Slides Strategic Management Class Resources Capabilities IFE
Sessin 4 Resources and Capabilities
-
Upload
alex-simkovitz -
Category
Documents
-
view
326 -
download
2
Transcript of Sessin 4 Resources and Capabilities
Assessing firm internal characteristicsUnderstanding how firms differ in their competitive advantages
S V Horner 2008
Why assess internal characteristics?
• Firms in same industry using same strategies often vary in performance– Not due to industry or strategy– Must be due to individual organizational
differences: resourcedifferences: resource
• Resources not equally distributed across firms
S V Horner 2008
Overview of internal analysis
• Use the value chain to identify internal potential for creating value
• Explain competitiveness using the resource-based view of the firmbased view of the firm
S V Horner 2008
Internal analysis
• The resource-based view
– identifies key resources that are potential sources of capabilities
– Sustained competitiveness depends on capabilities that are valuable, rare, difficult to imitate, and non-substitutableare valuable, rare, difficult to imitate, and non-substitutable
S V Horner 2008
Strategic capability
• Strategic capability is the resources and competences of an organisation needed for it to survive and prosper.
• Resources:– Tangible: physical assets of an organisation such as plant, people and
finance.finance.– Intangible: Non physical assets such as information, reputation, and
knowledge.
Strategic capability
• Competences are the skills and abilities by which resources are deployed effectively through an organisation’s activities and processes.
• Two basic questions:
What are the threshold resources required to support certain strategies?What are the threshold skills necessary for organize resources in order to satisfy the requirements of customers and support certain strategies?
Strategic capabilities and competitive advantage
Unique resources and core competences
• Unique resources are those resources that critically underpin competitive advantage and that others cannot easily imitate or obtain.
• Core competences are the skills and abilities by • Core competences are the skills and abilities by which resources are deployed through an organisation’s activities and processes such to achieve competitive advantage in ways that other cannot imitate or obtain.
Strategic capability: the terminology
Diagnosing strategic capabilitiesAnalyzing resources
Analyzing the Chain ValueUsage of resourcesControl of resources
Obtaining comparisons:Historical analysis
Product portfolio analysisHistorical analysis
Industry normsBenchmarking
analysisSkills and competences
analysis
Identifying key issuesAnalyse weakness and strenghtsDefining core competences and
resources
Cost efficiency
• Managers often refer to the management of cost as as key strategic capability.
• Customer can benefit from cost efficiencies in terms of lower prices or more product features terms of lower prices or more product features for the same price.
Sources of cost efficiency
The experience curve
•Growth is not optional in may markets
•Unit cots should decline year on year as a result of cumulative year as a result of cumulative experience
•First mover advantage can be important
Creating sustainable competitive advantage through resources and capabilities (VRIN framework)
• Value. In order to build a competitive advantage organisations must have capabilities that are of value for its customers.
• Rarity. Competive advantage could also be based on rare competences: for example unique skills developed over time. However the following must me take in account:account:– Ease of transferability (who owns the competence and how
easily transferable is it)– Sustainability (it is dangerours to assume that competences will
remain the same always)– Core ridigities (dificult to change and therefore damaging to the
organisation)
S V Horner 2008
Creating sustainable competitive advantage through resources and capabilities (VRIN framework)
• Difficult to imitate– Physical uniqueness– Path dependence: series of events occurring at
various junctures in firm’s development– Causal ambiguity: difficulty in precisely identifying
cause-effect relationships of what a firm does and the product it producescause-effect relationships of what a firm does and the product it produces
– Social complexity: interpersonal relations among the employees and managers of a firm, its culture, and its reputation among suppliers and customers
S V Horner 2008
Creating sustainable competitive advantage through resources and capabilities (VRIN framework)
• Non-substitutable• Limited availability of strategically
equivalent substitutes:– Substitute a similar resource that leads to
same strategysame strategy– Different resources become substitutes for
each other (e.g., Amazon and Barnes and Noble)
S V Horner 2008
Capabilities and skills of the organization and likely outcomes
¿Are thisSkills
valuable?
¿Are thiscompetences
rare?
¿Are thiscompetences
difficult toimitate?
¿Is the companyorganized in
order to exploitthese
capabilities? Competetiveconsequences
Economicresults
---- ----No NoCompetive
disadvantage
Results below normal
17
No
Yes
Yes
Yes YesYes
Yes
Yes ----
No
CompetitiveParity
CompetitiveAdvantage
SustainableCompetitiveAdvantage
Normalresults
normal
Results above normalResults above normal
Barney & Griffin, 1992 p. 220
Value chain
• Organization as sequential process of activities that create value
S V Horner 2008
Value chain
• Exists within larger context– Industry supply chain: suppliers, customers,
alliance partners
• Value chain primary activities– Contribute to physical creation of product or – Contribute to physical creation of product or
service– Inbound logistics, operations, outbound logistics,
marketing and sales, service
S V Horner 2008
Value chain
• Support activities add value1. By themselves or2. Through important relationships with primary
and other support activities– Procurement, technology development, human – Procurement, technology development, human
resource management, general administration
S V Horner 2008
Inbound logistics
• Receiving, storing, and distributing (within the firm) product inputs
• Materials handling, warehousing, inventory control, vehicle scheduling, returns to supplierssuppliers
S V Horner 2008
Operations
• Transforming inputs into final form• Machining, packaging, assembly, testing,
printing, facility operations
S V Horner 2008
Outbound logistics
• Collecting, storing, and distributing product or service to buyers
• Finished goods, warehousing, material handling, delivery vehicle operation, order processing, schedulingprocessing, scheduling
S V Horner 2008
Marketing and sales
• Purchases of products and services by end users, sales activities by firm members, and inducements to influence the purchases
S V Horner 2008
Service
• Providing service to enhance or maintain product value
• Installation, repair, training, parts supply, product adjustment
S V Horner 2008
Procurement
• All activities related to the arrangement for purchasing (not handling) inputs used in the firm’s value chain
S V Horner 2008
Technology development
• Knowledge, techniques, processes, procedures, and methods used at various stages of the value chain
S V Horner 2008
Human resource management
• Recruiting, hiring, training, development, and compensation of all types of personnel
• Supports both individual primary and support activities and entire value chain
S V Horner 2008
General administration
• General management, planning, finance, accounting, legal and government affairs, quality management, information systems
• Typically supports entire value chain rather than individual activitiesthan individual activities
S V Horner 2008
Interrelationships of the value chain
• Interrelationships exist among value chain activities within and across organizations
• Interrelationships with the firm• Relationships among activities within the firm
and with other organizations (e.g., customers and with other organizations (e.g., customers and suppliers) that are part of the firm’s expanded value chain
S V Horner 2008
Value chain and service organizations
• Service firms also have operations activities
– Accounting firms: convert records of transactions (inputs) into financial records
– Travel agency: creates itinerary including transportation, accommodations, and activities customized to one’s accommodations, and activities customized to one’s budget and travel dates
S V Horner 2008
The value network
• The value network is the set of organisational links and relationships that are necessary to create a product or service.
• Organisations needs to be clear about what • Organisations needs to be clear about what activities it ought to undertake itself and which it should not and, perhaps, should outsource.
The value network
Four key issues about the value network
1. Which activities are centrally important to an organisation’s strategic capability and which are less central?
2. Where are the profit pools? Profit pools refers to the different levels of profit available at diferent parts of the value network.
3. To ‘make or buy’ decision for a particular activity or component is 3. To ‘make or buy’ decision for a particular activity or component is therefore critical. This is the outsourcing decision.
4. Partnering. Who might be the best partners int the parts of the value network and what type of relationships are important to develop with each partner?
Activity map
• An activity map tries to show how different activities of an organisation are linked together.
• The aim of activity map is to:• The aim of activity map is to:– Identify the critical success factors– Which of these activities outperform competition
Activity map
Benchmarking
Benchmarking is a systematic process that allows to connect the definition of strategies with the analysis of the industry and competition. It is a method that allows you to:
1) Measure the results of best-in-class’ competitors with respect to the key success factors in the industry. 2) Determine how the best-in-class achieve those results. 3) Use this results as a basis for setting goals and strategies and deploy 3) Use this results as a basis for setting goals and strategies and deploy them in the company.
A rigorous process of benchmarking will ensure that business strategy will provide a superior competitive position regards competition based on the key success factors.
SWOT
• SWOT summarises the key issues from the business environment and the strategic capability of an organisation that are most likely to impact on strategy development.
• The aim is to identify the extent to which strenghts and weaknesses are relevant to, or capable to of dealing with the weaknesses are relevant to, or capable to of dealing with the changes taking place in the business environment.
• A SWOT analysis should help focus discussion on future choices and the extent to which an organisation is capable of supporting theses stratategies.
SWOT Analysis framework
Strenghts
• A firm’s strenghts are its resources and capabilities that can be used as a basis for developing a competitive advantage: Example of such strenghts include:– Patents– Strong brand names– Strong brand names– Good reputation among customers– Cost advantages from propietary know-how– Exclusive access to high grade natural resources– Favorable access to distribution networks
Weaknesses
• The absecence of certain strenghts may be viewed as a weaknesses:
– Lack of patents– Weak brand name and reputation– High cost structure– High cost structure– Lack of access to channels of distribution
• In some cases, a strenght for a company (large amount of manufacturing capacity) can act as the opposite (inflexible to adapt quickly to changes)
Opportunities
• The external environment may reveal new opportunitties for profit and gowth:
– Unfullfiled customer need– Arrival of new technologies– Arrival of new technologies– Loosening of regulations– Removal of international trade barriers
Threats
• Changes in the environment also may present threats to the firm:
– Shifts in consumers tastes away from the firm’s product– Emergence of substitute products– Emergence of substitute products– New regulations– Increased trade barriers
The SWOT/TOWS Matrix
S-O strategies pursue opportunities that are a good fit to the company’s stregnthsW-O strategies overcome weakness to pursue opportunitiesS-T strategies identify ways that the firm can use its strenghts to reduce its vulnerability to external threatsW-T strategies establish a defensive plan to prevent the firm’s weaknesses from making it highly susceptible to external threats.