Leverage Resources and Capabilities

GLOBAL BUSINESS Chapter 4: Leveraging Resources and Capabilities

© 2007-08 by Mike W. Peng and Thomson South-Western

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Chapter 4. LEVERAGING RESOURCES AND CAPABILITIES

Learning Objectives After studying this chapter, you should be able to • • • • • • explain what firm resources and capabilities are undertake a basic SWOT analysis along the value chain decide whether to keep an activity in-house or outsource it analyze the value, rarity, imitability, and organizational aspects of resources and capabilities participate in two leading debates on cross-border capabilities and offshoring draw implications for action

Opening Case: The Rise of Hainan Airlines (PHOTO: Hainan jet) Thanks to external shocks such as “9/11,” SARS, and the rising oil prices, airlines around the world have had a hard time, and an increasing number of them, such as Delta, Swissair, and United, have flown into bankruptcy. In China, rapid growth has made the country the second largest aviation market behind the United States. Disappointingly, the growth has largely been profitless and the Chinese airline industry collectively barely breaks even. Yet, the young Hainan Airlines, which started in 1993, has defied gravity. From obscure roots, Hainan has not only risen to become the 4th largest airline in China, but also the most profitable one. In China, until the mid 1980s, there had been only one service provider for the entire country, Civil Aviation Administration of China (CAAC). As a state-owned monopoly, CAAC was known for its arrogance, high price, sloppy service, and frequent cancellations, earning its nickname as “China Airlines Always Cancels.” In the 1980s, CAAC reformed itself to become a regulator. As a result, CAAC formed three large airlines: Air China headquartered in Beijing, China Eastern based in Shanghai, and China Southern centered on Guangzhou. Through deregulation,...