Chapter 3: The Internal Environment 3-1 Chapter 3: The Internal Organization-Resources, Capabilities, Core Competencies and Competitive Advantages KNOWLEDGE OBJECTIVES 1. Explain why firms need to study and understand their internal organization. 2. Define value and discuss its importance. 3. Describe the differences between tangible and intangible resources. 4. Define capabilities and discuss how their development. 5. Describe four criteria used to determine whether resources and capabilities are core competencies. 6. Explain how value-chain analysis is used to identify and evaluate resources and capabilities. 7. Define outsourcing and discuss reasons for its use. 8. Discuss the importance of identifying internal strengths and weaknesses. 1 Explain the need for organizations to study and understand their internal organization. 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. FIGURE 3.1 Components of Internal Analysis Leading to Competitive Advantage and Strategic Competitiveness. As illustrated in Figure 3.1 , a firm's tangible and intangible resources (for example, its facilities and corporate culture, respectively) represent sources of capabilities these capabilities (teams or bundles of resources) represent sources of core competencies when exploited and nurtured (and valuable, costly to imitate, rare, and non-substitutable), core competencies are potential sources of competitive advantage if a firm is able to use its core competencies to achieve a competitive advantage, it will achieve strategic competitiveness and earn above-average returns so long as competitors are unable or unwilling to imitate them successfully 2 Define value and discuss its importance.
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- Summer '12
- Business, Internal Organization, Sustainable Strategic Capabilities