Presentation is loading. Please wait.

Presentation is loading. Please wait.

PowerPoint Presentation by Charlie Cook The University of West Alabama Strategic Management Competitiveness and Globalization: Concepts and Cases Michael.

Similar presentations


Presentation on theme: "PowerPoint Presentation by Charlie Cook The University of West Alabama Strategic Management Competitiveness and Globalization: Concepts and Cases Michael."— Presentation transcript:

1 PowerPoint Presentation by Charlie Cook The University of West Alabama Strategic Management Competitiveness and Globalization: Concepts and Cases Michael A. Hitt R. Duane Ireland Robert E. Hoskisson Seventh edition S TRATEGIC M ANAGEMENT I NPUTS © 2007 Thomson/South-Western. All rights reserved. CHAPTER 3 The Internal Environment: Resources, Capabilities, and Core Competencies

2 © 2007 Thomson/South-Western. All rights reserved. 3–2 BUSINESS PLAN COMPETITION February 4, 2008Business Plan Writing Workshop Set for Feb. 13 February 4, 2008Business Plan Writing Workshop Set for Feb. 13 The Rhode Island Business Plan Competition will host a free workshop--"How to Write a Business Plan"--Wednesday, Feb. 13, that will provide insights and tips on how to write a business plan that will attract attention from investors.The Rhode Island Business Plan Competition will host a free workshop--"How to Write a Business Plan"--Wednesday, Feb. 13, that will provide insights and tips on how to write a business plan that will attract attention from investors. The workshop is the second of three offered in advance of the April 7 deadline to apply to this year's competition, which will award $165,000 in prizes.The workshop is the second of three offered in advance of the April 7 deadline to apply to this year's competition, which will award $165,000 in prizes. Sixcia Devine, a highly regarded, Rhode Island-based consultant and business coach to entrepreneurs, will lead this fast-paced, hands-on workshop.Sixcia Devine, a highly regarded, Rhode Island-based consultant and business coach to entrepreneurs, will lead this fast-paced, hands-on workshop. Named one of 40 Under 40 Young Professionals of the Year by the Providence Business News in 2007, Devine works with business resources partners throughout Rhode Island. She also is the founder of SpeakNow! Spanish and counsels women entrepreneurs from a variety of cultural and economic backgrounds.Named one of 40 Under 40 Young Professionals of the Year by the Providence Business News in 2007, Devine works with business resources partners throughout Rhode Island. She also is the founder of SpeakNow! Spanish and counsels women entrepreneurs from a variety of cultural and economic backgrounds. Pre-registration Is RequiredPre-registration Is Required The event, which is free to the public, will be held p.m. at the Culinary Archives and Museum at the Harborside Campus of Johnson & Wales University.The event, which is free to the public, will be held p.m. at the Culinary Archives and Museum at the Harborside Campus of Johnson & Wales University. Pre-registration is required, and may be completed online by clicking here.Pre-registration is required, and may be completed online by clicking here.clicking hereclicking here The campus, about a six-minute drive from downtown Providence, has plenty of free parking. For directions, click here.The campus, about a six-minute drive from downtown Providence, has plenty of free parking. For directions, click here.click hereclick here

3 © 2007 Thomson/South-Western. All rights reserved. 3–3 Final Workshop: March 13 The final free workshop of the 2008 Rhode Island Business Plan Competition--"How to Present Your Business Plan"--will be held March 13.Final Workshop: March 13 The final free workshop of the 2008 Rhode Island Business Plan Competition--"How to Present Your Business Plan"--will be held March 13. The event will feature successful Rhode Island entrepreneurs who will provide do's and don'ts on how to present a plan to investors. To register, click here.The event will feature successful Rhode Island entrepreneurs who will provide do's and don'ts on how to present a plan to investors. To register, click here.click hereclick here Deadline to Apply: April 7 April 7 is the deadline to apply online to the 2008 Rhode Island Business Competition. Deadline to Apply: April 7 April 7 is the deadline to apply online to the 2008 Rhode Island Business Competition. Final plans are not required at that time--only completion of an online application. For more on how to apply, click here.Final plans are not required at that time--only completion of an online application. For more on how to apply, click here.click hereclick here Dates to WatchDates to WatchDates to WatchDates to Watch Rules & PrizesRules & PrizesRules & PrizesRules & Prizes Apply OnlineApply OnlineApply OnlineApply Online Upcoming EventsUpcoming EventsUpcoming EventsUpcoming Events SponsorsSponsorsSponsors Helpful ResourcesHelpful ResourcesHelpful ResourcesHelpful Resources web: The 2008 Rhode Island Business Plan Competition, sponsored by a consortium of businesses, nonprofits, colleges and universities, and public agencies to promote the development of start-up and early stage companies in Rhode island.The 2008 Rhode Island Business Plan Competition, sponsored by a consortium of businesses, nonprofits, colleges and universities, and public agencies to promote the development of start-up and early stage companies in Rhode island.

4 © 2007 Thomson/South-Western. All rights reserved. 3–4 K NOWLEDGE O BJECTIVES 1.Explain the need for firms to study and understand their internal environment. 2.Define value and discuss its importance. 3.Describe the differences between tangible and intangible resources. 4.Define capabilities and discuss how they are developed. 5.Describe four criteria used to determine whether resources and capabilities are core competencies. Studying this chapter should provide you with the strategic management knowledge needed to:

5 © 2007 Thomson/South-Western. All rights reserved. 3–5 K NOWLEDGE O BJECTIVES (contd) 6.Explain how value chain analysis is used to identify and evaluate resources and capabilities. 7.Define outsourcing and discuss the reasons for its use. 8.Discuss the importance of identifying internal strengths and weaknesses. Studying this chapter should provide you with the strategic management knowledge needed to:

6 © 2007 Thomson/South-Western. All rights reserved. 3–6 Competitive Advantage Firms achieve strategic competitiveness and earn above-average returns when their core competencies are effectively:Firms achieve strategic competitiveness and earn above-average returns when their core competencies are effectively: Acquired. Acquired. Bundled. Bundled. Leveraged. Leveraged. Over time, the benefits of any value-creating strategy can be duplicated by competitors.Over time, the benefits of any value-creating strategy can be duplicated by competitors.

7 © 2007 Thomson/South-Western. All rights reserved. 3–7 Competitive Advantage (contd) Sustainability of a competitive advantage is a function of:Sustainability of a competitive advantage is a function of: The rate of core competence obsolescence due to environmental changes. The rate of core competence obsolescence due to environmental changes. The availability of substitutes for the core competence. The availability of substitutes for the core competence. The difficulty competitors have in duplicating or imitating the core competence. The difficulty competitors have in duplicating or imitating the core competence.

8 © 2007 Thomson/South-Western. All rights reserved. 3–8 External Analyses Outcomes By studying the external environment, firms identify what they might choose to do. Opportunities and threats

9 © 2007 Thomson/South-Western. All rights reserved. 3–9 Internal Analyses Outcomes By studying the internal environment, firms identify what they can do Unique resources, capabilities, and competencies (required for sustainable competitive advantage)

10 © 2007 Thomson/South-Western. All rights reserved. 3–10 The Context of Internal Analysis Global EconomyGlobal Economy Traditional sources of advantages can be overcome by competitors international strategies and by the flow of resources throughout the global economy. Traditional sources of advantages can be overcome by competitors international strategies and by the flow of resources throughout the global economy. Global Mind-SetGlobal Mind-Set The ability to study an internal environment in ways that are not dependent on the assumptions of a single country, culture, or context. The ability to study an internal environment in ways that are not dependent on the assumptions of a single country, culture, or context. Analysis OutcomeAnalysis Outcome Understanding how to leverage the firms bundle of heterogeneous resources and capabilities. Understanding how to leverage the firms bundle of heterogeneous resources and capabilities.

11 © 2007 Thomson/South-Western. All rights reserved. 3–11 FIGURE 3.1 Components of Internal Analysis Leading to Competitive Advantage and Strategic Competitiveness

12 © 2007 Thomson/South-Western. All rights reserved. 3–12 Creating Value By exploiting their core competencies or competitive advantages, firms create value.By exploiting their core competencies or competitive advantages, firms create value. Value is measured by:Value is measured by: Product performance characteristics Product performance characteristics Product attributes for which customers are willing to pay Product attributes for which customers are willing to pay Firms create value by innovatively bundling and leveraging their resources and capabilities.Firms create value by innovatively bundling and leveraging their resources and capabilities. Superior value Above-average returnsSuperior value Above-average returns

13 © 2007 Thomson/South-Western. All rights reserved. 3–13 Creating Competitive Advantage Core competencies, in combination with product- market positions, are the firms most important sources of competitive advantage.Core competencies, in combination with product- market positions, are the firms most important sources of competitive advantage. Core competencies of a firm, in addition to its analysis of its general, industry, and competitor environments, should drive its selection of strategies.Core competencies of a firm, in addition to its analysis of its general, industry, and competitor environments, should drive its selection of strategies.

14 © 2007 Thomson/South-Western. All rights reserved. 3–14 The Challenge of Internal Analysis Strategic decisions in terms of the firms resources, capabilities, and core competencies:Strategic decisions in terms of the firms resources, capabilities, and core competencies: Are non-routine. Are non-routine. Have ethical implications. Have ethical implications. Significantly influence the firms ability to earn above- average returns. Significantly influence the firms ability to earn above- average returns.

15 © 2007 Thomson/South-Western. All rights reserved. 3–15 The Challenge of Internal Analysis (contd) To develop and use core competencies, managers must have:To develop and use core competencies, managers must have: Courage Courage Self-confidence Self-confidence Integrity Integrity The capacity to deal with uncertainty and complexity The capacity to deal with uncertainty and complexity A willingness to hold people (and themselves) accountable for their work A willingness to hold people (and themselves) accountable for their work

16 © 2007 Thomson/South-Western. All rights reserved. 3–16 FIGURE 3.2 Conditions Affecting Managerial Decisions about Resources, Capabilities, and Core Competencies Source: Adapted from R. Amit & P. J. H. Schoemaker, 1993, Strategic assets and organizational rent, Strategic Management Journal, 14: 33.

17 © 2007 Thomson/South-Western. All rights reserved. 3–17 Resources, Capabilities and Core Competencies ResourcesResources Are the source of a firms capabilities. Are the source of a firms capabilities. Are broad in scope. Are broad in scope. Cover a spectrum of individual, social and organizational phenomena. Cover a spectrum of individual, social and organizational phenomena. Alone, do not yield a competitive advantage. Alone, do not yield a competitive advantage. Discovering Core Competencies Resources TangibleTangible IntangibleIntangible Capabilities CoreCompetencies

18 © 2007 Thomson/South-Western. All rights reserved. 3–18 Resources ResourcesResources Are a firms assets, including people and the value of its brand name. Are a firms assets, including people and the value of its brand name. Represent inputs into a firms production process, such as: Represent inputs into a firms production process, such as: Capital equipmentCapital equipment Skills of employeesSkills of employees Brand namesBrand names Financial resourcesFinancial resources Talented managersTalented managers Types of ResourcesTypes of Resources Tangible resources Tangible resources Financial resourcesFinancial resources Physical resourcesPhysical resources Technological resourcesTechnological resources Organizational resourcesOrganizational resources Intangible resources Intangible resources Human resourcesHuman resources Innovation resourcesInnovation resources Reputation resourcesReputation resources

19 © 2007 Thomson/South-Western. All rights reserved. 3–19 TABLE 3.1 Tangible Resources Financial Resources The firms borrowing capacity The firms ability to generate internal funds Organizational ResourcesThe firms formal reporting structure and its formal planning, controlling, and coordinating systems Physical ResourcesSophistication and location of a firms plant and equipment Access to raw materials Technological ResourcesStock of technology, such as patents, trademarks, copyrights, and trade secrets Sources: Adapted from J. B. Barney, 1991, Firm resources and sustained competitive advantage, Journal of Management, 17: 101; R. M. Grant, 1991, Contemporary Strategy Analysis, Cambridge, U.K.: Blackwell Business, 100–102.

20 © 2007 Thomson/South-Western. All rights reserved. 3–20 TABLE 3.2 Intangible Resources Human ResourcesKnowledge Trust Managerial capabilities Organizational routines Innovation ResourcesIdeas Scientific capabilities Capacity to innovate Reputational ResourcesReputation with customers Brand name Perceptions of product quality, durability, and reliability Reputation with suppliers For efficient, effective, supportive, and mutually beneficial interactions and relationships Sources: Adapted from R. Hall, 1992, The strategic analysis of intangible resources, Strategic Management Journal, 13: 136–139; R. M. Grant, 1991, Contemporary Strategy Analysis, Cambridge, U.K.: Blackwell Business, 101–104.

21 © 2007 Thomson/South-Western. All rights reserved. 3–21 Resources, Capabilities and Core Competencies CapabilitiesCapabilities Represent the capacity to deploy resources that have been purposely integrated to achieve a desired end state Represent the capacity to deploy resources that have been purposely integrated to achieve a desired end state Emerge over time through complex interactions among tangible and intangible resources Emerge over time through complex interactions among tangible and intangible resources Often are based on developing, carrying and exchanging information and knowledge through the firms human capital Often are based on developing, carrying and exchanging information and knowledge through the firms human capital Discovering Core Competencies Resources TangibleTangible IntangibleIntangible Capabilities CoreCompetencies

22 © 2007 Thomson/South-Western. All rights reserved. 3–22 Resources, Capabilities and Core Competencies Capabilities (contd)Capabilities (contd) The foundation of many capabilities lies in: The foundation of many capabilities lies in: The unique skills and knowledge of a firms employeesThe unique skills and knowledge of a firms employees The functional expertise of those employeesThe functional expertise of those employees Capabilities are often developed in specific functional areas or as part of a functional area. Capabilities are often developed in specific functional areas or as part of a functional area. Discovering Core Competencies Resources TangibleTangible IntangibleIntangible Capabilities CoreCompetencies

23 © 2007 Thomson/South-Western. All rights reserved. 3–23 TABLE 3.3 Examples of Firms Capabilities Functional Areas Capabilities Distribution Effective use of logistics management techniques Human resources Motivating, empowering, and retaining employees ManagementEffective and efficient control of inventories through information systemspoint-of-purchase data collection methods MarketingEffective promotion of brand-name products Effective customer service Innovative merchandising ManagementAbility to envision the future of clothing Effective organizational structure ManufacturingDesign and production skills yielding reliable products Product and design quality Miniaturization of components and products Research & Innovative technology development Development of sophisticated elevator control solutions Rapid transformation of technology into new products and processes Digital technology

24 © 2007 Thomson/South-Western. All rights reserved. 3–24 Resources, Capabilities and Core Competencies Four criteria for determining strategic capabilities:Four criteria for determining strategic capabilities: Value Value Rarity Rarity Costly-to-imitate Costly-to-imitate Nonsubstitutability Nonsubstitutability Discovering Core Competencies Resources TangibleTangible IntangibleIntangible Capabilities CoreCompetencies

25 © 2007 Thomson/South-Western. All rights reserved. 3–25 Resources, Capabilities and Core Competencies Core CompetenciesCore Competencies Resources and capabilities that are the sources of a firms competitive advantage: Resources and capabilities that are the sources of a firms competitive advantage: Distinguish a company competitively and reflect its personality.Distinguish a company competitively and reflect its personality. Emerge over time through an organizational process of accumulating and learning how to deploy different resources and capabilities.Emerge over time through an organizational process of accumulating and learning how to deploy different resources and capabilities. Discovering Core Competencies Resources TangibleTangible IntangibleIntangible Capabilities CoreCompetencies

26 © 2007 Thomson/South-Western. All rights reserved. 3–26 Resources, Capabilities and Core Competencies Core CompetenciesCore Competencies Activities that a firm performs especially well compared to competitors. Activities that a firm performs especially well compared to competitors. Activities through which the firm adds unique value to its goods or services over a long period of time. Activities through which the firm adds unique value to its goods or services over a long period of time. Discovering Core Competencies Resources TangibleTangible IntangibleIntangible Capabilities CoreCompetencies

27 © 2007 Thomson/South-Western. All rights reserved. 3–27 Building Core Competencies Four Criteria of Sustainable Competitive AdvantageFour Criteria of Sustainable Competitive Advantage Valuable capabilities Valuable capabilities Rare capabilities Rare capabilities Costly to imitate Costly to imitate Nonsubstituable Nonsubstituable Discovering Core Competencies ValuableValuable RareRare Costly to imitateCostly to imitate NonsubstitutableNonsubstitutable Four Criteria of Sustainable Advantages

28 © 2007 Thomson/South-Western. All rights reserved. 3–28 TABLE 3.4 The Four Criteria of Sustainable Competitive Advantage Valuable CapabilitiesHelp a firm neutralize threats or exploit opportunities Rare CapabilitiesAre not possessed by many others Costly-to-Imitate CapabilitiesHistorical: A unique and a valuable organizational culture or brand name Ambiguous cause: The causes and uses of a competence are unclear Social complexity: Interpersonal relationships, trust, and friendship among managers, suppliers, and customers Nonsubstitutable CapabilitiesNo strategic equivalent

29 © 2007 Thomson/South-Western. All rights reserved. 3–29 Building Sustainable Competitive Advantage Valuable capabilitiesValuable capabilities Help a firm neutralize threats or exploit opportunities. Help a firm neutralize threats or exploit opportunities. Rare capabilitiesRare capabilities Are not possessed by many others. Are not possessed by many others. Discovering Core Competencies ValuableValuable RareRare Costly to imitateCostly to imitate NonsubstitutableNonsubstitutable Four Criteria of Sustainable Advantages

30 © 2007 Thomson/South-Western. All rights reserved. 3–30 Building Sustainable Competitive Advantage Costly-to-Imitate CapabilitiesCostly-to-Imitate Capabilities Historical Historical A unique and a valuable organizational culture or brand nameA unique and a valuable organizational culture or brand name Ambiguous cause Ambiguous cause The causes and uses of a competence are unclearThe causes and uses of a competence are unclear Social complexity Social complexity Interpersonal relationships, trust, and friendship among managers, suppliers, and customersInterpersonal relationships, trust, and friendship among managers, suppliers, and customers Discovering Core Competencies ValuableValuable RareRare Costly to ImitateCostly to Imitate NonsubstitutableNonsubstitutable Four Criteria of Sustainable Advantages

31 © 2007 Thomson/South-Western. All rights reserved. 3–31 Building Sustainable Competitive Advantage Nonsubstitutable CapabilitiesNonsubstitutable Capabilities No strategic equivalent No strategic equivalent Firm-specific knowledgeFirm-specific knowledge Organizational cultureOrganizational culture Superior execution of the chosen business modelSuperior execution of the chosen business model Discovering Core Competencies ValuableValuable RareRare Costly to imitateCostly to imitate NonsubstitutableNonsubstitutable Four Criteria of Sustainable Advantages

32 © 2007 Thomson/South-Western. All rights reserved. 3–32 Outcomes from Combinations of the Four Criteria Valuable? Rare? Costly to Imitate? Nonsubstitutable? Competitive Consequences Performance Implications No Competitive Disadvantage Competitive Disadvantage Below Average Returns Below Average Returns Yes No Yes/ No Yes/ No Competitive Parity Competitive Parity Average Returns Yes No Yes/ No Yes/ No Temporary Com- petitive Advantage Temporary Com- petitive Advantage Above Average to Average Returns Yes Sustainable Com- petitive Advantage Sustainable Com- petitive Advantage Above Average Returns

33 © 2007 Thomson/South-Western. All rights reserved. 3–33 Table 3.5 Outcomes from Combinations of the Criteria for Sustainable Competitive Advantage

34 © 2007 Thomson/South-Western. All rights reserved. 3–34 Value Chain Analysis Allows the firm to understand the parts of its operations that create value and those that do not.Allows the firm to understand the parts of its operations that create value and those that do not. A template that firms use to:A template that firms use to: Understand their cost position. Understand their cost position. Identify multiple means that might be used to facilitate implementation of a chosen business-level strategy. Identify multiple means that might be used to facilitate implementation of a chosen business-level strategy.

35 © 2007 Thomson/South-Western. All rights reserved. 3–35 Value Chain Analysis (contd) Primary activities involved with:Primary activities involved with: A products physical creation A products physical creation A products sale and distribution to buyers A products sale and distribution to buyers The products service after the sale The products service after the sale Support ActivitiesSupport Activities Provide the assistance necessary for the primary activities to take place. Provide the assistance necessary for the primary activities to take place.

36 © 2007 Thomson/South-Western. All rights reserved. 3–36 Value Chain Analysis (contd) Value ChainValue Chain Shows how a product moves from the raw-material stage to the final customer. Shows how a product moves from the raw-material stage to the final customer. To be a source of competitive advantage, a resource or capability must allow the firm:To be a source of competitive advantage, a resource or capability must allow the firm: To perform an activity in a manner that is superior to the way competitors perform it, or To perform an activity in a manner that is superior to the way competitors perform it, or To perform a value-creating activity that competitors cannot complete To perform a value-creating activity that competitors cannot complete

37 © 2007 Thomson/South-Western. All rights reserved. 3–37 FIGURE 3.3 The Basic Value Chain

38 © 2007 Thomson/South-Western. All rights reserved. 3–38 Table 3.6 Examining the Value-Creating Potential of Primary Activities Inbound Logistics Activities, such as materials handling, warehousing, and inventory control, used to receive, store, and disseminate inputs to a product. Operations Activities necessary to convert the inputs provided by inbound logistics into final product form. Machining, packaging, assembly, and equipment maintenance are examples of operations activities. Outbound Logistics Activities involved with collecting, storing, and physically distributing the final product to customers. Examples of these activities include finished goods warehousing, materials handling, and order processing. Marketing and Sales Activities completed to provide means through which customers can purchase products and to induce them to do so. To effectively market and sell products, firms develop advertising and promotional campaigns, select appropriate distribution channels, and select, develop, and support their sales force. Service Activities designed to enhance or maintain a products value. Firms engage in a range of service- related activities, including installation, repair, training, and adjustment. Each activity should be examined relative to competitors abilities. Accordingly, firms rate each activity as superior, equivalent, or inferior. Source: Adapted with the permission of The Free Press, an imprint of Simon & Schuster Adult Publishing Group, from Competitive Advantage: Creating and Sustaining Superior Performance, by Michael E. Porter, pp. 39–40, Copyright © 1985, 1998 by Michael E. Porter.

39 © 2007 Thomson/South-Western. All rights reserved. 3–39 Table 3.7 Examining the Value-Creating Potential of Support Activities Procurement Activities completed to purchase the inputs needed to produce a firms products. Purchased inputs include items fully consumed during the manufacture of products (e.g., raw materials and supplies, as well as fixed assetsmachinery, laboratory equipment, office equipment, and buildings). Technological Development Activities completed to improve a firms product and the processes used to manufacture it. Technological development takes many forms, such as process equipment, basic research and product design, and servicing procedures. Human Resource Management Activities involved with recruiting, hiring, training, developing, and compensating all personnel. Firm Infrastructure Firm infrastructure includes activities such as general management, planning, finance, accounting, legal support, and governmental relations that are required to support the work of the entire value chain. Through its infrastructure, the firm strives to effectively and consistently identify external opportunities and threats, identify resources and capabilities, and support core competencies. Each activity should be examined relative to competitors abilities. Accordingly, firms rate each activity as superior, equivalent, or inferior. Source: Adapted with the permission of The Free Press, an imprint of Simon & Schuster Adult Publishing Group, from Competitive Advantage: Creating and Sustaining Superior Performance, by Michael E. Porter, pp. 40–43, Copyright © 1985, 1998 by Michael E. Porter.

40 © 2007 Thomson/South-Western. All rights reserved. 3–40 The Value-Creating Potential of Primary Activities Inbound LogisticsInbound Logistics Activities used to receive, store, and disseminate inputs to a product Activities used to receive, store, and disseminate inputs to a product OperationsOperations Activities necessary to convert the inputs provided by inbound logistics into final product form Activities necessary to convert the inputs provided by inbound logistics into final product form Outbound LogisticsOutbound Logistics Activities involved with collecting, storing, and physically distributing the product to customers Activities involved with collecting, storing, and physically distributing the product to customers

41 © 2007 Thomson/South-Western. All rights reserved. 3–41 The Value-Creating Potential of Primary Activities (contd) Marketing and SalesMarketing and Sales Activities completed to provide the means through which customers can purchase products and to induce them to do so. Activities completed to provide the means through which customers can purchase products and to induce them to do so. ServiceService Activities designed to enhance or maintain a products value Activities designed to enhance or maintain a products value Each activity should be examined relative to competitors abilities and rated as superior, equivalent or inferior.Each activity should be examined relative to competitors abilities and rated as superior, equivalent or inferior.

42 © 2007 Thomson/South-Western. All rights reserved. 3–42 The Value-Creating Potential of Primary Activities: Support ProcurementProcurement Activities completed to purchase the inputs needed to produce a firms products. Activities completed to purchase the inputs needed to produce a firms products. Technological DevelopmentTechnological Development Activities completed to improve a firms product and the processes used to manufacture it. Activities completed to improve a firms product and the processes used to manufacture it. Human Resource ManagementHuman Resource Management Activities involved with recruiting, hiring, training, developing, and compensating all personnel. Activities involved with recruiting, hiring, training, developing, and compensating all personnel.

43 © 2007 Thomson/South-Western. All rights reserved. 3–43 The Value-Creating Potential of Primary Activities: Support (contd) Firm InfrastructureFirm Infrastructure Activities that support the work of the entire value chain (general management, planning, finance, accounting, legal, government relations, etc.) Activities that support the work of the entire value chain (general management, planning, finance, accounting, legal, government relations, etc.) Effectively and consistently identify external opportunities and threatsEffectively and consistently identify external opportunities and threats Identify resources and capabilitiesIdentify resources and capabilities Support core competenciesSupport core competencies Each activity should be examined relative to competitors abilities and rated as superior, equivalent or inferior. Each activity should be examined relative to competitors abilities and rated as superior, equivalent or inferior.

44 © 2007 Thomson/South-Western. All rights reserved. 3–44 Figure 3.4 Prominent Applications of the Internet in the Value Chain Source: Reprinted by permission of Harvard Business Review from Strategy and the Internet by Michael E. Porter, March 2001, p. 75. Copyright © 2001 by the Harvard Business School Publishing Corporation; all rights reserved.

45 © 2007 Thomson/South-Western. All rights reserved. 3–45 Outsourcing The purchase of a value-creating activity from an external supplierThe purchase of a value-creating activity from an external supplier Few organizations possess the resources and capabilities required to achieve competitive superiority in all primary and support activities. Few organizations possess the resources and capabilities required to achieve competitive superiority in all primary and support activities. By performing fewer capabilities:By performing fewer capabilities: A firm can concentrate on those areas in which it can create value. A firm can concentrate on those areas in which it can create value. Specialty suppliers can perform outsourced capabilities more efficiently. Specialty suppliers can perform outsourced capabilities more efficiently.

46 © 2007 Thomson/South-Western. All rights reserved. 3–46 Outsourcing Decisions A firm may outsource all or only part of one or more primary and/or support activities. Margin Primary Activities Support Activities Service Firm Infrastructure Procurement Human Resource Mgmt.Technological Development Marketing and Sales Outbound Logistics Operations Inbound Logistics

47 © 2007 Thomson/South-Western. All rights reserved. 3–47 Strategic Rationales for Outsourcing Improving business focusImproving business focus Helps a company focus on broader business issues by having outside experts handle various operational details. Helps a company focus on broader business issues by having outside experts handle various operational details. Providing access to world-class capabilitiesProviding access to world-class capabilities The specialized resources of outsourcing providers makes world-class capabilities available to firms in a wide range of applications. The specialized resources of outsourcing providers makes world-class capabilities available to firms in a wide range of applications.

48 © 2007 Thomson/South-Western. All rights reserved. 3–48 Strategic Rationales for Outsourcing (contd) Accelerating re-engineering benefitsAccelerating re-engineering benefits Achieves re-engineering benefits more quickly by having outsiderswho have already achieved world- class standardstake over process. Achieves re-engineering benefits more quickly by having outsiderswho have already achieved world- class standardstake over process. Sharing risksSharing risks Reduces investment requirements and makes firm more flexible, dynamic and better able to adapt to changing opportunities. Reduces investment requirements and makes firm more flexible, dynamic and better able to adapt to changing opportunities. Freeing resources for other purposesFreeing resources for other purposes Redirects efforts from non-core activities toward those that serve customers more effectively. Redirects efforts from non-core activities toward those that serve customers more effectively.

49 © 2007 Thomson/South-Western. All rights reserved. 3–49 Outsourcing Issues Seeking greatest valueSeeking greatest value Outsource only to firms possessing a core competence in terms of performing the primary or supporting the outsourced activity. Outsource only to firms possessing a core competence in terms of performing the primary or supporting the outsourced activity. Evaluating resources and capabilitiesEvaluating resources and capabilities Do not outsource activities in which the firm itself can create and capture value. Do not outsource activities in which the firm itself can create and capture value. Environmental threats and ongoing tasksEnvironmental threats and ongoing tasks Do not outsource primary and support activities that are used to neutralize environmental threats or to complete necessary ongoing organizational tasks. Do not outsource primary and support activities that are used to neutralize environmental threats or to complete necessary ongoing organizational tasks.

50 © 2007 Thomson/South-Western. All rights reserved. 3–50 Outsourcing Issues (contd) Nonstrategic team resourcesNonstrategic team resources Do not outsource capabilities critical to the firms success, even though the capabilities are not actual sources of competitive advantage. Do not outsource capabilities critical to the firms success, even though the capabilities are not actual sources of competitive advantage. Firms knowledge baseFirms knowledge base Do not outsource activities that stimulate the development of new capabilities and competencies. Do not outsource activities that stimulate the development of new capabilities and competencies.

51 © 2007 Thomson/South-Western. All rights reserved. 3–51 Cautions and Reminders Never take for granted that core competencies will continue to provide a source of competitive advantage.Never take for granted that core competencies will continue to provide a source of competitive advantage. All core competencies have the potential to become core rigiditiesformer core competencies that now generate inertia and stifle innovation.All core competencies have the potential to become core rigiditiesformer core competencies that now generate inertia and stifle innovation. Determining what the firm can do through continuous and effective analyses of its internal environment will increase the likelihood of long-term competitive success.Determining what the firm can do through continuous and effective analyses of its internal environment will increase the likelihood of long-term competitive success.


Download ppt "PowerPoint Presentation by Charlie Cook The University of West Alabama Strategic Management Competitiveness and Globalization: Concepts and Cases Michael."

Similar presentations


Ads by Google