1、,Chapter 3,The internal environment: Resources, capabilities and core competencies,Copyright 2011 Cengage Learning Pty Limited,Knowledge objectives,1 explain the need for firms to study and understand the internal environment 2 define value and discuss its importance 3 describe the differences betwe
2、en tangible and intangible resources 4 define capabilities and discuss how they are developed,Copyright 2011 Cengage Learning Pty Limited,Knowledge objectives,5 describe four criteria used to determine whether resources and capabilities are core competencies 6 explain how value chain analysis is use
3、d to identify and evaluate resources and capabilities 7 define outsourcing and discuss the reasons for its use.,Copyright 2011 Cengage Learning Pty Limited,The context of internal environment,Sustainable competitive advantage can be achieved: when a firm has the ability to undertake value-creating a
4、ctivities when a firm use its unique resources, capabilities to create new core competencies the sustainability of a competitive advantage is a function of three factors: managing portfolio resources leveraging the firms unique resources and capabilities to create strategic competitiveness ensuring
5、a global mindset.,Copyright 2011 Cengage Learning Pty Limited,Components of internal analysis,Copyright 2011 Cengage Learning Pty Limited,Creating value,Definition value is measured by a products performance characteristics and by its attributes value is in the form of goods or services for which cu
6、stomers are willing to pay it needs to be provided by competing firms creating value for customers is the source of above-average returns.,Copyright 2011 Cengage Learning Pty Limited,Creating value (cont.),Definition (cont.) a firms ability to bundle and leverage its resources and capabilities is th
7、e source of above-average returns a firms competencies in creating value can drive the selection of strategies.,Copyright 2011 Cengage Learning Pty Limited,The challenge of internal analysis,Managers strategic decisions about resources, capabilities and core competencies are non-routine and have eth
8、ical and competitive implications. Managers must have: courage self-confidence integrity the capacity to deal with uncertainty and complexity willingness to hold themselves and other people accountable for their work.,Copyright 2011 Cengage Learning Pty Limited,The challenge of internal analysis (co
9、nt.),Managers should have the intangible knowledge to face uncertainty in terms of: new proprietary technologies rapidly changing economic and political trends transformation in social values shifts in customer demands.,Copyright 2011 Cengage Learning Pty Limited,Conditions affecting strategic manag
10、erial decisions,Copyright 2011 Cengage Learning Pty Limited,Tangible resources,Copyright 2011 Cengage Learning Pty Limited,Intangible resources,Copyright 2011 Cengage Learning Pty Limited,Resources, capabilities and core competencies,Resources are inputs into a firms production process are the sourc
11、e of a firms capability cover a spectrum of individual, social and organisational phenomena. Typically, resources alone do not yield a competitive advantage. Competitive advantage is created through the unique bundling of resources.,Copyright 2011 Cengage Learning Pty Limited,Resources, capabilities
12、 and core competencies (cont.),Capabilities are the firms capacity to deploy resources that have been purposely integrated to achieve a desired end state are often based on developing, carrying and exchanging information and knowledge through the firms human capital are often developed in specific f
13、unctional areas, such as R&D and marketing.,Copyright 2011 Cengage Learning Pty Limited,Resources, capabilities and core competencies (cont.),Core competencies are capabilities that serve as a source of competitive advantage for a firm over its rivals distinguish the firm competitively and give it a
14、 unique identity emerge over time through an organisational process of accumulating and learning how to deploy different resources and capabilities.,Copyright 2011 Cengage Learning Pty Limited,Building core competencies,Every core competency is a capability, but not every capability is a core compet
15、ency. A capability becomes a core competency only when it is: valuable and non-substitutable for customersand unique (rare) and inimitable (costly-to-imitate) for competitors.,Copyright 2011 Cengage Learning Pty Limited,The four criteria of sustainable competitive advantage,Copyright 2011 Cengage Le
16、arning Pty Limited,Outcomes from combinations of the criteria for sustainable competitive advantage,Copyright 2011 Cengage Learning Pty Limited,Value chain analysis,Value chain analysis allows the firm to understand the parts of its operations that create value and those that do not. It helps manage
17、rs to understand a firms cost position. The value chain is segmented into primary and support activities.,Copyright 2011 Cengage Learning Pty Limited,Value chain analysis (cont.),Primary activities are involved with a products physical creation, its sale and distribution to buyers, and its service a
18、fter sale. Support activities provide the support necessary for the primary activities to take place.,Copyright 2011 Cengage Learning Pty Limited,The basic value chain,Copyright 2011 Cengage Learning Pty Limited,The value-creating potential of primary activities,Inbound logistics activities, such as
19、 materials handling, warehousing and inventory control, used to receive, store and disseminate inputs to a product. Operations activities necessary to convert the inputs provided by inbound logistics into final product form machining, packaging, assembly and equipment maintenance are examples of ope
20、rations activities.,Copyright 2011 Cengage Learning Pty Limited,The value-creating potential of primary activities (cont.),Outbound logistics activities involved with collecting, storing and physically distributing the final product to customers examples of these activities include finished-goods wa
21、rehousing, materials handling and order processing.,Copyright 2011 Cengage Learning Pty Limited,The value-creating potential of primary activities (cont.),Marketing and sales activities completed to provide means through which customers can purchase products and to induce them to do so to market and
22、 sell products effectively, firms develop advertising and promotional campaigns, select appropriate distribution channels, and select, develop and support their sales force.,Copyright 2011 Cengage Learning Pty Limited,The value-creating potential of primary activities (cont.),Service activities desi
23、gned to enhance or maintain a products value firms engage in a range of service-related activities, including installation, repair, training and adjustment. Each activity should be examined relative to competitors abilities. Accordingly, firms rate each activity as superior, equivalent or inferior.,
24、Copyright 2011 Cengage Learning Pty Limited,Examining the value-creating potential of support activities,Procurement activities needed to purchase the inputs to produce a firms products. Technological development activities performed to improve a firms product and the processes technological develop
25、ment takes many forms, such as process equipment, basic research and product design, and servicing procedures.,Copyright 2011 Cengage Learning Pty Limited,The value-creating potential of support activities,Human resource management activities involved with recruiting, hiring, training, developing an
26、d compensating personnel. Firm infrastructure activities such as general management, planning, finance, accounting, legal support and governmental relations, which are required to support the work of the entire value chain through its infrastructure, the firm consistently identifies external opportu
27、nities and threats, assesses resources and capabilities, and supports core competencies.,Copyright 2011 Cengage Learning Pty Limited,Outsourcing,Outsourcing is the purchase of a value-creating activity from an external supplier. A firm cannot possess the resources and capabilities it requires to ach
28、ieve competitive superiority. By outsourcing non-core functions a firm can concentrate on those areas in which it can create value specialty suppliers can perform outsourced capabilities more efficiently.,Copyright 2011 Cengage Learning Pty Limited,Reasons for outsourcing,The main reason for outsour
29、cing is that few firms possess the resources and capabilities to achieve competitive superiority in all primary and support activities. When outsourcing, a firm seeks the greatest value from another firm. Preferably the supplier has core competency in the primary or support activities outsourced.,Co
30、pyright 2011 Cengage Learning Pty Limited,Reasons for outsourcing (cont.),Outsourcing can provide access to world- class capabilities and accelerate business re-engineering benefits. Outsourcing may improve the business focus, share risks, increase flexibility and free resources for use in the firms
31、 core activities.,Copyright 2011 Cengage Learning Pty Limited,Outsourced activity,Outsourcing decisions,A firm may outsource all or only part of one or more primary and/or support activities.,Copyright 2011 Cengage Learning Pty Limited,Outsourcing issues,Firms must be careful not to outsource: activ
32、ities with which they can create and capture value capabilities that are critical to their success (e.g., some of their non-strategic teams of resources) in ways that damage the firms integrated knowledge base in ways that unintentionally damage the firms potential to continuously evaluate its key a
33、ssumptions, learn and create new capabilities and core competencies.,Copyright 2011 Cengage Learning Pty Limited,Competencies, strengths, weaknesses and strategic decisions,Core competencies, unlike physical assets, tend to become more valuable through additional use. Core competencies are largely k
34、nowledge-based. Core rigidities generate inertia and stifle innovation. Strategic myopia and inflexibility on the part of the firms managers eventually will result in core rigidities.,Copyright 2011 Cengage Learning Pty Limited,Competencies, strengths, weaknesses and strategic decisions (cont.),Stra
35、tegic intent is the leveraging of a firms resources, capabilities and core competencies to accomplish the firms goals in the competitive environment. The strategic mission is a statement of the firms unique purpose and the scope of its operations in product and market terms. With the intent and mission formed, the firm is prepared to choose strategies to pursue strategic competitiveness and above-average returns.,Copyright 2011 Cengage Learning Pty Limited,
