PUJA
h6000
cap_3_hitt.pptx
PART 1:
STRATEGIC MANAGEMENT INPUTS
CHAPTER 3 THE INTERNAL ENVIRONMENT: RESOURCES, CAPABILITIES, & CORE COMPETENCIES
Edgar Ramírez, Ph. D.
Authored by:
Marta Szabo White. PhD.
Georgia State University
THE STRATEGIC MANAGEMENT PROCESS
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
KNOWLEDGE OBJECTIVES
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
● Explain why firms need to study and understand their internal organization.
● Define value and discuss its importance.
● Describe the differences between tangible and intangible resources.
● Define capabilities and discuss their development.
● Describe four criteria used to determine whether resources and capabilities are core competencies.
KNOWLEDGE OBJECTIVES
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
● Explain how firms analyze their value chain for the purpose of determining where they are able to create value when using their resources, capabilities, and core competencies.
● Define outsourcing and discuss reasons for its use.
● Discuss the importance of identifying internal strengths and weaknesses.
● Discuss the importance of avoiding core rigidities.
INTERNAL ANALYSES’ OUTCOMES
Unique Resources, Capabilities, and Competencies (required for sustainable competitive advantage)
By studying the internal environment, firms identify what they CAN DO
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MATCHES
STRATEGIC COMPETITIVENESS AND ABOVE-AVERAGE RETURNS RESULT WHEN:
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
INTERNAL ORGANIZATION
What a firm can do:
What a firm might do:
EXTERNAL ENVIRONMENT
Function of resources, capabilities, and core competencies
Function of opportunities in the firm’s external environment
COMPETITIVE ADVANTAGE
Components of Internal Analysis Leading to Competitive Advantage and Strategic Competitiveness
FIGURE 3.1
Components of an Internal Analysis
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ANALYZING THE INTERNAL ORGANIZATION
Creating Value
By innovatively bundling and leveraging their resources and capabilities; by exploiting their core competencies or competitive advantages, firms create value.
Value is measured by:
Product performance characteristics
Product attributes for which customers are willing to pay
Superior value Above-average returns
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
RESOURCES, CAPABILITIES, AND CORE COMPETENCIES
TYPES OF RESOURCES
Tangible Resources
Assets that can be seen, touched, and quantified
Intangible Resources
Assets rooted deeply in the firm’s history, accumulated over time
In comparison to ‘tangible’ resources, usually can’t be seen or touched
Compared to tangible resources, intangible resources are a superior source of core competencies
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
RESOURCES, CAPABILITIES AND, CORE COMPETENCIES
TYPES OF RESOURCES
Tangible Resources
FINANCIAL RESOURCES - the firm’s capacity to borrow and generate internal funds
ORGANIZATIONAL RESOURCES - formal reporting structures
PHYSICAL RESOURCES - sophistication and location of a firm’s plant and equipment; distribution facilities; product inventory
TECHNOLOGICAL RESOURCES - stock of technology, such as patents, trademarks, copyrights, and trade secrets
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
RESOURCES, CAPABILITIES AND, CORE COMPETENCIES
TYPES OF RESOURCES
Intangible Resources
HUMAN RESOURCES - knowledge; trust; skills; collaborative abilities
INNOVATION RESOURCES - scientific capabilities; capacity to innovate
REPUTATIONAL RESOURCES - brand name; perceptions of product quality, durability, and reliability; positive reputation with stakeholders, e.g., suppliers/customers
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
RESOURCES, CAPABILITIES, AND CORE COMPETENCIES
CAPABILITIES
■ Emerge over time through complex interactions among tangible and intangible resources
■ Stem from employees
Unique skills and knowledge
Functional expertise
■ Are activities that a firm performs exceptionally well relative to rivals
■ Are activities through which the firm adds unique value to its goods or services over an extended period of time
Core Competencies
Capabilities
Resources
Tangible
Intangible
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
RESOURCES, CAPABILITIES, AND CORE COMPETENCIES
CAPABILITIES (cont’d)
■ Exist when resources have been purposely integrated to achieve a specific task or set of tasks
■ Are often developed in specific functional areas
Distribution
Human resources
Management information systems
Marketing
Management
Manufacturing
Research & Development
Core Competencies
Capabilities
Resources
Tangible
Intangible
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
BUILDING CORE COMPETENCIES
The Four Criteria of Sustainable Competitive Advantage
Capabilities must fulfill four specific criteria in order to be
CORE COMPETENCIES
Valuable
Rare
Costly-to-imitate
Nonsubstitutable capabilities
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BUILDING CORE COMPETENCIES
VALUE CHAIN ANALYSIS
Allows the firm to understand the parts of its operations that create value and those that do not
A template that firms use to:
Understand their cost position
Facilitate the implementation of a chosen business-level strategy
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
BUILDING CORE COMPETENCIES
FIGURE 3.3
A Model of the Value Chain
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OUTSOURCING
Definition: purchase of a value-creating activity or support function from an external supplier
Effective execution includes an increase in flexibility and risk mitigation, and a reduction in capital investment
Global industries trend continues at a rapid pace
Firms must outsource activities where they cannot create value or are at a substantial disadvantage compared to competitors
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
OUTSOURCING
■ Outsource those value chain activities and support functions that are NOT a source of core competence
■ Concerns: innovation, technological uncertainty, and job loss; usually revolves around firm’s innovative ability and loss of jobs to external supplier
■ Offshoring - foreign supply source
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
COMPETENCIES, STRENGTHS, WEAKNESSES, AND STRATEGIC DECISIONS
Firms must identify their strengths and weaknesses
Appropriate resources and capabilities are needed to develop desired strategy and create value for customers and other stakeholders
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
STRATEGY
COMPETENCIES, STRENGTHS, WEAKNESSES, AND STRATEGIC DECISIONS
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
INTERNAL ORGANIZATION
What a firm can do:
What a firm might do:
EXTERNAL ENVIRONMENT
Function of resources, capabilities, and core competencies
Function of opportunities in the firm’s external environment
