management
tiancaigu
3.pptxStrategic management
MGMT 490
Yongseok Jang, Ph.D.
Assistant Professor of Entrepreneurship
Chapter 4-1 Internal Analysis
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Competitive Advantage based on Core Competencies, Resources, Capabilities
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What Are Core Competencies?
Unique strengths
Embedded deep within a firm
Allow a firm to differentiate its products and services from those of its rivals
Results in:
Creating higher value for the customer or
Offering products and services at lower cost
Do core competencies evolve over time?
Is CC originated when a firm starts or what they strive to be?
Instructors:
The digital companion to this book McGraw-Hill Connect has an interactive exercise on this section of the textbook. It builds student confidence on the core competencies (LO 4-1).
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Examples of Core Competencies
IKEA
Superior in designing modern functional home furnishings at low cost
Beats Electronics
Superior marketing: perception of coolness
Superior algorithms to offer targeted online ads
“core competencies that are not continuously nourished will eventually lose their ability to yield a CA” means..
Resources, Capabilities and Activities Help Deliver Core Competencies
Resources:
Any assets that a firm can draw on
Capabilities:
Organizational and managerial skills
Activities:
Distinct and fine-grained business processes
Resources: Any assets that a firm can draw on when formulating and implementing a strategy
Capabilities: Organizational and managerial skills necessary to orchestrate a diverse set of resources and deploy them strategically
Activities: Distinct and fine-grained business processes that enable firms to add incremental value by transforming inputs into goods and services
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What is the Resource Based View (RBV)?
A model that sees certain types of resources (VRIO) as key to superior firm performance
Valuable
Rare
Costly to Imitate
Organized to Capture Value
Is a product considered rare if it is superior to the rest of the competition?
Instructors:
The digital companion to this book McGraw-Hill Connect has a brief case exercise on this section of the textbook. It builds student confidence on VRIO elements of the resource based view (LO 4-4).
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What is the Resource Based View (RBV)?
A model that sees certain types of resources (VRIO) as key to superior firm performance
Valuable
Rare
Costly to Imitate
Organized to Capture Value
Walmart does not carry rare items.. Yet they are powerful. Are they just an exception?
Instructors:
The digital companion to this book McGraw-Hill Connect has a brief case exercise on this section of the textbook. It builds student confidence on VRIO elements of the resource based view (LO 4-4).
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Tangible and Intangible Resources
Jump to Appendix 4 long image description
Why are some companies able to imitate a product’s design so closely when patents or copyrights are in place?
Which type of resource is the most beneficial, why?
Can you select a company for tangible and intangible resources?
What type of resource is most favorable? I think valuable/intellectual property since it creates and helps SCA.
tangible resources: Resources that have physical attributes and thus are visible.
intangible resources: Resources that do not have physical attributes and thus are invisible.
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Example Google Headquarters
Tangible Resource
Googleplex: land + futuristic building
Intangible Resource
Location: heart of Silicon Valley
Large & computer savvy workforce
Largest concentration of venture capitalists in the U.S.
Why is location not considered a tangible asset?
Conceptual Blocks
Resource stocks
The firm’s current level of intangible resources
Resource flows
The firm’s level of investments to maintain or build a resource
Resource Stocks and Flows
What is the major differentiation between recourse stocks and resource flows?
Two Critical Assumptions of the RBV
Resource Heterogeneity
A firm is bundle of resources, competencies and capabilities that differ across firms
Resource Immobility
A firm has resources that tend to be “sticky” and that do not move easily from firm to firm
Q- What is the difference between the resource heterogeneity and resource immobility?
Example of sticky resource
Re: Which type of resource is the most beneficial, why?
VRIO framework
Q: Can you explain the concept of organized to capture value in more detail?
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VRIO framework
Valuable?
Rare?
Costly to imitate?
Exploited by organization?
May we go through an in class discussion explaining the VRIO framework please?
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Sustainable Competitive Advantage (SCA)
Significant difference: valuable, rare, non-substitutable, difficult to imitate, and durable;
A function of difficulty in imitating or obtaining
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Isolating Mechanisms: How to Sustain a Competitive Advantage
Protect resources, capabilities, or competencies that underlie a firm’s competitive advantage.
How:
Better expectations of future resource value
Path dependence
Causal ambiguity
Social complexity
Intellectual property (IP) protection
Any ways a company can diverge from “path dependence?”
Which isolating mechanism sustain the most CA?
BETTER EXPECTATIONS OF FUTURE RESOURCE VALUE. Sometimes firms can acquire resources at a low cost, which lays the foundation for a competitive advantage later when expectations about the future of the resource turn out to be more accurate.
PATH DEPENDENCE. Path dependence describes a process in which the options one faces in a current situation are limited by decisions made in the past. Arthur, W.B. (1989), “Competing technologies, increasing returns, and lock-in by historical events,” Economics Journal 99: 116–131; and Dierickx and Cool, “Asset stock accumulation and sustainability of competitive advantage.”
CAUSAL AMBIGUITY. Causal ambiguity describes a situation in which the cause and effect of a phenomenon are not readily apparent.
SOCIAL COMPLEXITY. Social complexity describes situations in which different social and business systems interact.
INTELLECTUAL PROPERTY PROTECTION. Intellectual property (IP) protection is a critical intangible resource that can also help sustain a competitive advance.
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Isolating Mechanisms
Strategic decisions have long term consequences
Path dependence vs time compression diseconomies
Ex) GM killed EV in 1990 caused struggles in 2000s)
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Isolating Mechanisms
Causal ambiguity: cause and effect is not readily apparent
What is the difference of Apple’s framework and superiority within the markets, and what method does Apple excel in the VRIO method
BETTER EXPECTATIONS OF FUTURE RESOURCE VALUE. Sometimes firms can acquire resources at a low cost, which lays the foundation for a competitive advantage later when expectations about the future of the resource turn out to be more accurate.
PATH DEPENDENCE. Path dependence describes a process in which the options one faces in a current situation are limited by decisions made in the past. Arthur, W.B. (1989), “Competing technologies, increasing returns, and lock-in by historical events,” Economics Journal 99: 116–131; and Dierickx and Cool, “Asset stock accumulation and sustainability of competitive advantage.”
CAUSAL AMBIGUITY. Causal ambiguity describes a situation in which the cause and effect of a phenomenon are not readily apparent.
SOCIAL COMPLEXITY. Social complexity describes situations in which different social and business systems interact.
INTELLECTUAL PROPERTY PROTECTION. Intellectual property (IP) protection is a critical intangible resource that can also help sustain a competitive advance.
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Isolating Mechanisms
Social complexity: where different business and social system interact
Individual systems vs Organizational Complexity
BETTER EXPECTATIONS OF FUTURE RESOURCE VALUE. Sometimes firms can acquire resources at a low cost, which lays the foundation for a competitive advantage later when expectations about the future of the resource turn out to be more accurate.
PATH DEPENDENCE. Path dependence describes a process in which the options one faces in a current situation are limited by decisions made in the past. Arthur, W.B. (1989), “Competing technologies, increasing returns, and lock-in by historical events,” Economics Journal 99: 116–131; and Dierickx and Cool, “Asset stock accumulation and sustainability of competitive advantage.”
CAUSAL AMBIGUITY. Causal ambiguity describes a situation in which the cause and effect of a phenomenon are not readily apparent.
SOCIAL COMPLEXITY. Social complexity describes situations in which different social and business systems interact.
INTELLECTUAL PROPERTY PROTECTION. Intellectual property (IP) protection is a critical intangible resource that can also help sustain a competitive advance.
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Chapter Case 4: Consider This
Do you think these competencies will remain as valuable under Apple?
Why do you think Apple purchased Beats?
Amazon’s core competency is online ordering. Could this become their core rigidity?
Why wouldn’t CSUSB rent out unused classrooms for businesses?
Dynamic Capabilities
A firm’s ability to:
Create, deploy, modify, reconfigure, upgrade, and leverage its resources over time
Helps prevent a core rigidity
A former core competency that turned into a liability as the environment changed
Example of a company that experienced core rigidity?
Apple’s dynamic capabilities allowed it to redefine the markets for mobile devices and computing, in particular in music, smartphones, and media content. For the portable music market through its iPod and iTunes store, Apple generated environmental change to which Sony and others had to respond. With its iPhone, Apple redefined the market for smartphones, again creating environmental change to which competitors such as Samsung, BlackBerry, Google (with its Motorola Mobility unit), or Microsoft (with its Nokia unit) must respond. Apple’s introduction of the iPad redefined the media and tablet computing market, forcing competitors such as Amazon and Microsoft to respond. With the introduction of the Apple Watch it is attempting to shape the market for computer wearables in its favor.
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Dynamic Capabilities
Helps prevent a core rigidity
A former core competency that turned into a liability as the environment changed
With a firms' external environment changing constantly, why do so many companies experience core rigidity? Isn't it as simple as making alterations to their core competencies to keep up with competition??
Apple’s dynamic capabilities allowed it to redefine the markets for mobile devices and computing, in particular in music, smartphones, and media content. For the portable music market through its iPod and iTunes store, Apple generated environmental change to which Sony and others had to respond. With its iPhone, Apple redefined the market for smartphones, again creating environmental change to which competitors such as Samsung, BlackBerry, Google (with its Motorola Mobility unit), or Microsoft (with its Nokia unit) must respond. Apple’s introduction of the iPad redefined the media and tablet computing market, forcing competitors such as Amazon and Microsoft to respond. With the introduction of the Apple Watch it is attempting to shape the market for computer wearables in its favor.
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Strategy Highlight 4.2
Dynamic Capabilities at IBM
Current disruptions:
Cloud computing
Systems of engagement
Big data and analytics
Understanding Industry : The Value Chain
10-24
A description of activities that are used to produce and deliver a product to customers
Sourcing of raw materials, inbound logistics, the manufacture of products, the distribution to entities to sell them to customers, marketing, and after sales services.
Exhibit 4.8 The Value Chain
Jump to Appendix 7 long image description
Which of the two add the most value to the final outcome?
Which of the two more important to ahe final outcome?
Understanding Industry : The Value Chain in Mobile Phones
10-26
Firms support activities all seem to include the part of the company that affects employees (Human Resources, accounting), shouldn't they be primary activities because employees are the key components to giving excellent service.
What activities in the value chain are most important to a firm?
Develop the vision and mission statement, and the business model.
Describe the firm's core competencies, its customers, and its competitive advantage.
Describe the industry and context for the firm and describe the competitors.
Determine the firm's strengths and weaknesses in the context of the industry and environment.
Describe the opportunities and threats for the venture.
Identify the key factors for success using the six forces model.
Formulate strategic options and select the appropriate strategy.
Translate the strategy into action plans with suitable measures and controls.
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SWOT analysis: How to identify
1. Porter’s five forces : O and T
2. VRIO framework (RBV): S and W
Can you do an example of a SWOT for Tesla?
Develop the vision and mission statement, and the business model.
Describe the firm's core competencies, its customers, and its competitive advantage.
Describe the industry and context for the firm and describe the competitors.
Determine the firm's strengths and weaknesses in the context of the industry and environment.
Describe the opportunities and threats for the venture.
Identify the key factors for success using the six forces model.
Formulate strategic options and select the appropriate strategy.
Translate the strategy into action plans with suitable measures and controls.
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