ASM Competencies

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Leben Johnson

ASM-Competencies 1

Competencies

MPIBA-012015th February 2013

Adapted from: Thomas L Wheelen & J. David HungerCompetitiveness & Globalization By: Michael A Hitt, R. Duane Ireland , Robert E.

Hoskisson


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Competencies

Resources: An organization's assets

Tangible Assets: Plant, Equipment, Finances and location

Human Assets: Number of employees, skills and motivation

Intangible Assets: Patents, Copyrights, knowledge, culture and reputation.

Capabilities: Are the abilities to exploit its resources and are functionally based.

Example: Marketing capabilities, Manufacturing capabilities, HR capabilities.Dynamic Capabilities: Constant change in processes to adapt to the uncertain environment.

Competencies: Cross functional integration and coordination of capabilities.

Example: Competency of new product development is the results of integrating MIS, Marketing,

R&D capabilities.

Core Competency: A competency that a corporation can do well across divisions.

Distinctive Competency: When Core Competency is superior to competition and differentiates

product.

VRIO Framework:

Value, Rareness, Imitability, Organization.

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Criteria for Resources and Capabilities That Become

Core Competencies

Core

Competencies

Valuable Rare

Costly to ImitateNonsubstitutable

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How Resources and Capabilities

Provide Competitive Advantage

The firm is organized appropriately to obtainthe full benefits of the resources in order torealize a competitive advantage

Valuable Allow the firm to exploit opportunities orneutralize threats in its external environment

Rare Possessed by few, if any, current andpotential competitors

Costly to imitate When other firms cannot obtain them ormust obtain them at a much higher cost

Nonsubstitutable

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Core Competencies

When the four key criteria of resources and

capabilities are met, they become core

competencies.

Managerial competencies are especially

important.

Core competencies serve as a source of

competitive advantage, create value, and provide

the opportunity for above-average returns.

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Why Two Models? Industrial Organization

(I/O) Model Focuses on the

environment outside thefirm.

Resource-Based Model

Focuses on the inside of

the firm

Successful strategy formulation and implementation actions

result only when the firm properly uses both models.

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Competitive Advantage Roots

Resources

Distinctive

Competencies

Capabilities

Functional Strategies

Superior:

-Efficiency

- Quality

- Innovation

- Customer Service

Differentiation

Low Cost

Value

Creation

Superior

Profitability

Build

Build

Shape

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Competitive Advantage

Competitive advantage Factors:

Value: The amount of value the customers place on the product

Price: The price that a company charges for the product

Cost: The cost of creating that value

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V-P

P-C

C

V

P

C

V = Value to Consumer

P = Price of Product

C = Cost to production

V-P=Consumer Surplus

P-C=Profit Margin

V-C=Value Created


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Value Creation and Pricing Options

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V-P

P-C

C

V-P

P-C

C

V-P

P-C

C

Option1: Lowers Price

To generate demand

Option2: Raises Price

To reflect valueInitial State


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Value Chain

The chain of activities that a company performs to add value and transform an

input into an output.

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Value

Reliability

High

Low

Inferior

Value

Superior

Attributes

Yugo

Ford Explorer

Toyota Corolla Lexus


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Durability of Competitive Advantage

Barriers to Imitation:

- Imitating Resources.- Imitating Capabilities.

Capability of Competitors:

- Strategic Commitment.

- Absorptive Capacity.

Industry Dynamism:

Loosing Competitive AdvantageInertia:

Prior Strategic Commitments:

The Icarus Paradox: Craftmesn, Builders, Pioneers and Salesmen

Uncertainty

Poor commercialization

Poor positioning Strategy

Technological Myopia

Slow to Market

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Sustaining Competitive Advantage

- Focus on building blocks.- Institute continuous improvement & Learning

- Track best industrial practices

- Benchmark

- Overcome inertia.

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Building Competitive Advantage

Achieving Superior Efficiency:

- Economies of Scale

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UnitCost

$

0

Output

Economies of Scale Diseconomies of Scale


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- Learning Effects

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UnitCost

$

0

Output

Learning Effect

Time 1

Time 2


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- Flexible Manufacturing and Mass Customization

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UnitCost

Production Vol & Product Variety

Total Unit Cost

Variety

Related

VolumeRelated

UnitCost

Production Vol & Product Variety

Total Unit Cost

Variety Related

Volume Related

Flexible ManufacturingTraditional Manufacturing


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- Marketing and Efficiency

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ProfitperCustome

r

Length of time customer stays with company

(+)

(-)

0


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- Material Management

- R & D Efficiency

- Human Resource Efficiency

Hiring Efficiency

Employee Training

Self-Managing Teams

Pay for Performance

- Information System and Internet Efficiency

- Infrastructure Efficiency

- Total Quality Management (TQM)

Six-Sigma Methodology

Build Org. Commitment to Quality

Focus on the Customer

Measure Quality

Set goals and create incentives

Solicit inputs from employees

Identify defects and trace them to source

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- Innovation

Quantum Innovation

Incremental Innovation

Build Skills in Basic and Applied Research

Project Selection and Management

Cross-functional integrationProduct development teams

Partly parallel development process

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Phase 1

Idea

Generation

Phase 2

Project

Refinement

Phase 3

Project Execution

Gate1

Gate2

Market

The Development Funnel

ASM Competencies

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