Why did very similar companies such as for example Walmart and K-Mart operated in the same industry.

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

1.      "Quantitative techniques can be useful in business strategy but the strict assumptions underlying them makes their use more an art than a science." Discuss this statement.

2.      "The Resources and Capabilities approach to strategy offers a different and better perspective than Porter's five forces theory." Discuss this statement.

Why did very similar companies such as for example Walmart and K-Mart operated in the same industry performed so differently? Walmart has been able to be the dominant player on the market, as Walmart was growing and making the success, Kmart at the same time was losing share and had to declare bankruptcy in 2010. What went so terribly wrong, if Kmart wasn't selling product fundamentally different. How could Walmart achieve such success and profitability? Was this fact due to industry or effects of their performance?

Why do some firms outperform the others? Kmart problem could perhaps be explained by the theory of Porters five forces; however since 1980s, when Porter had established the framework analysing the variables influencing the competition and profitability, many other ideas and theories were put forward regarding the analysis of the sources of the competitive advantage. Those have included Capabilities and Resources based view. Therefore, which of these two theories; Resource and Capabilities and Porter Five forces, gives a better perspective on firms profitability and explain what does the competition influence?

Regardless the different goals and objectives that a firm wants to achieve, there are two primary goals that has to be accomplished; profitability and growth. While trying to aim for these goals, companies face both different opportunities and obstacles coming from the firm itself or the outside. The way how to achieve the businesses goals can be supported by two theories that could give us an evaluation of the

The company's goals can be actualized only with the aid of an adequate analytical frame that shall enable the insight of the major determinants of these two areas.

The study of academic experts and of consultant-houses reveals numerous modalities of strategic analysis and company evaluations. Since the beginning of the last century researchers havecte aimed ath finding the answer to the question "why some companies continuously achieve better results than others?" The answer was sought for in the first researcher's efforts in distinctive competencies - a characteristic in a company that enables effective and efficient enforcement of the strategy. In the eighties this was a dominant economic perspective. Starting from 1979, M. Porter poses the framework for strategic analysis of companies which contrary to previous approaches is more oriented towards the external - towards the analysis of the industrial structure. As a criticism towards the external orientation of the strategic and structural approach during the late eighties and nineties, and through the engagements of numerous researchers, once again the Resource-based theory is an affirmed strategy of companies. Theoreticians of the resource approach suggest that the competitive positioning in existing industries is a secondary strategic issue in circumstances of great variability and uncertainty of the environment. The category of competitive advantage is eluded from the industrial analysis and remains the crucial issue in the long-term existence of the company, independent of the industry's future.


Firms are seen to be homogenous, and competition is seen as occurring via positioning in markets. Strategic challenge is to identify attractive markets to compete in attractive markets being ones with characteristics identified by five Porters Forces. [1] The intensity of competition can be determined by the level of competition from substitutes on the market. The rivalry among existing firms is the most important element of Porters diagram.

'Works of Bain (1956) reflected a view that it is assumed that management can't influence neither industry nor the performance of the firm. Firms conduct is constrained by industry forces, management role and its own assets can therefore be ignored.' [2] 

Resource based strategy:

On the other hand resource based perspective focuses the attention to the performance of the firms and emphasizes its assets and capabilities as its primary strength. The way the resources and capabilities are combined, makes firm different from one to another. It is important that these resources are valuable, rare, inimitable, and non-substitutable as Barney had suggested in his work. 'Rungtusanatham et al. (2003) have perfected Barney view and included that resource must be imperfectly mobile to discourage the ex-post competition for the resource that would offset the advantages of maintaining control of the resource. It was then abbreviated as VRINN (valuable, rare, imperfectly mobile, not imitable and not substitutable).' [3] 

As an example; a firm, which has used their resources to the maximum of their value is Toyota. It has identified their strategic resources and it is using them to enhance their sustainable competitive advantage. These resources classify into tangible, intangible and human resources including their assets, knowledge, technology, human skills, brand, financial securities etc. If a firm is having a vision about resources clear and how to operate with them makes it also easier to establish themselves in other markets and continues growing on a global scale. Toyota is known for using so called Just in Time method: "the ideal conditions for making things are created when machines, facilities, and people work together to add value without generating any waste." The best techniques for eliminating waste between operations, between lines, and between processes. ' [4] 'Through this system, Toyota has been able to initiate their unique capabilities and being able to manage their core competencies to meet the needs of the clients for innovative and new vehicles. [5] ' Apart from the strong manufacturing system, Toyota is known for its strong marketing capabilities; they built a strong brand name, which is inimitable and enhances their competitive advantage, attracting customers and satisfying their needs.

Disadvantages: A resources can be purchased, however it can be bought by the rivals too, therefore the companies are losing the competitive advantage by having the same available resources. In order to beat the competition, the firms have to use it in a way to achieve a competitive advantage from it, meaning that it has to be developed internally or ensure that there is a short supply; nevertheless it may take long time to figure out the way how to use the resource for the firm

Resource based vie may be a very simplistic view on resources and capabilities being the only aspect affecting the firm, many firms are dealing with turbulent industry they are performing in and doesn't matter how great their eg. managerial skills are.