Value chain

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  1. 1. Ch3 The Internal Environment:The Internal Environment: Resources, Capabilities andResources, Capabilities and Core CompetenciesCore Competencies www.aashrayforeveryone.org
  2. 2. Ch3 Chapter 2 External Environment What the Firm Might Do Chapter 3 Internal Environment What the Firm Can Do SustainableSustainable CompetitiveCompetitive AdvantageAdvantage
  3. 3. Ch3 SWOT Analysis Strengths Weaknesses Opportunities Threats
  4. 4. Ch3 The purpose of SWOT Analysis It is an easy-to-use tool for developing an overview of a companys strategic situation It forms a basis for matching your companys strategy to its situation
  5. 5. Ch3 Strengths A STRENGTH is something a company is good at doing or a characteristic that gives it an important capability. Possible Strengths: Name recognition Proprietary technology Cost advantages Skilled employees Loyal Customers
  6. 6. Ch3 Weaknesses A WEAKNESS is something a company lacks or does poorly (in comparison to others) or a condition that places it at a disadvantage Possible Weaknesses: Poor market image Obsolete facilities Internal operating problems Poor marketing skills
  7. 7. Ch3 Strengths and Weakness form a basis for INTERNAL analysis By examining strengths, you can discover untapped potential or identify distinct competencies that helped you succeed in the past. By examining weaknesses, you can identify gaps in performance, vulnerabilities, and erroneous assumptions about existing strategies.
  8. 8. Ch3 Resources * Tangible * Intangible Capabilities Teams of Resources Sources of Core Competencies Competitive Advantage Strategic Competitiveness Above-Average Returns Competitive Advantage Gained through Core Competencies Discovering Core Competencies Discovering Core Competencies Criteria of Sustainable Advantages Value Chain Analysis Valuable Rare Costly to Imitate Nonsubstitutable * * * * * Outsource
  9. 9. Ch3 How do we assembleHow do we assemble bundlesbundles of Resources,of Resources, Capabilities and Core Competencies to createCapabilities and Core Competencies to create VALUEVALUE for customers?for customers? Will environmental changes make our coreWill environmental changes make our core competencies obsolete?competencies obsolete? And...And... Are substitutes available for our coreAre substitutes available for our core competencies?competencies? Are our core competencies easily imitated?Are our core competencies easily imitated? Key Questions for Managers in Internal Analysis
  10. 10. Ch3- Resources * Tangible * Intangible Discovering Core Competencies
  11. 11. Ch3- What a firm has to work with:What a firm has to work with: itsits assetsassets, including its, including its peoplepeople andand the value of itsthe value of its brand namebrand name What a firmWhat a firm HasHas......Resources
  12. 12. Ch3- Resources representResources represent inputs into ainputs into a firms production processfirms production process...... such as capital equipment, skills ofsuch as capital equipment, skills of employees, brand names, financesemployees, brand names, finances and talented managersand talented managers What a firmWhat a firm HasHas...... What a firm has to work with:What a firm has to work with: its assets, including its peopleits assets, including its people and the value of its brand nameand the value of its brand name Resources
  13. 13. Ch3- What a firm has to work with:What a firm has to work with: its assets, including its peopleits assets, including its people and the value of its brand nameand the value of its brand name Resources represent inputs into aResources represent inputs into a firms production process...firms production process... such as capital equipment, skillssuch as capital equipment, skills of employees, brand names,of employees, brand names, finances and talented managersfinances and talented managers Some genius invented the Oreo. Were justSome genius invented the Oreo. Were just living off the inheritance.living off the inheritance. F. Ross Johnson,F. Ross Johnson, Former President & CEO,Former President & CEO, RJR NabiscoRJR Nabisco What a firmWhat a firm HasHas......Resources
  14. 14. Ch3- Tangible Resources Financial* Physical* Human Resources* Organizational* What a firm Has... What a firm has to work with: its assets, including its people and the value of its brand name Resources represent inputs into a firms production process... such as capital equipment, skills of employees, brand names, finances and talented managers Intangible Resources Technological* Innovation* Reputation* Some genius invented the Oreo. Were just living off the inheritance. F. Ross Johnson, Former President & CEO, RJR Nabisco Resources
  15. 15. Ch3- Resources * Tangible * Intangible Capabilities Teams of Resources Discovering Core Competencies
  16. 16. Ch3- What a firm Does... Capabilities represent:Capabilities represent: the firms capacity or ability tothe firms capacity or ability to integrateintegrate individual firm resourcesindividual firm resources to achieve a desiredto achieve a desired objective.objective. Capabilities
  17. 17. Ch3- What a firm Does... Capabilities develop over time as a result of complex interactions that take advantage of the interrelationships between a firms tangible and intangible resources that are based on the development, transmission and exchange or sharing of information and knowledge as carried out by the firm's employees. Capabilities represent: the firms capacity or ability to integrate individual firm resources to achieve a desired objective. Capabilities
  18. 18. Ch3- What a firm Does... Capabilities represent: the firms capacity or ability to integrate individual firm resources to achieve a desired objective. Capabilities develop over time as a result of complex interactions that take advantage of the interrelationships between a firms tangible and intangible resources that are based on the development, transmission and exchange or sharing of information and knowledge as carried out by the firm's employees. Capabilities become important when they are combinedCapabilities become important when they are combined inin unique combinationsunique combinations which create core competencieswhich create core competencies which havewhich have strategic valuestrategic value and can lead toand can lead to competitivecompetitive advantageadvantage.. Capabilities
  19. 19. Ch3- Resources * Tangible * Intangible Capabilities Teams of Resources Discovering Core Competencies Sources of Core Competencies Competitive Advantage Discovering Core Competencies
  20. 20. Ch3- What a firm Does... that is Strategically Valuable are the essence of what makes an organizationare the essence of what makes an organization unique in its ability to provide value tounique in its ability to provide value to customers.customers. Leonard-Barton, Bowen, Clark, Holloway & WheelwrightLeonard-Barton, Bowen, Clark, Holloway & Wheelwright McKinsey & Co. recommends identifying three to fourMcKinsey & Co. recommends identifying three to four competencies to use in framing strategic actions.competencies to use in framing strategic actions. Core Competencies
  21. 21. Ch3- Resources * Tangible * Intangible Capabilities Teams of Resources Sources of Core Competencies Competitive Advantage Discovering Core Competencies Criteria of Sustainable Advantages Valuable Rare Costly to Imitate Nonsubstitutable * * * * Discovering Core Competencies * Outsource
  22. 22. Ch3- For a strategic capability to be aFor a strategic capability to be a Core Competency, it must be:Core Competency, it must be: Core Competencies Valuable Rare Costly to Imitate Nonsubstitutable What a firm Does... that is Strategically Valuable
  23. 23. Ch3- Core Competencies must be: Nonsubstitutable Capabilities that do not have strategic equivalents, such as firm- specific knowledge or trust-based relationships What a firm Does... that is Strategically Valuable Core Competencies Valuable Rare Costly to Imitate Capabilities that other firms cannot develop easily, usually due to unique historical conditions, causal ambiguity or social complexity Capabilities that are possessed by few, if any, current or potential competitors Capabilities that either help a firm to exploit opportunities to create value for customers or to neutralize threats in the environment
  24. 24. Ch3- Resources * Tangible * Intangible Capabilities Teams of Resources Sources of Core Competencies Competitive Advantage Discovering Core Competencies Value Chain Analysis * Outsource Valuable Rare Costly to Imitate Nonsubstitutable * * * * Criteria of Sustainable Advantages Discovering Core Competencies
  25. 25. Ch3- Support Activities Primary Activities Value Chain Analysis Identifying Resources and Capabilities That Can Add Value
  26. 26. Ch3- Support Activities Primary Activities InboundInbound LogisticsLogistics Value Chain Analysis Identifying Resources and Capabilities That Can Add Value
  27. 27. Ch3- Support Activities Primary Activities InboundInbound LogisticsLogistics OperationsOperations Value Chain Analysis Identifying Resources and Capabilities That Can Add Value
  28. 28. Ch3- Support Activities Primary Activities InboundInbound LogisticsLogistics OperationsOperations OutboundOutbound LogisticsLogistics Value Chain Analysis Identifying Resources and Capabilities That Can Add Value
  29. 29. Ch3- Support Activities Primary Activities InboundInbound LogisticsLogistics OperationsOperations OutboundOutbound LogisticsLogistics MarketingMarketing &Sales&Sales Value Chain Analysis Identifying Resources and Capabilities That Can Add Value
  30. 30. Ch3- Support Activities Primary Activities InboundInbound LogisticsLogistics OperationsOperati