Firm specific strengths that allow a company to differentiate its products and/or achieve substantially lower costs to achieve a competitive advantage. e.g. starbucks management, higher employee productivity, lower costs. Made up of resources (assets of a company - e.g. tangible - land, buildings etc, intangible - reputation, intellectual property e.g patents.) and capabilities - company's skills at coordinating skills and putting them to productive use e.g. rules, routines, procedures.