Harlequin Enterprises: the Mira Decision

Firms in the same industry may have very different performances. It is due to their resources andcapabilities. To generate a sustained competitive advantage, a company must have internal resources andcapabilities that have specific characteristics as regards as Value, Rarity, Imitability and Organization.Resources can be financial, physical, human or organizational. As far as financial resources are concerned,Harlequin has been in business since 1964, so it must have a reliable source of money, either throughbonds, equity or retained earnings. Physical resources include its ability to reach many internationalmarkets and its distribution channel. Human resources include knowledgeable editors, ensuringconsistency to the product and talented authors with standardized contracts. Organizational resources refer to relationships with the firm’s external environment and to the formal and informal planning, controlling and coordinated systems that allow Harlequin to control its product quality throughout thevalue chain.These resources are valuable, because they allow the company to lower its costs and increase its revenue.Indeed, thanks to long term relationships with printers and well-established distribution channels, the firmcan appropriate a larger share of profits than its direct competitors (e.g. the cost of printing a book is only$0.44 for Harlequin, against 0.88 for its competitors).They are also rare, since the brand equity developed with time, the clearly defined product line, theknowledge acquired through experience and the standing order distribution plan are not matched bycompetitors.They are also costly to imitate
. First, creating such a strong image for one’s product in order to challengethe reliability and consistency guaranteed by Harlequin, would require high marketing investments and entail high risks. Second, social complexity comes into play. The firm’s culture of evaluating the mostimportant aspects in each book and the firm’s r eputation among