1. Strategic management 3 Resource analysis, competences,
value chain, and strategic position

3. Analysing strategic capability
Resource audit
Competences
In separate activities
Through linking activities
Value chain analysis
Comparisons
Historical
Industry norms
Benchmarking
Identifying key issues
SWOT analysis
Critical success factors
Understanding strategic
capability

4. Resources, competences, and value chain analysis
Resource Audit
Audit Competences
Value chain
analysis
Identify core resources
Identify core competences
Strategic capabilities
Comparisons
Historical basis
Industry Norms
Benchmarking
Identifying key issues
SWOT Analysis

5. Resources audit
Physical resources: Machines, buildings, production capacity
Technological resources: Pc, equipments, networks
Financial resources: Capital, cash, debtors/creditors, suppliers of money (shareholders, bankers etc)
Human resources: Number and mix of people, skills, competences and knowledge
Intellectual capital: Patents, brands, business systems, customer databases,
Intangible resources: reputation, “goodwill”

6. Appraising Resources RESOURCE CHARACTERISTICS INDICATORS
Financial Borrowing capacity Debt/ Equity ratio
Internal funds generation Credit rating
Tangible Net cash flow
Resources Physical Plant and equipment: Market value of
size, location, technology fixed assets.
flexibility. Scale of plants
Land and buildings. Alternative uses for
Raw materials. fixed assets
Technology Patents, copyrights, know how No. of patents owned
R&D facilities. Royalty income
Intangible Technical and scientific R&D expenditure
Resources employees R&D staff
Reputation Brands. Customer loyalty. Company Brand equity
reputation (with suppliers, customers, Customer retention
government) Supplier loyalty
Human Training, experience, adaptability, Employee qualifications,
Resources commitment and loyalty of employees pay rates, turnover.

7. Audit resources- core resources 1.
The resource audit identifies the resources „available” to an organisation in supporting
its strategies both from within and outside the organisation
Resources can be grouped
Physical resources
Material assets
Immobility
Machines
Others
Current assets
Inventory
Nature of assets
age
condition
location
Number of employees
Skills
Education
Experience
Loyalty
Corporate culture
Human resources
Financial resources
Equity
Debt
Credibility
Relationship with
Suppliers
Investors
Bankers
Managing cash
Goodwill
Loyalty of consumers
Brand name
Good contacts with
Politicians
CEOs
Corporate image
Intangibles

8. Audit resources- core resources 2.
Define core resources
Easy to
imitate
Difficult to
imitate
Necessary
Resources
Unique
Resources
Resources
Core resources
Same as
competitors
Better than
competitors

9. Competences How an organisation employs and deploys its resources
Efficiency and effectiveness of physical, financial, human and intellectual resources
How they are managed
Cooperation between people
Adaptability
Innovation
Customer and supplier relationships
Learning

10. The differences between resources and competences
Tangible
Intangible
Measureble
Mostly difficult to measure
Easy to identify the „owners”
Difficult to identify the „owners”
You can buy and sell
You can acquire by „learnind by doing”

11. Analysing competences and core competences 1.
The competence undertake the activities of the organisation. It shows how to link the
different activities together and how to deploy resources to sustain excellent performance
Bases of competences
Cost efficiency
Economies of scale: offers the ability in mass consumer advertising,
Supply costs: well managed input costs, with IT or personal networks
Experience: the cumulative experience decrease the R+D and unit costs
Value added
How well are matched the products/services to the identified needs of the
chosen customers. Value added activity must be done from the viewpoint
of the customer or user of the production or service.
Managing linkages
Competences are likely to be more robust and difficult to imitate if there
are linkages within the organisation’s value chain and linkages into the
supply and distribution channels.
Robustness
The strategic importance of an organisation’s competences relates to how
easy or difficult they are to imitate.

12. Unique Resources and Core Competences
Critically underpin competitive advantage and cannot be imitated or obtained by others
Core competences
Activities and processes through which resources are deployed such as to achieve competitive advantages in ways which others cannot imitate or obtain

13. How core competences change over time: the world automobile industry
Market access
Global network
Overseas plants
Quality/Reliability
Production processes
Supplier management
Product features
(at low volume)
Life-style niche marketing
'Agile' production ??

14. Strategic Capability (1)
Strategic capability is the adequacy and suitability
of the resources and competences of an
organisation for it to survive and prosper
Resources
Tangible resources – physical assets of an organisation
Intangible resources – non-physical assets of an organisation

15. Strategic Capability (2)
Competences
The activities and processes through which an organisation deploys its resources effectively

16. Identifying Organizational Capabilities: A Functional Classification
FUNCTION CAPABILITY EXEMPLARS
Corporate Financial management ExxonMobil, GE
Management Strategic control IBM, Samsung
Coordinating business units BP, P&G
Managing acquisitions Citigroup, Cisco
MIS Speed and responsiveness through Wal-Mart, Dell
rapid information transfer Capital One
R&D Research capability Merck, IBM
Development of innovative new products Apple, 3M
Manufacturing Efficient volume manufacturing Briggs & Stratton
Continuous Improvement Nucor, Harley-D
Flexibility Zara, Four Seasons
Design Design Capability Apple, Nokia
Marketing Brand Management P&G, LVMH
Quality reputation Johnson & Johnson
Responsiveness to market trends MTV, L’Oreal
Sales, Distribution Sales Responsiveness PepsiCo, Pfizer
& Service Efficiency and speed of distribution LL Bean, Dell
Customer Service Singapore Airlines
Caterpillar

17. Value Chain and Value Network
The value chain describes the activities within
and around an organisation which together
create a product or service
The main roles of the value chain analysis:
To diagnose strategic capability
To understand how value is created or lost in terms of the activities undertaken

18. Value Chain Analysis
Identifies clusters of activities providing particular benefit to customers
Highlights activities which are less efficient and which might be de-emphasised or outsourced
Requires managers to think about the role of such activities
Can be used to identify the cost and value of activities

19. The value system of an industry
Channel
value chains
Supplier
value chains
Customer
value chains
Organisation's
value chain

20. The Porter’s Value Chain modell
Exhibit 3.6

21. Main areas of primarry activitions
Inbound logistics: concerned with receiving, storing, and distributing inputs,
Operations: trnasformation the inputs into final products and services,
Outbound logistics: moving the product ti buyer (including warehousing and distributinon) ,
Marketind and sales: bringing the product to buyers and inducing them to buy and use it,
Services: activities to enhence or maintain the value of product and service (installing, repairing, maintenace, training, and other services)

22. Main areas of supporting activitions
Procurement: process for acquiring resources and input,
Technology development: covering product, process and raw material development and „know how”,
Human resource management: recruitment, training, motivating, development, and rewards
Management infrastructure: strategic, and operational decision-making problem-solving, financial planning, leading

23. The Value Network – Key Questions (1)
Where are cost and value created?
Which activities are vital to an organisation?
Retain direct control of core capabilities
Outsource less important activities
Where are the profit pools?
Potential profits at different parts of the value network
Availability of competences to compete in these areas

24. Vertical Segmentation & Industry Profit Pools
—The US Auto Industry
25% 20
Leasing
Service & repair
Operating margin 15
Warranty
Aftermarket
parts
Auto manufacturing 10
Auto rental
Auto insurance
Auto loans
New car dealers 5
Used car dealers
Gasoline
100%
Share of industry revenue

25. The Value Network – Key Questions (2)
Make or buy?
Outsourcing
Develop competence in influencing performance of other organisations
Who are the best partners?
What kind of relationships are required?

26. Benchmarking Strategic Capability
Historical – performance compared to previous years
Industry/sector – comparative performance of other organisations (strategic groups)
Best in class – wider search for best practice
Increased expectations due to improved performance in another sector
Breaking the frame about performance standards to be achieved
Spot opportunities to outperform incumbents in other markets – stretch core competences

27. SWOT (1) Summarise of the strategic position of the organizations
Made by providing analysis of
Business environment
Opportunities and threats
Strategic capabilities
Strengths and weaknesses
Used for comparison with competitors
Focuses on future choices and capability of organisation to support them

28. The SWOT analysis (2)
Strengths: internal resources in which you have advantage to competitors,
Weaknesses: internal resources in which you have disadvantages to comeptitors,
Opportunities: environmental factors which favorable for your organization,
Threats: environmental factors which unfavorable for your organization

29. Simple SWOT matrix (3) List: STRENGHTS (Resource factors) WEAKNESSES
OPPORTUNITIES
(Factors of the environments):
THREATS
Factors of the environments):

30. Extended SWOT matrix (4)
Strenghts 1, 2, 3,
Weaknesses
Opportunities
SO strategic projects:
WO strategic projects:
Threats
ST strategic projects:

31. SWOT (5) Problems of SWOT analysis
Can generate long lists: need to focus on key issues
Danger of over-generalisation: not a substitute for rigorous strategic analysis
It create illusion: we have a strategy

32. Stretching and Adding Capabilities
Extending best practices
Adding and changing activities
Stretching competences
Building on apparent “weaknesses”
Ceasing activities
Trade-offs
External capability development

33. Building Dynamic Capabilities
Promote a learning organisation
Recognise intuition of people
Accept conflicting ideas
Experimentation as the norm
Add activities to support learning, e.g. “venturing” business units
Manage organisational knowledge
Need right culture and structure
Develop spiral of interaction between tacit and explicit knowledge
Question core rigidities

34. Strategic Capability – Key Points (1)
Competitive advantage derives from strategic capabilities
Strategic capability comprises tangible and intangible resources deployed via competences
Continual improvement of cost efficiency is vital
For sustainable competitive advantage strategic capabilities must be valuable, rare, robust or non-substitutable
Dynamic capabilities are needed in a changing environment
Value chain/value network/activity mapping to understand cost and value creation

35. Strategic Capability – Key Points (2)
Benchmarking establishes relative performance and challenges assumptions
Management of strategic capabilities involves stretching capabilities and building dynamic capabilities

36. Strategic Capability - Outline
Resources, competences and dynamic capabilities
Continual improvement in cost efficiency
Strategic capabilities and competitive advantage
Organisational knowledge and strategic capability
Diagnosing strategic capability: value chain, value networks, activity maps, benchmarking
Developing strategic capabilities