Chapter 3 The Internal Environment: Resources, Capabilities, and Core Competencies Hitt, Ireland,...

Chapter 3

The Internal Environment: Resources, Capabilities, and Core Competencies

Hitt, Ireland, and Hoskisson

Copyright © 2008 Cengage

The Context of Internal Analysis Global Economy

Traditional sources of advantages can be overcome by competitors’ international strategies and by the flow of resources throughout the global economy.

Global Mind-Set The ability to study an internal environment in ways that are

not dependent on the assumptions of a single country, culture, or context.

Analysis Outcome Understanding how to leverage the firm’s bundle of

heterogeneous resources and capabilities.


Components of internal analysis leading to competitive advantage and strategic competitiveness

Figure 3.1


Resources, capabilities, core competencies A firm’s resources, capabilities, and core

competencies may have a relatively stronger influence on its performance than do external environment conditions.

Strategic competitiveness and above-average returns can result only when a firm’s core competencies are matched with opportunities.


Competitive advantages change Resources, capabilities, and core competencies

change over time. The Internet’s capabilities have generally reduced

the sustainability of many competitive advantages. Because competitive advantages are not

permanently sustainable, firms must exploit their current advantages while also using their resources and capabilities to form new advantages that can lead to future competitive success.


Core competency: human capital A firm must carefully analyze its resources

and capabilities to effectively manage core competencies.

A firm’s human capital and its knowledge may be the most significant competitive advantage of all, so a firm must create an environment that allows people to collaborate.


Core competencies

Four criteria for determining strategic capabilities: Value Rarity Costly-to-imitate Nonsubstitutability


Value chain analysis


Outsourcing

Improve business focus Gain access to world-class capabilities Accelerate re-engineering benefits Share risks Free resources for other purposes Seek greatest value Evaluate resources and capabilities

Chapter 3 The Internal Environment: Resources, Capabilities, and Core Competencies Hitt, Ireland,...

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