MGMT5663 Module 2 resources and capabilities analysis example

A Library of 1,400 Culvert Designs: Which of a Precast Producer's Resources Rivals Cannot Copy Quickly

Student Name

American College of Education

MGMT5663: Innovation and Strategic Management

Module 2 Assignment

Instructor Name

May 8, 2028

The Question From Module 1

Module 1 found that Tallis Precast, a composite two-plant producer in the upper Midwest, earns a gross margin of 29 percent on engineered products such as box culverts and bridge sections and only 14 percent on standard products, and that the engineer who designs a crossing, not the contractor who buys it, decides most of what follows. The industry sets a ceiling on profit, but it does not explain why Tallis wins some engineered work at good prices and loses standard work at poor ones. That requires looking at what Tallis has.

Barney (1991) argued that a resource can support sustained competitive advantage only if it is valuable, rare among current and potential competitors, imperfectly imitable and without strategically equivalent substitutes. The test is demanding by design. Most of what a company is proud of fails at least one of those four criteria, and saying so is where resource analysis starts to be useful.

Six Candidate Resources, Tested

The first candidate is Tallis's two state-certified plants. They are valuable, because uncertified plants cannot supply public work, but they are not rare: all four producers in the market hold the same certifications. The second is its delivery fleet of 38 trucks and trailers. It is valuable and reasonably modern, but any competitor can buy or lease the same equipment, so it is neither rare nor hard to imitate. Both are necessary to compete and neither explains why Tallis wins.

The third candidate is family ownership, which lets Tallis accept long paybacks and hold prices through a slow year without a parent company's quarterly targets. That is valuable and rare among the rivals, since Corbel's division answers to a national parent, but it is matched by the other two family-owned firms, so it passes only in part. The fourth, Tallis's cement supply, fails outright: Tallis buys on the open market from suppliers that include its largest rival's parent, which Module 1 identified as a weakness rather than a resource.

The fifth and sixth candidates are where the analysis changes direction. Tallis employs nine engineers, six of them licensed, who prepare shop drawings for custom culverts and bridge sections, and it maintains a library of about 1,400 designs that state and county reviewers have already approved, covering most combinations of span, rise, fill height and loading that occur in its market. And it runs three crane crews that deliver and set its own products, so a county can close a road for two or three days rather than the several weeks a cast-in-place structure needs. Both are valuable and rare; no rival in the market has more than 300 approved designs, and only Corbel sets its own products.

Why the Design Library Is Hard to Copy

Rarity today does not guarantee advantage tomorrow; the question is whether a rival could build the same thing. Dierickx and Cool (1989) argued that the most durable advantages come from asset stocks that are accumulated over time rather than bought, and they identified several properties that slow imitation. Three of them apply directly to the design library.

The first is time compression diseconomies: an imitator cannot build 25 years of approved designs in three by spending eight times as much, because each design must be prepared for a real project, reviewed by the owner's engineers and installed before it is trusted. The second is asset mass efficiencies: every new project adds to a library that already covers most cases, so Tallis's engineers now produce shop drawings in about three working days, while a rival starting from a smaller library needs two to three weeks for the same crossing. The third is interconnectedness: the library is valuable because of the reviewers' familiarity with it, and that familiarity grew alongside it. A competitor could hire two of Tallis's engineers, but it could not hire the approvals.

Peteraf (1993) added that advantage must also be protected by ex post limits to competition, conditions that stop rivals from competing the rents away once the advantage is visible. The design library meets that condition partly by social complexity. County engineers in 52 of the 71 counties in Tallis's market have used a Tallis design at least once, and several now draw preliminary plans with Tallis section dimensions. That relationship is difficult for a rival to observe in full, let alone reproduce.

The set crews are easier to copy than the library, and it would be a mistake to rate them as highly. A rival could buy two 150-ton cranes and train crews within a year or two, and Corbel already runs its own. What makes Tallis's crews harder to match is their pairing with the designs: because the crews install sections they have set many times before, lifting points, joint details and bedding requirements are already known, and a typical four-cell culvert goes in over a weekend. The crews add value mainly through the library, which is why the analysis treats them as part of one bundle rather than as a separate advantage.

Evidence That the Bundle Creates Value

The value of a resource should show up in results, not only in description. Over the past three years, Tallis won 61 percent of the engineered projects in which its engineers had been consulted during design, against 22 percent of engineered projects it first saw at the bid stage and 19 percent of standard product lettings. The margin pattern is similar. Consulted projects averaged a gross margin of 33 percent, and projects where Tallis also set the product averaged 36 percent, because the county's saving from a shorter road closure made a higher price acceptable.

Those figures come from Tallis's own bid records and do not isolate the effect of the bundle from the effect of project type. Consulted projects may simply be larger or more complex. The pattern is still hard to explain without the library, the engineers and the crews, and it is consistent with the claim that these three resources together, not any one of them alone, are the source of Tallis's advantage.

What the Analysis Exposes

The analysis has three uncomfortable implications. First, about 48 percent of Tallis's plant hours go to standard products that draw on none of the advantaged resources, which means much of the firm's capacity is spent competing on price with no protection. Second, the advantaged resources are concentrated in a few people: two senior engineers approved roughly half of the library, and both are within six years of retirement. Dierickx and Cool (1989) warn that accumulated assets also erode when they are not maintained, and an engineering library without the people who understand it would erode quickly. Third, Corbel is the one rival with set crews, and it has the capital to build an engineering group if it chooses.

Module 3 will need options that use the design library and set crews more intensively, protect them against erosion and reduce the share of capacity that earns the least. An option that does not draw on these resources would be competing where Tallis has no advantage to use.

References

Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99-120. https://doi.org/10.1177/014920639101700108

Dierickx, I., & Cool, K. (1989). Asset stock accumulation and sustainability of competitive advantage. Management Science, 35(12), 1504-1511. https://doi.org/10.1287/mnsc.35.12.1504

Peteraf, M. A. (1993). The cornerstones of competitive advantage: A resource-based view. Strategic Management Journal, 14(3), 179-191. https://doi.org/10.1002/smj.4250140303