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

The Strategic Management Process

海尔集团

On 2011, Haier Group global turnover of 150 On 2011, Haier Group global turnover of 150.9 billion yuan,17 countries in the world with more than 80000 employees, Haier users around the world more than 100 countries and regions. In the domain of white home appliance, Haier is the world's leading brand of white goods. Haier Group holds a number of consumer life brand. Which, according to the statistics of Haier brand, has won for three consecutive years the world's largest sales of household appliances brand (data source: Euromonitor International Euromonitor ).

In the era of Internet, Haier build open innovation system to support the brand and market development, as of 2011, has declared12318 patents, or 8350 authorized patents; cumulative reported77 international standard proposal, of which 27 have been published and implemented.

Haier motto The essence of management is not known, but action Forever, trembling with fear, always to be very careful attitude A journey of a thousand miles begins with a single step, the world famous brand in the Do not discount the quality, the service does not discount, credit. Capital is a boat, the brand is sail, business is the people, culture is the soul To seek truth from facts, is to change the mindset problem Dare to seek truth from facts, is the problem of improving the ideological realm(意识形态)

Haier industry White electric products Digital and personal products group The whole kitchen Home appliances

Haier products

What is the core Competency of Haier?

Core competency of Haier 1、Brand value 2、Patents 3、Service 4、Management 5、Culture

Components of Internal Analysis Leading to Competitive Advantage and Strategic Competitiveness

Analyzing the Internal Organization (IO) Context of Internal Analysis Creating Value The Challenge of Analyzing the IO

Analyzing the Internal Organization (IO) (Cont’d) Context of Internal Analysis ‘Global mind-set’ （全球化观念） 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（组合） of resources and bundle heterogeneous（不同种类的） resources and capabilities Understand how to leverage（激活） these bundles An organization's core competencies creates and sustains its competitive advantage

Analyzing the Internal Organization (IO) (Cont’d) Creating Value Exploit core competencies or competitive 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（非常规的）, have ethical implications（伦理内涵） and influence the organization’s above-average returns Involves identifying, developing, deploying（配置） and protecting firms’ resources, capabilities and core competencies Managers face uncertainty on many fronts -- Proprietary technologies（专利技术） Changes in economic and political trends, societal values and shifts in customer demands Environment – increases complexity Intraorganizational conflict Due to decisions about core competencies and how to nurture them

Conditions Affecting Managerial Decisions About Resources, Capabilities, and Core Competencies

Resources, Capabilities and Core Competencies Competitive Advantage (CA) foundation includes Resources Bundles to created 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 Distinguish a company from its competitors – the personality

Strategic cooperation between TECENT & SOHU 448 million for 36.5% share

Products input method Browser Search Engine SNS(Social Networking Services)

Resources, Capabilities and Core Competencies Tangible Assets that can be seen, touched and quantified Examples include equipment, facilities, distribution centers, formal reporting structures Four specific types Intangible Assets rooted deeply in the firm’s history, accumulated over time In comparison to ‘tangible’ resources, usually can’t be seen or touched 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

Building Core Competencies: Criteria and Value Chain Analysis Four specific criteria of Sustainable CA Valuable Rare Costly-to-imitate Nonsubstitutable capabilities Competitive consequences include Disadvantage, parity（同等）, temporary advantage and sustainable advantage Performance implications include returns Above, below or average

Discussion What kind of resources can contributes to the sustainable advantage? Give an example

Building Core Competencies: Criteria and Value Chain Analysis Value chain activities Involved with product’s physical creation, sales and distribution to buyers, and service after the sale Service, marketing/sales, outbound/inbound logistics and operations Support activities Provide assistance necessary for the primary activities to take place Includes firm infrastructure, HRM, technologies development and procurement

The Basic Value Chain

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 Usually revolves around innovative ability and loss of jobs

The advantages and disadvantages of outsouring? Discussion The advantages and disadvantages of outsouring?

Competencies, Strengths, Weaknesses 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(僵化) Competencies emphasized when no longer competitively relevant can become a weakness External environmental conditions and events impact a firm’s core competencies

Task 1/ read the book p81 : Value Chain Analysis P97-99 2/ prepare Chapter 4:P98-107, focus on figures.