The Internal Organization

The Internal Organization - The Internal Organization:...

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Unformatted text preview: The Internal Organization: Resources, Capabilities, and Core Competence 1 External and Internal Analyses Environment Sociocultural Ge n De mo eral gra phi c Industry Environment By studying the external environment, firms identify what they might choose to do Opportunities and threats Competitor Environment Technological General Po l iti c al En / Le v ir g on me al nt a all ner ner c Ge Ge omiic nm ono Eco Ec ball t oba ent Go Gll nmen m o on vr viir En En 2 External and Internal Analyses By studying the internal environment, firms identify what they can do Unique resources, capabilities, and core competencies (sustainable competitive advantage) 3 Value Creation V-P V P C C P-C V=Value to Consumer P=Price C=Costs of Production V-P=Consumer Surplus P-C=Profit Margin 4 Components of Internal Analysis Core Competencies Capabilities Resources • Tangible • Intangible • • • • Four Criteria of Sustainable Advantages Valuable Rare Costly to Imitate Nonsubstitutable Value Creation Competitive Advantage Discovering Core Competencies Value Chain Analysis • Outsource 5 Challenge of Internal Analysis How do we effectively manage current core competencies while simultaneously developing new ones? How do we assemble bundles of resources, capabilities and core competencies to create value for customers? How do we learn to change rapidly? 6 Conditions Affecting Managerial Decisions About Resources, Capabilities, and Core Competencies Uncertainty regarding characteristics of the general and the industry environments, competitors’ actions, and customers’ preferences Complexity regarding the interrelated causes shaping a firm’s environments and perceptions of the environments Intraorganizational Conflicts among people making managerial decisions and those affected by them 7 Discovering Core Competencies Resources • Tangible • Intangible Resources are what a firm has to work with--its assets-including its people and the value of its brand name Resources represent inputs into a firm’s production process... such as capital equipment, skills of employees, brand names, finances and talented managers 8 Discovering Core Competencies Resources • Tangible • Intangible Tangible Resources • Financial • Organizational • Physical • Technological Intangible Resources • Human • Innovation • Reputation 9 Discovering Core Competencies Capabilities Capabilities become important when they are combined in unique combinations which create core competencies which have strategic value and can lead to competitive advantage 10 11 12 Discovering Core Competencies Capabilities Capabilities are what a firm does, and represent the firm’s capacity to deploy resources that have been purposely integrated to achieve a desired end state 13 Discovering Core Competencies Core Competencies Core competencies are resources and capabilities that serve as a source of competitive advantage over rivals Core competencies distinguish a company competitively and make it distinctive McKinsey and Co. recommends using three to four competencies when framing strategic actions 14 Discovering Core Competencies Four Criteria of Sustainable Advantages • • • • Valuable Rare Costly to Imitate Nonsubstitutable Valuable: Capabilities that help a firm neutralize threats or exploit opportunities 15 Discovering Core Competencies Four Criteria of Sustainable Advantages • • • • Valuable Rare Costly to Imitate Nonsubstitutable Rare: Capabilities that are not possessed by many others 16 Discovering Core Competencies Four Criteria of Sustainable Advantages • • • • Valuable Rare Costly to Imitate Nonsubstitutable Costly to imitate: capabilities that other firms cannot develop easily, usually due to • Unique historical conditions • Causal ambiguity • Social complexity 17 Discovering Core Competencies Four Criteria of Sustainable Advantages • • • • Valuable Rare Costly to Imitate Nonsubstitutable Nonsubstitutable: capabilities that do not have strategic equivalents • Invisible to competitors • Firm specific knowledge • Trust-based working relationships between managers and nonmanagerial personnel 18 Distinctive Competencies, Resources, and Capabilities The Role of Luck 19 Sustainability of a Competitive Advantage Sustainability of a competitive advantage is a function of: the rate of core­competence obsolescence due to environmental changes the availability of substitutes for the core competence the imitability of the core competence 20 The Basic Value Chain M gin ar M ar gin Human Resource Mgmt. Technological Development Firm Infrastructure Support Activities Service Procurement Marketing & Sales Outbound Logistics Operations Inbound Logistics Primary Activities 21 Outsourcing Outsourcing is the Outsourcing purchase of some or all of a valueor creating activity creating from an external supplier supplier Usually this is Usually because the specialty supplier can provide these functions more efficiently efficiently in rg a M Human Resource Mgmt. Technological Development M ar g in Support Activities Firm Infrastructure Service Procurement Marketing & Sales Outbound Logistics Operations Inbound Logistics Primary Activities 22 Strategic Rationales for Outsourcing Improve Business Focus Provide Access to World­Class Capabilities lets company focus on broader business issues by having outside experts handle various operational details the specialized resources of outsourcing providers makes world­class capabilities available to firms in a wide range of applications 23 Strategic Rationales for Outsourcing Accelerate Business Re­Engineering Benefits Share Risks achieves re­engineering benefits more quickly by having outsiders­­who have already achieved world­class standards­­take over process reduces investment requirements and makes firm more flexible, dynamic and better able to adapt to changing opportunities 24 Strategic Rationales for Outsourcing Free Resources for Other Purposes permits firm to redirect efforts from non­core activities toward those that serve customers more effectively 25 Outsourcing Issues Greatest Value Evaluating Resources and Capabilities outsource only to firms possessing a core competence in terms of performing the primary or support activity being outsourced don’t outsource activities in which the firm itself can create and capture value Environmental Threats and Ongoing Tasks do not outsource primary and support activities that are used to neutralize environmental threats or complete necessary ongoing organizational tasks 26 Outsourcing Issues Nonstrategic Team of Resources Firm’s Knowledge Base do not outsource capabilities that are critical to their success, even though the capabilities are not actual sources of competitive advantage do not outsource activities that stimulate the development of new capabilities and competencies 27 Core Competencies: Cautions and Reminders Never take for granted that core competencies will continue to provide a source of competitive advantage All core competencies have the potential to become core rigidities Core rigidities are former core competencies that now generate inertia and stifle innovation 28 Why Do Companies Fail? Inertia 29 Why Do Companies Fail? Inertia Prior Strategic Commitments 30 Why Do Companies Fail? The Icarus Paradox 31 ...
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This note was uploaded on 12/21/2010 for the course BUSA 5336 taught by Professor Jeff during the Summer '09 term at UT Arlington.

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