Strategic management Ch 03

8/3/2019 Strategic management Ch 03

1/23

1

Strategic Management:Concepts and Cases

Part I: Strategic Management Inputs

Chapter 3: The Internal Organization:Resources, Capabilities, Core Competencies and

Competitive Advantages


2/23

2

The Strategic Management Process


3/23

3

Chapter 3: The Internal Organization:

Resources, Capabilities, Core Competencies

and Competitive Advantages

Overview: Eight content areas

Importance of understanding internal organization

Value: Definition and importance

Tangible vs intangible resources

Capabilities: Definition and development

Core competencies: Criteria (N=4)

Value Chain Analysis Outsourcing: Definition and why?

Importance of internal organization assessment


4/23

4

Innovation vs. Efficiency: 3M

Diversified technology into 6 business segments

Historically: Commitment to innovation Slogan: The Spirit of Innovation. Thats 3M.

Relied on skills of scientists and engineers Historically 1/3 annual sales from products introduced

into marketplace in most recent 5 yrs.

30-plus core technologies basis for > 55,000 products

Changing times: by mid-2007 only 25% sales earnedfrom products introduced over previous 5 yrs why?


5/23

5

Innovation vs. Efficiency: 3M (Contd)

Leadership

CEO McNerney (formerly of GE) implemented Six-

Sigma, a management technique to decrease

product defects and increase efficiency Six Sigma doesnt lend itself to creativity / innovation,

something imperative in the R&D arena

Six Sigma

Focuses on actions to define, measure, analyze,improve and control efficiency

Efficiency vs. innovation its one or the other!

New CEO Buckley a reenergization of R&D


6/23

6







Tangible vs intangible resources






7/23

7

Analyzing the Internal Organization (IO)

Context of Internal Analysis

Creating Value

The Challenge of Analyzing the IO


8/23

8

Analyzing the Internal Organization (IO) (Contd)

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, orcontext

Analyze firms portfolio of resources and bundle

heterogeneous resources and capabilities

Understand how to leverage these bundlesAn organization's core competencies creates and sustains

its competitive advantage

Creating Value



9/23

9

Components of Internal Analysis Leading to

Competitive Advantage and Strategic Competitiveness


10/23

10


Context of Internal Analysis

Creating Value Exploit core competencies or competitive advantage

Value: measured by a product's performancecharacteristics and by its attributes for which customers

are willing to pay



11/23

11


Context of Internal Analysis Creating Value

The Challenge of Analyzing the IO Strategic decisions are non-routine, have ethical implications and

influence the organizations above-average returns Involves identifying, developing, deploying and protecting firms

resources, capabilites and core competencies

Managers face uncertainty on many fronts -- Proprietary technologies Changes in economic and political trends, societal values and shifts

in customer demands Environment increases complexity

Intraorganizational conflict Due to decisions about core competencies and how to nurture them


12/23

12

Conditions Affecting Managerial Decisions About

Resources, Capabilities, and Core Competencies


13/23

13







Tangible vs. intangible resources






14/23

14

Resources, Capabilities and Core Competencies

Competitive Advantage (CA) foundation includes Resources

Bundles to created organizational capabilities

Tangible and intangible (As seen in Figure 3.1) Capabilities

Source of a firms core competencies and basis for CA

Purposely integrated to achieve a specific task/set of tasks

Core Competencies Capabilities that serve as a source of CA for a firm over its

rivals

Distinguish a company from its competitors the

personality


15/23

15

Resources, Capabilities and Core Competencies

TangibleAssets that can be seen, touched and quantified Examples include equipment, facilities, distribution

centers, formal reporting structures Four specific types

IntangibleAssets rooted deeply in the firms history, accumulated

over time In comparison to tangible resources, usually cant be

seen or touched Examples include knowledge, trusts, organizational

routines, capabilities, innovation, brand name, reputation

Three specific types


16/23

16













17/23

17

Building Core Competencies:

Criteria and Value Chain Analysis

Two tools firms use to identify and build on their

core competencies

Four specific criteria of Sustainable CA

Value Chain Analysis


18/23

18



Four specific criteria of Sustainable CA Valuable

Rare

Costly-to-imitate Nonsubstitutable capabilities

Competitive consequences include Disadvantage, parity, temporary advantage and

sustainable advantage

Performance implications include returnsAbove, below or average


19/23

19



Value Chain Analysis Primary activities

Involved with products physical creation, sales and

distribution to buyers, and service after the sale Service, marketing/sales, outbound/inbound logistics and

operations

Support activities Provide assistance necessary for the primary activities to

take place Includes firm infrastructure, HRM, technologies

development and procurement


20/23

20

The Basic Value Chain


21/23

21













22/23

22

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


23/23

23

Competencies, Strengths, Weaknesses

and Strategic Decisions

Firms must identify their strengths and weaknesses

Appropriate resources and capabilities needed todevelop desired strategy and create value forcustomers/other stakeholders

Tools (I.e., outsourcing) can help a firm focus on corecompetencies as the source for CA

Core competencies have potential to become corerigidities Competencies emphasized when no longer competitively

relevant can become a weakness

External environmental conditions and events impact afirms core competencies

Strategic management Ch 03

Documents