad and Hamel would say it is not a list of core competencies.

Against Q2

Run environmental credibility through Collis and Montgomery’s five tests. It passes inimitability easily. Who captures its value: Patagonia, its customers, or the 5,000 firms in 1% for the Planet? And what would substitute for it in a buyer’s mind?

Against Q3

Find the activities that differentiate. Is the difference made in one box, such as marketing, or across the chain? If a rival copied the ad, the repairs and the pledge, which activities would it still be missing?

Against Q4

Write Patagonia’s SWOT in 2011, the year of the ad, using only case facts dated before 2012. Then name the one fact that sits in two boxes and say which box the ad moved it towards.

The puzzle

Telling customers not to buy

For almost any retailer, an ad against its own product on the busiest shopping day of the year is incoherent. It is coherent only if the firm is selling something other than the jacket: a reason to believe the jacket is worth keeping, repairing and passing on.

The RBV reading

The ad spends a stock

The ad is one deployment of an intangible resource, environmental credibility, built by decades of flows. A rival could run the same words tomorrow; without the history, customers would read it as a stunt. That is the difference between an activity anyone can copy and the resource that makes it work.

What the case does not tell you

There is no sales figure

Patagonia is private and does not publish financial data; the roughly $1 billion of revenue and $100 million of net income for 2022 are media estimates (p. 2). The case gives no figure for the ad’s effect on sales. Before calling it a success, say what evidence you would want.

Activity · the flows behind the stock

Sixty-five years of decisions that filled the tub

Every dot is a decision recorded in the case. Switch the four kinds on and off, then step through them. Ask of each one: is it a flow into the credibility stock, a flow into another resource, or a withdrawal?

Show every decision as a table

Year	Kind	Decision	Case page

Source: Trelstad, Hsieh, Norris & Pinckney (2023). Where the case gives a decade rather than a year, the table says so.

Activities build resources: the link between questions 1 to 3

Because Patagonia does X in its value chain, it holds Y, which a rival cannot simply acquire. This is the professor’s value-chain-to-RBV table, rebuilt with evidence from the case.

Value chain activity	What Patagonia does (case)	Resource it builds	Why it is costly to copy
Procurement	Moved all 166 cotton products to organic within 18 months after a 1994 assessment, risking sportswear, then 30% of the business; sales recovered within two years (p. 4)	Supplier relationships and the capability to reconfigure a supply base on principle	Path dependence: the capability was proved under risk, once, and cannot be demonstrated by a newcomer without the same bet
Service	Free repairs at the Reno facility, about 100,000 items a year; buyback for store credit, then repair and resale or recycling (p. 4)	Customer trust that durability claims are real	The facility can be built; the belief that the offer is not a sales tactic cannot be bought
Marketing & sales	A catalogue explaining chocks in the early 1970s, after which the US market shifted within months (p. 2); “Don’t Buy This Jacket” (2011); every Black Friday dollar, $10 million, given away in 2016 (p. 5)	Reputation for environmental credibility	Causal ambiguity: nobody, Patagonia included, can say which of five decades of acts made the message believable
Human resource management	One of the first onsite corporate daycare centres, paid parental leave before it was common, training in Yosemite; growth capped after 1991 to keep work stable (p. 3)	A mission-aligned culture	Social complexity: each practice can be copied; the pattern of daily behaviour they produce cannot
Firm infrastructure	10% of profits from 1985; the greater of 1% of sales or 10% of profit from 1986 (p. 3); a 2011 benefit-corporation charter that can change only by unanimous shareholder vote (p. 5)	Governance that binds the firm to its purpose	Hard to reverse, which is what makes it credible

Profit is part of the resource, not its opposite

Kris Tompkins, recalling the 1980s: “Because if you’re not successful financially, the experiment’s over” (Trelstad et al., 2023, p. 3). Chouinard goes further and claims that every decision best for the planet has made the company money (p. 3). Treat that as a hypothesis. The RBV can explain why credibility earns returns; it cannot show that every green decision paid.

What comes next

In September 2022 the Chouinard family moved all of Patagonia’s voting stock into a purpose trust and all of its non-voting stock into a nonprofit, the Holdfast Collective (p. 11). Session 6, Shared Value and Competitive Advantage, reads Prahalad and Hamel again with Ghemawat and Rivkin to ask how these resources become an advantage, and how sharing value through operations differs from giving profits away. Session 7 asks which competitive position the activities support.

The question the room usually splits on

Is Patagonia’s core competence environmental credibility or making things that last? The first is a reputation: an intangible resource, path-dependent in Collis and Montgomery’s sense, which travels to anything that can carry the message. The second is a capability in Prahalad and Hamel’s sense, collective learning in materials, design and repair, which travels only where durability and repair matter. Both readings fit the case, and they imply opposite things about growth. A reputation is spent by every product that does not live up to it; a capability is strengthened by every product that uses it.

Take a side before class. The exhibit workshop below gives you the numbers; you will be asked which piece of evidence would change your mind.

Discussion questions

Come with a written answer to the first two. The others are for the room.

01
If you were CEO Ryan Gellert, which single Patagonia resource would you protect first, and which of the company’s own activities is most likely to erode it?
02
The case gives no sales figure for “Don’t Buy This Jacket”. What evidence would convince you that it created value rather than attention, and who would you need to hear from?
03
Chouinard says every decision best for the planet has made the company money. Is that a causal claim, or survivorship? What would a counter-example look like, and would the case report it?
04
In the cotton switch, was the advantage the organic cotton, or the organisation that could move 166 products in 18 months? Which of the two could a rival buy?
05
By 2020, 1% for the Planet had more than 5,000 business members, and B Lab’s co-founder says thousands of companies followed Patagonia in making themselves legally accountable to stakeholders. When a practice you pioneered becomes common, what happens to its VRIO score, and where must your advantage move?
06
A customer post the professor shared (r/BuyItForLife) describes two free repairs and, when a jacket could not be fixed, store credit for its full original value. Is that a cost, a marketing expense, or an investment in a resource? How would you show which?

The exhibit workshop · 20 minutes

Should Patagonia drop the floor under its pledge?

It is late 2020 and retail has had a hard year. Since 1986 Patagonia has given, every year, the greater of 1% of sales or 10% of profit (Trelstad et al., 2023, p. 3). A director proposes giving 10% of profit only, this year: “Nobody outside reads the small print, and the money stays in the business.” You sit on the board. Decide, and say which resource the decision touches.

Figures are from the case: Exhibits 4 and 5, and the estimates stated on pp. 2–6. Patagonia publishes no accounts, so revenue is the case’s 2022 media estimate, used for scale. Compute before you reveal: the reveal is worth nothing if you have not committed to an answer first.

Exhibit A · The pledge at three profit margins (p. 3; scale from p. 2)

Net margin	Revenue	Profit	1% of sales	10% of profit
5% (a bad year)	$1,000m	$50m	$10m	$5m
10% (the 2022 estimate)	$1,000m	$100m	$10m	$10m
15% (a good year)	$1,000m	$150m	$10m	$15m

Task 1. For each row, what does the pledge give, and what share of profit is that? At what margin do the two rules cross, and how much would the director’s proposal save in each row?

Exhibit B · The stock, as outsiders can see it (Exhibit 4; p. 6)

B Impact score, 2020	151.4, against 80 needed to certify
B Corp “Best of the World”	Community and Environment: 2017, 2018, 2019, 2021, 2022. Changemakers and Overall: 2017, 2018, 2019
Patagonia’s giving since 1980	Nearly $200m by fall 2020
1% for the Planet, co-founded 2002	$435m raised from more than 5,000 member businesses by 2020

Task 2. How many times the threshold is the score? How many awards in all? What has the average 1% for the Planet member given? Which of these markers is rare?

Exhibit C · The ad as a ledger (Exhibit 5)

The jacket shown: the R2, “one of our best sellers”, 60% recycled polyester.
Making it took 135 litres of water.
Getting it to the Reno warehouse emitted nearly 20 pounds of carbon dioxide, 24 times the jacket’s weight.
It left behind two-thirds of its weight in waste.

Task 3. What does the jacket weigh, and how much waste did it leave? Then: why would a firm print its best seller’s costs in its biggest ad of the year?

Exhibit D · Growth in three eras (pp. 2–4)

Era	Annual sales (estimates)
Through the 1980s	~$20m → ~$100m
1991 caps → 2005	~$100m → ~$200m
2005 → 2022	~$200m → ~$1,000m

Task 4. Compute the compound annual growth rate of each era. The case also says growth in the 1980s averaged 30% to 50% a year (p. 3). Do the two figures agree?

Only after you have written your own.

What the numbers do and do not settle

They settle that the giving rule bites when profits fall, that the credibility stock is old and verified by outsiders, and that the pledge on its own is no longer rare. They do not settle whether the pledge or the ad earned money: the case has no sales figure for either, and the faster growth of the 2010s cannot be credited to the stock without one. Nor do they settle which of the case’s two growth figures for the 1980s is right.

Name the resource

Which stock does the director’s proposal draw down?

Name who pays

Who bears the $5m either way, and who would notice?

Give the number

What figure would change your vote?

In the room

Workshops & simulation

Two decisions with the outcome revealed, and a branching simulation built from the earlier deck’s start-up portfolio. The firms in Workshop 1 and the simulation are fictional, and every outcome is a stylised scenario written for this session, not a report of what happened. Workshop 2 uses Patagonia’s case facts where it cites them.

In the room

Studio: two rounds, one decision each

Round 1 · 12 min · pairs

Disaggregate one strength

Choose one Patagonia activity from the value-chain map. Say which resource it builds, which core-competence hypothesis it supports, and which of Collis and Montgomery’s five tests is still unproven. Then break the strength down two levels, as the article does with “consumer marketing skills”, until it is specific enough to compare with a named rival.

What to hand in

One line: activity → resource → test → evidence gap, citing a case page or exhibit. A good reputation is not proof of every test.

Round 2 · 15 min · fours

Role play: the board tests the competence claim

Roles: Head of Product (states Patagonia’s core competence in one disaggregated sentence); CFO (asks who keeps the returns, and what happens if the people who carry the competence leave); rival strategist (may copy the visible product, but must explain the cost, time and coordination needed to copy the routines, then asks whether customers could get the benefit another way); Director (asks: better than whom? An improvement on the firm’s own past is not superiority). The Head of Product revises the claim once.

What to hand in

The revised claim, and the test that forced the revision: imitation, substitution, appropriability or superiority.

Last 12 minutes — the in-class quiz (graded)

The last 12 minutes of every class are a graded quiz, taken individually. Today’s covers the four questions and the case: resources, capabilities and core competencies with Prahalad and Hamel’s tree and three tests; Collis and Montgomery’s five tests and VRIO; the value chain; SWOT; and their application to Patagonia. To prepare, make sure you can classify a resource as tangible, intangible or a capability with a reason, run one Patagonia resource through VRIO from memory, place five Patagonia activities in the value chain, and say why one case fact can sit in two SWOT boxes. The final quiz and concept check below are practice; the graded questions are not on this page.

Knowledge check

Final quiz: fifteen questions

Score: 0 / 0

Test your grip on the session’s core ideas, including the workshops and simulations above. Each answer explains itself.

Concept check

Twelve questions, with reasons

0 / 0 correct

Answer first; the reasoning appears immediately. A wrong answer here is cheaper than a wrong answer in the exam.

See it · explain it · test it

A resource claim becomes a testable advantage

Owning something useful is not enough. Explain the task it enables, the customer benefit it creates, the comparison with rivals and the arrangements that let the firm capture and renew its value.

Original teaching diagram. Read the same reasoning in the numbered explanation beside it; arrows are propositions to test.

Read the diagram as a story

A specific resource enables a capability only when people and processes can deploy it. That capability must create a customer benefit and withstand comparison with rivals and substitutes. Organisation and appropriation determine whether the firm captures value; investment and learning renew resources as they depreciate. Each arrow is a hypothesis needing evidence, not a guarantee of sustained advantage.

Resource: fictional Surya Dairy has farmer relationships, chilling equipment and quality records. A list of these assets is not yet a core competence.
Capability: it may reliably collect, chill and deliver consistent-quality milk. Verify performance rather than inferring it from equipment ownership.
Market tests: compare this task with a named rival, customer needs and alternative ways of achieving the same benefit. A useful but widely available capability may deliver parity.
Capture and renewal: assess contracts, incentives, training and investment. Quality failures can consume the trust stock; feedback may help rebuild it.

One concept, three business contexts

Hypothetical · original teaching scenario

Surya Dairy: equipment versus a working capability

A fictional dairy buys the same chilling equipment as three rivals. That equipment may be valuable, but the purchase does not establish rarity. Surya’s candidate advantage is a coordinated collection and quality routine. Test whether it reduces spoilage or improves consistency relative to rivals, whether customers value the result and whether other methods can match it. Farmer incentives and reinvestment determine whether the routine keeps working.

Discuss: What observation would make you downgrade the routine from advantage to parity?

Global · Patagonia case history and a current teaching observation

Patagonia: a repair service is visible; the capability needs evidence

Patagonia publishes repair guides and offers a repair route. The assigned case supplies historical decisions and exhibits for a deeper resource analysis. Teaching inference: repair knowledge, design feedback and customer trust might reinforce one another. A visible service alone does not demonstrate a rare or costly-to-imitate capability. Compare the routine, costs and customer response with alternatives before claiming a sustained advantage.

Discuss: Which part could a rival buy tomorrow, and which part might take repeated learning to build?

Patagonia product care and repair (observed October 2026); historical evidence: Trelstad et al. (2023), assigned case

Indian · Amul’s 2024 description of its model

Amul: coordination is a candidate capability

Amul’s published three-tier model connects village societies, district unions and a state federation. The physical assets are only part of that arrangement; coordinating collection, processing and marketing is a candidate capability. This is our teaching interpretation, not an official VRIO verdict. Ask which routines create a measured customer benefit, what rivals can reproduce and who captures the resulting value. Large scale alone does not answer those questions.

Discuss: How could a rival achieve the same customer benefit through a different resource bundle?

Amul model and distribution brochure, p. 2 (2024)

Four diagnostic decisions

Choose an answer, read the reason and compare it with the diagram. Start a fresh attempt when you want to revisit all four decisions.

Practice score: 0 / 4.

Discuss, then defend a decision

Make “our people” precise

Replace a broad claim such as “our talented team” with a specific task, a performance measure, a named comparator and a mechanism explaining the difference. Then ask whether the evidence shows an asset, a capability or a transferable core competence.

Protect a stock while improving a flow

Choose a Patagonia proposal from the existing workshop. Identify the resource stock it develops or spends, the proposed flow and one early warning indicator. Explain what the case does and does not establish.

Use the supplied resources with this lab

The guide below maps the supplied filenames to their teaching purpose. Read the authorised course-pack originals alongside the existing reading list; the lab provides original explanations and practice.

competing on resources.pdf
Collis and Montgomery (1995): the supplied file is scanned. Use its five resource tests and the emphasis on market value and rival comparison. Disaggregate a general label into a task you can actually compare. Obtain the original through the course pack.
TheCoreCompetenceOfTheCorporation.pdf
Prahalad and Hamel (1990) is supplied in the older-numbered Session 6 resources folder, but its topic belongs to this session’s core-competence analysis too. Use the three tests and explain a possible second application rather than calling a successful product a competence.
Patagonia Earth Is Now Our Only Shareholder_gl.pdf; Patagonia “Earth Is Now Our Only Shareholder”.pdf
Both supplied files contain HBS Case 9-323-057, revised September 2023. Treat them as versions of the same assigned case, not independent corroboration. Use the case history and exhibits for resource evidence, and return to the ownership question in later sessions. No licensed original is rehosted here.

Return to the learning outcomes · Continue the existing workshops · Open the complete reading list

Preparation

Readings for Session 5

Read Prahalad and Hamel first, then Collis and Montgomery, and read the case last: it is the material you argue with, and the articles are the tools. Readings and cases are obtained through the course pack; none is reproduced or linked here.

Case
Trelstad, B., Hsieh, N.-h., Norris, M., & Pinckney, S. (2023). Patagonia: “Earth is now our only shareholder” (HBS Case No. 9-323-057). Harvard Business School.

Read pp. 1–6 and Exhibits 2, 4, 5 and 9 closely: the history, not the ownership decision, which Sessions 6 and 7 take up.
Required · Q1
Prahalad, C. K., & Hamel, G. (1990). The core competence of the corporation. Harvard Business Review, 68(3), 79–90.

The tree, core products, the three tests, and how competencies are lost. Bring a capability hypothesis for Patagonia, a second application and one reason the transfer could fail. Session 6 reads it again.
Required · Q2 and Q4
Collis, D. J., & Montgomery, C. A. (1995). Competing on resources: Strategy in the 1990s. Harvard Business Review, 73(4), 118–128.

Three market forces and five tests for a valuable resource; the brief history of strategy from Andrews to the RBV. Bring the five tests in your own words.
Supplementary · Q3
Porter, M. E. (1987). From competitive advantage to corporate strategy. Harvard Business Review, 65(3), 43–59.

For today, the section on the value chain and its nine categories. The rest returns with corporate strategy in Session 9.
Supplementary · textbook
Rothaermel, F. T. (2024). Strategic management (6th ed., ch. 4). McGraw Hill.

Internal analysis: core competencies, resources and capabilities, VRIO, isolating mechanisms, dynamic capabilities, the value chain and SWOT. Five Guys, Yeti and Groupon come from here.
Further
Grant, R. M. (2019). Contemporary strategy analysis (10th ed., ch. 5). Wiley.

Appraising resources and capabilities, and its comparison with VRIO, including durability.
Further · illustration
Yoffie, D. B., & von Bargen, S. (2024). Nvidia, Inc. in 2024 and the future of AI (HBS Case No. 9-725-360). Harvard Business School.

The source of the Nvidia facts above. It is the case for Sessions 8 and 9; nothing in it is needed for today.
Carried forward
Porter, M. E. (1996). What is strategy? Harvard Business Review, 74(6), 61–78.

Session 1’s reading: fit among activities, the idea behind the “system is the moat” calculator.

Earlier interactive decks

Their content is merged into this page. They were built for other course numberings, so the session numbers in their own titles may differ from this page’s.

The earlier Session 5 page (outlines v0.1 and v0.2) The previous version of this page, kept as it was, with its reading lenses, resource studio and reading check. Everything on it is carried into this page.
Short deck: Session 5, Internal Analysis & Resource-Based View “Don’t Buy This Jacket” taken apart, a VRIO assessor for a resource of your own firm, and a three-question check. Its dating of the 1% pledge to 1985 differs from the case (1986).
2-year MBA, Session 9: Inside the Black Box A SWOT audit of Amazon, core competencies across a dozen firms, a VRIO calculator with Nvidia and AWS presets, Five Guys, Nvidia’s value chain and a group turnaround challenge.
Further study: Sustaining Competitive Advantage Patagonia’s defences classified as commitments or capabilities, with a “moat tester”. It extends this page’s isolating mechanisms towards Session 7’s commitments.

References

APA 7th edition. Cited in the text by author and date.

Brandenburger, A. M., & Nalebuff, B. J. (1995). The right game: Use game theory to shape strategy. Harvard Business Review, 73(4), 57–71.
Collis, D. J., & Montgomery, C. A. (1995). Competing on resources: Strategy in the 1990s. Harvard Business Review, 73(4), 118–128.
Courtney, H., Kirkland, J., & Viguerie, P. (1997). Strategy under uncertainty. Harvard Business Review, 75(6). (Reprint 97603)
Grant, R. M. (2019). Contemporary strategy analysis (10th ed.). Wiley.
peter_dolan. (2024). Incredibly impressive behavior from Patagonia [Online forum post]. Reddit, r/BuyItForLife. reddit.com
Porter, M. E. (1987). From competitive advantage to corporate strategy. Harvard Business Review, 65(3), 43–59.
Porter, M. E. (1996). What is strategy? Harvard Business Review, 74(6), 61–78.
Prahalad, C. K., & Hamel, G. (1990). The core competence of the corporation. Harvard Business Review, 68(3), 79–90.
Rothaermel, F. T. (2024). Strategic management (6th ed.). McGraw Hill.
Sull, D., & Reavis, C. (2019). Tesla’s entry into the U.S. auto industry (Case No. 18-186). MIT Sloan School of Management.
Trelstad, B., Hsieh, N.-h., Norris, M., & Pinckney, S. (2023). Patagonia: “Earth is now our only shareholder” (HBS Case No. 9-323-057). Harvard Business School.
Yoffie, D. B., & von Bargen, S. (2024). Nvidia, Inc. in 2024 and the future of AI (HBS Case No. 9-725-360). Harvard Business School.

Dierickx and Cool (1989) and Andrews (1971) are cited as they appear in Rothaermel (2024) and Collis and Montgomery (1995). The HBR articles and the Harvard cases are reproduced nowhere on this page; obtain them through the course pack.