Chapter 3

Chapter 3 - Chapter 3 The Internal Organization Resources...

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Chapter 3 The Internal Organization: Resources, Capabilities, Core Competencies and Competitive Advantages ANALYZING THE INTERNAL ORGANIZATION The Context of Internal Analysis In the global economy, traditional factors such as labor costs, access to financial resources and raw materials, and protected or regulated markets continue to be sources of competitive advantage, but to a lesser degree (mostly because the advantages created by these more traditional sources can be overcome by competitors through an international strategy and by the flow of resources throughout the global economy). Increasingly, those analyzing their firm’s internal environment should use a global mind-set (i.e., the ability to study an internal environment in ways that are not dependent on the assumptions of a single country, culture, or context). Analysis of the firm’s internal environment requires that evaluators examine the firm’s portfolio of resources and the bundles of heterogeneous resources and capabilities managers have created. Understanding how to leverage the firm’s unique bundle of resources and capabilities is a key outcome decision makers seek when analyzing the internal environment. By using or exploiting their core competencies, firms are in a position to develop and perform value-creating strategies better than their competitors or to create and perform value-creating strategies that competitors either are unable or unwilling to imitate. Note: Value represents a concept of the relationship between a product's features (such as quality) and its price relative to those offered by competitors. As will be discussed in Chapter 4, value can be provided by low cost, high differentiation of product features, or a combination of low cost and differentiated features. Note: The importance of a firm's internal characteristics—represented by its resources and capabilities—highlights a shift in the priorities and prescriptions of strategic management research. The field has evolved or developed from a position that understanding industry characteristics and then positioning the firm to take advantage of industry characteristics relative to competitors was of primary importance to recognizing that it is a firm's resources and capabilities (which represent sources of core competencies) that should serve as the foundation for firm strategy. This shift recognizes that industry attractiveness is not dependent only on industry characteristics. Industry attractiveness is ultimately determined by both industry characteristics (which can be translated into opportunities and threats) or what a firm might do and its internal strengths (its resources, capabilities, and core competencies) which determine what a firm is capable of doing to take advantage of (or exploit) external opportunities. Creating Value
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This note was uploaded on 04/01/2012 for the course MGT 4476 taught by Professor Marthabrowski during the Spring '10 term at Troy.

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Chapter 3 - Chapter 3 The Internal Organization Resources...

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