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Theinternalorganization resourcescapabilitiescorecompetenciesandcompetitiveadvantages 130309150622 phpapp02, Study notes of Architecture

University of MysoreArchitecture

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©2011 Cengage Learning. All Rights Reserved. May not be scanned,
copied or duplicated, or posted to a publicly accessible website, in
whole or in part.
Strategic Management:
Concepts and Cases 9e
Part I: Strategic Management Inputs
Chapter 3: The Internal Organization:
Resources, Capabilities, Core Competencies
and Competitive Advantages
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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Strategic Management:

Concepts and Cases 9e

Part I: Strategic Management Inputs Chapter 3: The Internal Organization: Resources, Capabilities, Core Competencies and Competitive Advantages

Chapter 3: The Internal Organization:

Resources, Capabilities, Core Competencies

and Competitive Advantages

• Overview:

  • Importance of understanding internal organization
  • Value: Definition and importance
  • Tangible vs intangible resources
  • Capabilities: Definition and development
  • Core competencies: Criteria
  • Value Chain Analysis
  • Outsourcing: Definition and “why?”
  • Internal organization assessment and strategic decisions

Analyzing the Internal Organization (IO) (Cont’d)

• The Challenge of Analyzing the IO

  • Strategic decisions are non-routine, have ethical implications and influence the organization’s above- average returns - Involves identifying, developing, deploying and protecting firms’ resources, capabilities 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

Components of Internal Analysis Leading to

Competitive Advantage and Strategic

Competitiveness

Resources, Capabilities and Core

Competencies

• Competitive Advantage (CA) foundation includes

  • Resources
    • Bundled to create organizational capabilities
    • Tangible and intangible (As seen in Figure 3.1)
  • Capabilities
    • Source of a firm’s 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

Resources, Capabilities and Core Competencies

• Tangible Resources

  • Assets that can be seen, touched and quantified
  • Examples include equipment, facilities, distribution centers, formal reporting structures
  • Four specific types

• 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
  • Examples include knowledge, trusts, organizational routines, capabilities, innovation, brand name, reputation
  • Three specific types

Building Core Competencies:

Criteria and Value Chain Analysis

• Four specific criteria of sustainable competitive

advantage – capabilities that are:

  • Valuable
  • Rare
  • Costly-to-imitate
  • Nonsubstitutable capabilities

• Competitive consequences:

  • Focus on capabilities that yield competitive parity and either temporary or sustainable competitive advantage

• Performance implications include:

  • Parity = average returns
  • Temporary advantage = avg. to above avg. returns
  • Sustainable advantage = above average returns

Building Core Competencies:

Criteria and Value Chain Analysis

• Value Chain Analysis

  • Primary activities
    • Involved with product’s physical creation, sales and distribution to buyers, and service after the sale
  • Support activities
    • Provide assistance necessary for the primary activities to take place

Internal Organization Assessment and

Strategic Decisions

• Firms must identify their strengths and

weaknesses

• Appropriate resources and capabilities needed to

develop desired strategy and create value for

customers/other stakeholders

• Tools (i.e., outsourcing) can help a firm focus on

core competencies as the source for CA

• Core competencies have potential to become core

rigidities

  • Competencies emphasized when no longer competitively relevant can become a weakness

• External environmental conditions and events

impact a firm’s core competencies