1. Leveraging Capability Globally and Core Competence
FMA3093
INTERNATIONAL BUSINESS MANAGEMENT SEMINAR

2. Introduction: Strategic Analysis
Strategic analysis involves 2 stages:
Internal Analysis
External Analysis
Internal analysis – a systematic evaluation of the key internal features of an organization
External analysis – a systematic evaluation of the competitive environment (industry and market)

3. Analysis of the Global Organization
Internal analysis
When considering the internal analysis of any organization, four areas need to be considered:
The organization’s resources, capabilities, and competences
The way in which the organization configures and coordinates its key value adding activities
The structure of the organization and the characteristics of its culture
The performance of the organization as measured by the strength of the products. This, in turn, is largely determined by the three aforementioned factors

4. Internal Analysis
Enables managers to gain a picture of the organization
Such information essential when deciding strategic options or on adjusting global strategy to provide optimum performance
“Superior performance depends upon management’s ability to employ their resource inputs into core competences more effectively than competitors. This, in turn, depends upon how well-configured the organization’s value adding activities are and how it configures and coordinates its value-adding activities in the various parts of the world”.

5. Internal Analysis Analysis of the global business
Resources, capabilities
and core competences
Cultural and
Structural
analysis
Global value chain analysis:
Configuration and coordination
Global Product and Performance
Global products and performance

6. Resources, Competences and Capabilities
Industry specific skills,
relationships,
organizational
knowledge,
Intangible and
invisible assets
Perceived customer
benefits/ value
added
Resources:
Human, financial,
physical, technological,
legal, information
Tangible and
Visible assets
Core Competence:
Distinctive and
superior skills,
technology relationship,
knowledge and reputation
Of the firm
Unique and difficult
to copy + =
Denotes feedback loop
Denotes core
competences
development

7. Resources, Competences and Capabilities
Core Competences/Distinctive capabilities
The combinations of resources and capabilities which are unique to a specific organization and which are responsible for generating its competitive advantage
Core competences can only create competitive advantage when they are applied in markets
Examples: reputation, architecture (that is, internal and external relationships), innovation and strategic assets
Core competences must be perceived by customers as providing benefits if they are to create competitive advantage

8. Resources, Competences and Capabilities
Assets which are employed in the activities and processes of the organization
Can be either tangible or intangible
Can be obtained externally from suppliers in resource markets or can be internally generated.
Internally generated resources are organization-specific and externally obtained are organization-addressable
Can be highly specific and non-specific

9. Understanding Resources and Capabilities
The basic proposition of the Resource-Based View (RBV) is that a firm consists of a bundle productive resources and capabilities.
Resources are “the tangible and intangible assets a firm uses to choose and implement its strategies”.
Some argue that capabilities as firm’s capacity to dynamically deploy resources.
The two terms will be used interchangeably and often in parallel.

10. Understanding Resources and Capabilities
All firms, including the smallest ones, possess a variety of resources and capabilities
Two types of resources:- tangible and intangible
Tangible resources and capabilities are assets that are observable and more easily quantified. Intangible resources and capabilities are harder to observe and more difficult (or sometimes impossible) to quantify.
Broadly organized into 4 categories:

11. Tangible Resources and Capabilities
Financial resources and capabilities
The depth of a firm’s financial pockets. Examples include abilities to generate internal funds and raise external capital
Physical resources and capabilities
Plants, offices, and equipment, geographic locations and access to raw materials and distribution channels

12. Tangible Resources and Capabilities (cont.)
Technological resources and capabilities
Skills and assets that generate leasing-edge products and services supported by patents, trademarks, copyrights, and trade secrets
Organizational resources and capabilities
A firm’s planning, command, and control systems and structures. In general, younger firms tend to rely more on the visions of managers (founders), whereas more established firms usually have more formalized systems and structures

13. Intangible Resources and Capabilities
Harder to observe, yet it is widely acknowledge that they must be “there” because no firm is likely to generate competitive advantage by relying on tangible resources alone
Examples of intangible resources and capabilities include:

14. Intangible Resources and Capabilities (cont.)
Human resources and capabilities
The knowledge, trust, and talents embedded within a firm that are not captured by its formal, tangible systems and structures
Innovation resources and capabilities
A firm’s assets and skills to (1) research and develop new products and services and (2) innovate and change ways of organizing

15. Intangible Resources and Capabilities (cont.)
Reputational resources and capabilities
A firm’s abilities to develop and leverage its reputation as a solid provider of goods/services, an attractive employer, and /or a socially responsible corporate citizen. Reputation can be regarded as an outcome of a competitive process in which firms signal their attributes to the constituents.

16. Examples of Tangible Resources and Capabilities
Financial
Ability to generate internal funds
Ability to raise external capital
Physical
Location of plants, offices, and equipment.
Access to raw materials and distribution channels
Technological
Possession of patents, trademarks, copyrights, and trade secrets
Organizational
Formal planning, command, and control systems
Integrated management information systems

17. Examples of Intangible Resources and Capabilities
Human
Managerial talents
Organizational structures
Innovation
Research and development capabilities
Capabilities for organizational innovation and change
Reputational
Perceptions of product quality, durability and reliability
Reputation as a good employer
Reputation as a socially responsible corporate citizen

18. Resources, capabilities and core competence
Core competences can be evaluated against a set of criteria:
Complexity – how elaborate is the bundle of resources and capabilities which comprise the core competence?
Identifiability – how difficult is it to identify
Imitability – how difficult it is to imitate?
Durability – How long does it endure?
Substitutability – how easily can it be replaced by an alternative competence?
Superiority – is it clearly superior to the competences of other organizations?
Adaptability – how easily can the competence be leveraged or adapted
Customer orientation – how is the competence perceived by customers and how far is it linked to their needs?

19. Resources, Competences and Capabilities
By evaluating core competences against these criteria, managers can gain a valuable insights into their ability to bring about any sustained advantage. The strengths and weaknesses of existing competences can be assessed and any opportunities or needs for competence building and leveraging can be identified.