Question

Pick a publicly traded company. Describe its competitive advantage using the resource-based model of above average returns.

Answer 1

Brief: Strategic management enables firms to adopt methods to enter, sustain, survive and successfully gain the competitive advantage over other players in the industry. It is important to understand the key terms prior analysis of a publicly traded company using the resource-based model of above-average returns.

Strategic management process: The set of commitments, decisions, farsightedness, and actions a firm adopts to create its value and earn returns higher to that of the competitors.

Competitive advantage: The advantage that a firm gains from the successful creation, adoption, and implementation of strategies that differ from the competitors and help the firm create enhanced value in the competitive market.

As no two organizations are identical and possess different resources and capabilities being heterogenic in nature, therefore it becomes difficult for one competitor to imitate the resources and capabilities of another. The need to understand how rivals can achieve competitive advantage and superior performance lead to the concept of resource-based view contributing to the long-term survival of organizations.

Analysis of the distinctive resources and capabilities of organizations can be done using various strategic tools such as VRIO (Value | Rarity | Inimitability | Organizational Support) Model; The Value chain & Value system; Activity systems; Benchmarking and SWOT.

To critically understand the concepts explained above, we shall apply SWOT and resource-based model to Rocket Internet SE which is a European Internet company headquartered in Berlin. The company builds online startups and owns shareholdings (being Venture Capitalists) in various models of internet retail businesses.

What is a Venture Capitalist:

•      Provide capital for start-up or expansion.

•      VC investments in businesses are typically long-term.
(the average is from five to eight years)

•      VC firms obtain majority voting rights by having the majority of the shares.

Rocket Internet is different because:

•      Own and execute the startups.

•      Follows emotional investment model.

Quick Facts about Rocket Internet SE:

• Founded in 2007 - Oliver Samwer, Marc Samwer, and Alex Samwer (Brothers)
• German Venture Capitalist Company
• HQ - Berlin
• PLC - Listed on the Frankfurt Stock Exchange in 2014 (market value: 3 billion GBP)
• Invests and builds online start-ups, industries include: Food & Groceries, Fashion, Home & Living, and Travel
• More than 28,000 employees across its worldwide network of companies - over 100 entities in 110 countries.

The resources of Rocket Internet are:

Threshold resources: Technology | Financial Investment

Distinctive resources: Execution of projects on hand within 3 months (fast) | Global Venture program | Branding.

Capabilities of Rocket Internet are:

Threshold capabilities: Culture | Ability to gain funds

Distinctive capabilities: Owners are a family ( 3 brothers) | Human Resources: The hiring of 250 specialists and 200 engineers.

Dynamic Capabilities: Entrepreneurial capabilities | Flexibility

VRIO Model - A snapshot of Rocket Internet:

Resources and capabilities	Is the resource or capability…??				Competitive implications
	Valuable?	Rare?	Inimitable?	Supported by the ORG?
Strong Financial backup through Kinnevik and JP Morgan	Yes	No	Yes	Yes	Temporary competitive advantage
Founders "The three Brothers"	Yes	Yes	Yes	Yes	Sustained competitive advantage
Execution of other sustainable models globally	Yes	No	No	Yes	Competitive parity
State of the art technology’s	Yes	No	No	Yes	Competitive parity
Global venture Program	Yes	Yes	No	Yes	Temporary competitive advantage
Specialists in Headquarter	Yes	No	No	Yes	Competitive parity
The brand name	Yes	Yes	Yes	Yes	Sustained competitive advantage
The centralized Model - Berlin Centric (HQ)	No	Yes	No	Yes	Competitive parity
Diverse business models (different industries)	No	Yes	No	Yes	Competitive parity
International infrastructure out of China and the USA	No	No	No	Yes	Competitive disadvantage

Some more factors analysed looking deeper into Rocket Internet SE:

Conclusion:

•      The company is now at the ‘competitive parity’ stage and requires a lot more background knowledge to complete. They can continue to build at the same pace if they transfer the knowledge, as the relationship between 3 brothers is an inimitable resource. Whereas, the role of headquarters, Human resource management, and culture have gained the competitive advantage making above average returns.

SWOT- a snapshot of Rocket Internet:

STRENGTHS Founders: Talented Brothers Experienced specialists in investment (HQ) Execution of projects Strong financial support, High profitability, and Revenue Technology Global Venture Programme Brand name	WEAKNESSES The tension between brothers and other senior management Avoided the Chinese and American markets Aggressive culture (work-life balance) Cannibalization of own companies   Extreme expansion?
OPPORTUNITIES Participation in the growth of the Internet sector (The Internet sector is still one of the fastest growing sectors of the economy) Diversify into other industries	THREATS Competitors (Project A Ventures, IDG Capital, Nova Founder) Legal and Compliance Risk (copy other business models bring legal risk)

•       Conclusion: SWOT

Positives:

-       Understand the dynamics of the company in a short time frame

-       Useful from an internal and external perspective

-       Easy to compare with competitors   

Negatives:

-       Seems too basic to form a deep analysis, a ‘summary’

Concluding Remarks & Recommendations:

• The Samwer brothers with Oliver Samwer as the trio’s driving force still lead Rocket Internet after more than a decade since they founded the company.

• Although the company has a separate Managing Director their role is still crucial.

• Their leadership and Oliver Samwer’s in particular is clearly a fundamental to Rocket Internet success and not the least important for keeping up the pace of the company’s expansion.

• They clearly provide for sustained competitive advantage and have gained above average returns over the years creating a strong foot hold in the competitive market place.

I hope going through the above analysis of resource based view with Rocket Internet SE as a company will help, kindly let me know if you have further queries.

Thanks.