Microsoft's Strengths & Weaknesses: A Resource-Based View (Chapter 5)

Ch. 5 - Evaluating Firms Strengths & Weaknesses: The Resource-Based View

This chapter describes how to evaluate a company based on the various resources of the firm.

Microsoft's Recourses:

Resource Categories:

1. Financial Capital

• Microsoft has impressive financial resources including a net income of $44.2 billion and retained earnings of $34.6 billion.

2. Physical Capital

• Microsoft has a large physical capital including $44.1 billion in property and equiptment.

3. Human Capital

• Of course Microsoft grew with Bill Gates as founder and CEO, but the firm still has impressive leadership including the current CEO, Satya Nadella.

4. Organizational Capital

• Microsoft is a strongly structured organization with excellent systems in place for continued success.

Microsoft absolutely has sustained competitive advantage and distinctive competence that can be shown through the VRIO Framework.

• Value: Does Microsoft’s resources and capabilities enable the firm to respond to environmental threats or opportunities?
• Microsoft absolutely has the resources to neutralize risk factors.
• Rarity:  Is a resource currently controlled by only a small number of competing firms?
• Very few competitors have the same resources as Microsoft, especially in the personal computing and office software segments.
• Imitability: Do firms without a resource face a cost disadvantage in obtaining or developing it?
• It is extremely difficult and costly for other firms to try to copy the products or services that Microsoft provides.
• Organization: Are Microsoft's policies and procedures organized to support the exploitation of its valuable, rare, and costly-to-imitate resources?
• Microsoft's strong, established organization can capitalize on their adventitious resources.