03 internal env

8/8/2019 03 Internal Env

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The Internal Environment

Resources, Capabilities, Core

Competencies


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Chapter 5Bus. - Level

Strategy

Chapter 6

CompetitiveDynamics

Chapter 7

Corp. - LevelStrategy

Chapter 9International

Strategy

Chapter 10CooperativeStrategies

Chapter 8

Acquisitions &Restructuring

Chapter 11

CorporateGovernance

Chapter 12

Structure& Control

Chapter 13

StrategicLeadership

Chapter 14Entrepreneurship& Innovation

Strategic

Inputs

StrategicA

ctions

Strategic

Outcomes

Chapter 4InternalEnvironment

Chapter 3External

Environment Strat. Intent

Strat. Mission

TheStrategic .Management .

Process

Strategy Formulation Strategy Implementation

StrategicCompetitiveness

Chapter 1 Feedback

Above AverageReturns

Chapter 2

Above AverageReturns

Chapter 2

Chapter 3External

Environment

Chapter 4InternalEnvironment


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The Resource-Based model of Above Average Returns

Capabilities evolve and must be managed dynamically inpursuit of above-average returns.

Firms acquire different resources and develop uniquecapabilities. These resources may not be mobile acrossfirms and that the differences in resources are the basis ofcompetitive advantage.

The resource based view suggests that a firms uniqueresources and capabilities provide the basis for a strategy.


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The Resource-BasedModel of Superior

Returns

Identify firm resources.Study strengths &weaknesses relative torivals.

Resources

Inputs to a firmsproductionprocess.

an

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The Resource-BasedModel of

Superior Returns

Determine what firmcapabilities allow it todobetter than rivals.Resources

Inputs to a firmsproduction process.

Capability

Capacity for integratedset of resources tointegratively perform atask or activity.

an

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Superior Returns

Determine how firmsresources & capabilitiesmay create competitiveadvantage.

Resources


Capability

Capacity for anintegrated set ofresources tointegratively performa task or activity.

Competitive

Advantage

Ability of a firm tooutperform its rivals

an

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Superior Returns

Locate an attractiveindustry.

Resources


Capability

Capacity for anintegrated set ofresources tointegratively performa task or activity.

Competitive

Advantage


An AttractiveIndustry

Location of an industrywith opportunities thatcan be exploited by

firms resources &capabilities

an

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Superior Returns

Select strategy that bestexploits res.& capabilitiesrelative to opportunitiesin environments.

Resources


Capability

Capacity for anintegrated set ofresources tointegratively perform atask or activity.

Competitive

Advantage



Location of an ind.with opportunitiesthat can be exploited

by firms resources& capabilities

StrategyFormulation andImplementation

Strategic actions takento earn above-averagereturns

an

*


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The Resource-BasedModel of Superior

Returns

Resources


Capability

Capacity for anintegrated set ofresources tointegratively perform atask or activity.

Competitive

Advantage



Location of an ind.with opportunitiesthat can be exploited

by firms resources& capabilities

Maintain selected strat.in order to outperformindustry rivals.

StrategyFormulation andImplementation

Strategic actions takento earn above-averagereturns

SuperiorReturnsEarning of above-

average returns

an

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Criteria of

Sustainable

Advantages

Value

Chain

Analysis

Valuable RareCostly to Imitate

Organized to be exploited

* *

*

*

Outsource*

Discovering Core

Competencies


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Resources, Capabilities & Core Competencies


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Discovering Core

Competencies


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Discovering Core

Competencies


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Discovering Core

Competencies

Criteria of

Sustainable

Advantages



* **

*

Outsource*


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Core Competencies For a strategiccapability to be a Core Competency, it must be:

Organizedto

be

The firm must be organized appropriately toobtain full benefits of the resources in order torealize a competitive advantage.

Rare Possessed by few, if any, current and

potential competitors.

Valuable Allow a firm to neutralize threats or exploitopportunities in its external environment.

Costly to

ImitateWhen other firms either cannot obtain themor must obtain them at a much higher cost.$

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Core Competencies

Resources Inputs to a firmsproduction process

Core Competence A strategic capability

The source of

Does the capabilitysatisfy the criteria of

sustainable competitiveadvantage?

YES

NO

Capability A non-strategic teamof resources

Capability Integration of a

team of resources


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YES NO YESYESTemporary

CompetitiveAdvantage

Avg./AboveAverageReturns

YES NO NO YESCompetitive

ParityAverageReturns

NO NO NO NOBelow

AverageReturns

CompetitiveDisadvantage

AboveAverageReturns

YES YESYESSustainableCompetitiveAdvantage

YES

Valuable RareCostly toImitate

Org. to beExploited

CompetitiveConsequences

PerformanceImplications

Valuable

The VRIO Framework


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ValueChain

Analysis

Discovering Core

Competencies

Criteria of

Sustainable

Advantages



* **

*

Outsource*


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SupportActivities

Primary Activities

In

bound

Lo

gistics

Ope

rations

Ou

tbound

Lo

gistics

Ma

rketing

&

Sales

Procurement

Technological Development

Human Resource ManagementFirm Infrastructure

Service

M

ARGIN

MARGIN

Value Chain Analysis


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Primary Activities

Outsourcing Strategic choice to purchase someactivities from outside suppliers

SupportActivities

In

bound

Lo

gistics

Operations

Ou

tbound

Lo

gistics

Ma

rketing

&

Sales

Procurement



Service

M

ARGIN

MARGIN

Firms often buy a portion of their value-creating activities from specialtyexternal suppliers who can perform these functionsmore efficiently.


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Outsourcing Strategic choice to purchase someactivities from outside suppliers

SupportActivities

In

bound

Lo

gistics

Ope

rations

Ou

tbound

Lo

gistics

Ma

rketing

&

Sales

Procurement



Service

MAR

GIN

MAR

GIN

InboundLogistics

OperationsOutboundLogistics

Service

Marketing

& Sales

TechnologicalDevelopment

Human Resource Management

Procurement

Firms often buy a portion of their value-creating activities from specialtyexternal suppliers who can perform these functions more efficiently.


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Never take for granted that core competencieswill continue to provide a source of competitiveadvantage.

All core competencies have the potential tobecomeCore Rigidities.

Core Rigidities

They are former core competencies that sow

the seeds of organizational inertia.Prevent the firm from responding appropriately tochanges in the external environment.

Core Competencies--Cautions and Reminders


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Criteria of

Sustainable

Advantages

Value

Chain

Analysis



* **

*

Outsource*

Discovering Core

Competencies


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The Internal Environment: Resources,

Capabilities and Core Competencies

Knowledge Objectives:

1. Explain the need for firms to study & understand

their internal environment.2. Define value & discuss its importance.

3. Describe the differences between tangible &intangible resources.

4. Define capabilities & discuss how they aredeveloped.


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The Internal Environment: Resources,

Capabilities and Core CompetenciesKnowledge objectives continued

5. Describe four criteria used to determine whetherresources & capabilities are core competencies.

6. Explain how value chain analysis is used to identifyand evaluate resources and capabilities.

7. Define outsourcing & discuss the reasons for its use.

8. Discuss the importance of preventing core

competencies from becoming core rigidities.

03 internal env

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