The Internal Organization Resources, Capabilities, Core Competencies, and Competitive Advantages Pages 68 - 94.
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The Internal Organization Resources, Capabilities, Core Competencies, and Competitive Advantages Pages 68 - 94
Why Internal Analysis? Early strategy theory rooted in industry structural analysis - external focus This approach has lost its appeal because: internationalization & deregulation has all but removed safe havens technology and changes in demand have blurred industry lines
3 Analyzing the Internal Organization 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
4 Resource Based View Model of Competitive Advantage and Strategic Competitiveness
5 Resources and Capabilities Tangible Financial, Organizational, Physical, and Technological Assets that can be seen, touched and quantified Examples include equipment, facilities, distribution centers, formal reporting structures Intangible Human, Innovation and Reputational Resources Assets rooted deeply in the firm’s history, accumulated over time Usually can’t be seen or touched Examples include knowledge, trusts, organizational routines, capabilities, innovation, brand name, reputation
Resources & Capabilities Resources are what you have; Capabilities are what you can do
Evaluation of Resources Strength or Weakness relative to competitors basic business requirements key vulnerabilities
Core Competencies central to the firm’s competitiveness rewarded in market place combination of skills & knowledge, not products or functions flexible, long term platforms embedded in the organization’s systems distinctive competencies are those the firm performs better than rivals All core competencies have the potential to become core rigidities
Sustainable Competitive Advantage Must be valuable, rare, inimitable, and non- substitutable Sustainability is a function of Durability - how long will it last? Technology? Reputation? Fixed Assets? Imitability - how quickly can it be copied? Transparent - Transferable - Replicable -
Factors that Limit Imitation Physical Uniqueness Path Dependency Causal Ambiguity Social Complexity Absorptive Capacity
Sustainable Competitive Advantage? Competitive consequences include Disadvantage, parity, temporary advantage and sustainable advantage Performance implications include returns Above, below or average
Relative costs and prices Where do cost/price differences come from? raw materials and components differences in technology, plant, equipment efficiencies, learning, experience, wages, productivity marketing, sales, promotion, warehousing, distribution, administration costs distribution inflation, exchange and tax rates
Porter’s Value Chain Views the organization as a series (chain) of activities, which may or may not create value
Porter’s Value Chain (cont.) Primary Activities – Inbound logistics – Supply Chain Management – Operations – Outbound logistics - Distribution – Marketing and sales – Customer service – Contribute to the physical creation of the product/service, its sale and transfer to the buyer, and its service after the sale
Porter’s Value Chain (cont) Support Activities Company infrastructure – General Admin Human resource management R&D, Technology and Systems Development Procurement
A low cost strategy….. Company Infrastructure HRM Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Margin …tries to pull the arrow back….. R&D, Technology & Systems Development
Fewer layers of management Policies to reduce turnover WalMart’s inventory system Monitor supplier performance Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Margin Low Cost - Support Activity examples…...
A differentiation strategy….. Company Infrastructure HRM Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Margin ….tries to pull the arrow forward... R&D, Technology & Systems Development
Commitment to quality Compensation rewarding innovation Amazon recommendations Purchasing high-quality components Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Margin Differentiation - Support Activity examples…...
27 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