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56 views14 pages

Presentation 3

Uploaded by

Muhammad Zohaib
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Strategic Management:

Concepts and Cases


9e
Part I:Strategic Management Inputs
Chapter 3: The Internal Organization:
Resources, Capabilities, Core Competencies
and Competitive Advantages

©2011 Cengage Learning. All Rights Reserved. May not be scanned,


copied or duplicated, or posted to a publicly accessible website,
in
Chapter 3: The Internal Organization:
Resources, Capabilities, Core Competencies
and Competitive Advantages
• Overview:
– Importance of understanding internal organization
– Value: Definition and importance
– Tangible vs intangible resources
– Capabilities: Definition and development
– Core competencies: Criteria
– Value Chain Analysis
– Outsourcing: Definition and “why?”
– Internal organization assessment and strategic
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole
or in part.

decisions
Analyzing the Internal Organization (IO) (Cont’d)

• Context of Internal Analysis


– ‘Global mind-set’
• Ability to study an internal environment in ways that do not depend on the
assumptions of a single country, culture, or context
– Analyze firm’s portfolio of resources and bundle heterogeneous
resources and capabilities
• Understand how to leverage these bundles
– An organization's core competencies creates and sustains its
competitive advantage

• Creating Value
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole
– Develop core competencies that lead to competitive
or in part.

advantage
– Value: measured by a product's performance characteristics
and
by its attributes for which customers are willing to pay
Analyzing the Internal Organization (IO) (Cont’d)

• The Challenge of Analyzing the IO


– Strategic decisions are non-routine, have ethical
implications and influence the organization’s above-
average returns
• Involves identifying, developing, deploying and protecting
firms’ resources, capabilities and core competencies
– Managers face uncertainty on many fronts --
• Proprietary technologies
• Changes in economic and political trends, societal values and
shifts in customer demands
• Environment – increases complexity
– Intraorganizational conflict
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole
or in part.

• Due to decisions about core competencies and how to nurture


them
Components of Internal Analysis Leading to
Competitive Advantage and Strategic
Competitiveness

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole
or in part.
Conditions Affecting Managerial Decisions
About Resources, Capabilities, and Core
Competencies

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole
or in part.
Resources, Capabilities and Core
Competencies

• Competitive Advantage (CA) foundation includes


– Resources
• Bundled to create organizational capabilities
• Tangible and intangible (As seen in Figure 3.1)
– Capabilities
• Source of a firm’s core competencies and basis for CA
• Purposely integrated to achieve a specific task/set of tasks
– Core Competencies
• Capabilities that serve as a source of CA for a firm over its
rivals
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole
or in part.

• Distinguish a company from its competitors – the


personality
Resources, Capabilities and Core Competencies

• Tangible Resources
– Assets that can be seen, touched and quantified
– Examples include equipment, facilities, distribution
centers, formal reporting structures
– Four specific types

• Intangible Resources
– Assets rooted deeply in the firm’s history, accumulated
over time
– In comparison to ‘tangible’ resources, usually can’t be
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole

seen or touched
or in part.

– Examples include knowledge, trusts, organizational


routines, capabilities, innovation, brand name, reputation
– Three specific types
Building Core Competencies:
Criteria and Value Chain Analysis

• Two tools firms use to identify and build on


their core competencies
– Four specific criteria of Sustainable CA
– Value Chain Analysis

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole
or in part.
Building Core Competencies:
Criteria and Value Chain Analysis
• Four specific criteria of sustainable
competitive advantage – capabilities that are:
– Valuable
– Rare
– Costly-to-imitate
– Nonsubstitutable capabilities
• Competitive consequences:
– Focus on capabilities that yield competitive parity and
either temporary or sustainable competitive advantage
• Performance implications include:
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole
or in part.

– Parity = average returns


– Temporary advantage = avg. to above avg. returns
– Sustainable advantage = above average returns
Building Core Competencies:
Criteria and Value Chain Analysis

• Value Chain Analysis


– Primary activities
• Involved with product’s physical
creation, sales and distribution to
buyers, and service after the
sale

– Support activities
• Provide assistance necessary for
the primary activities to take
place
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole
or in part.
Outsourcing

• Definition: Purchase of a value-creating


activity from an external supplier
– Effective execution includes an increase in flexibility,
risk mitigation and capital investment reduction
– Trend continues at a rapid pace
– Firms must outsource activities where they cannot
create value or are at a substantial disadvantage
compared to competitors
• Can cause concerns
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole
or in part.
– Usually revolves around innovative ability and loss of
jobs
Internal Organization Assessment and
Strategic Decisions

• Firms must identify their strengths


and weaknesses
• Appropriate resources and capabilities needed to
develop desired strategy and create value for
customers/other stakeholders
• Tools (i.e., outsourcing) can help a firm focus
on core competencies as the source for CA
• Core competencies have potential to become
core rigidities
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole
or in part.

– Competencies emphasized when no longer


competitively relevant can become a weakness
• External environmental conditions and
events impact a firm’s core competencies

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