Competing For Advantage Part II – Strategic Analysis Chapter 4 – The Internal Organization:...
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Transcript of Competing For Advantage Part II – Strategic Analysis Chapter 4 – The Internal Organization:...
Competing For Advantage
Part II – Strategic Analysis
Chapter 4 – The Internal Organization: Resources, Capabilities, and Core Competencies
The Strategic Management Process
Outcomes from Organizational Analyses
Factors that Determine Sustainability of Competitive Advantage
Rate of core competence obsolescence
Availability of substitutes
Imitability of core competence
Conditions Influencing Internal Analysis
Key TermsGlobal Mind-Set – ability to study an
internal environment in ways that do not depend on the assumptions of a single country, culture, or context
Global Considerations and the Pace of Change
Environmental context beyond national/cultural boundaries
Diversity to prevent inertia, resistance to change, and denial
Experimentation and learning to promote responsiveness
New breed of managers to handle uncertainty, make complex decisions, and hold employees accountable
Strategy defined in terms of a unique and viable competitive position
Conditions Affecting Managerial Decisions about Resources, Capabilities, and Core Competencies.
Creating Value
Key Terms
Value – measured by a product's performance characteristics and by its attributes for which customers are willing to pay
Resources, Capabilities, and Core Competencies
Resources – the source of a firm's capabilities
Capabilities – the source of a firm's core competencies
Core competencies – the basis for a firm’s competitive advantages in the marketplace
Components of Internal Analysis Leading to
Competitive Advantage and Value Creation
Resources
Key Terms
Tangible Resources – assets that can be observed and quantified
Intangible Resources – assets that are typically rooted deeply in the firm's history and have accumulated over time
Resources
Key Terms (cont.)
Reputation – level of awareness a firm has been able to develop among stakeholders
Social Capital – relationships with other organizations that contribute to the creation of value
Resources
Key Terms (cont.)
Strategic Value of Resources – degree to which resources can contribute to the development of capabilities, core competencies, and ultimately, competitive advantage
Tangible Resources
Intangible Resources
Increasing Value of Intangible Resources
Less visibility and less imitable
More sustainability
More leverage within network of users
Capabilities
Key Terms
Capabilities – firm's capacity to deploy resources that have been purposely integrated to achieve a desired end state
Examples of Firm’s Capabilities
Core Competencies
Key Terms
Core Competencies – resources and capabilities that serve as sources of competitive advantage for a firm over its rivals
Core Competencies – Features
Resources that emerge within a firm over time
The capacity of an organization to take action
The activities that a firm performs well relative to its competitors
A representation of a firm's resources and capabilities—including only those with strategic value
Core Competencies – Features (cont.)
Supporting and nurturing more than four core competencies may prevent a firm from developing the focus needed to fully exploit its competencies in the marketplace
Tools for Building Core Competencies
Four Criteria of Sustainable Competitive Advantage
Value Chain Analysis
Four Criteria of Sustainable Competitive Advantage
Valuable Capabilities
Rare Capabilities
Costly-to-Imitate Capabilities
Nonsubstitutable Capabilities
Four Criteria of Sustainable Competitive Advantage
Key Terms Valuable Capabilities – allow the firm to exploit
opportunities or neutralize threats in its external environment
Rare Capabilities – possessed by few, if any, current or potential competitors
Costly-to-Imitate Capabilities – cost for other firms to develop is prohibitive, cannot easily be developed by other firms
Nonsubstitutable Capabilities – do not have strategic equivalents
Four Criteria for Determining Core Competencies
Core Competencies as a Strategic Capability
Costly-to-Imitate Capabilities
Unique historical conditions
Causal ambiguity
Social complexity
Outcomes from Combinations of the Criteria
for Sustainable Competitive Advantage
Value Chain Analysis
Key TermsPrimary Activities – involved with a
product's physical creation, its sale and distribution to buyers, and its service after sale
Support Activities – provide the support needed by the primary activities to be implemented
The Basic Value Chain
The Value-Creating Potential of Support Activities
Source of Competitive Advantage
The resource or capability must allow the firm to perform an activity in a manner superior to the way competitors perform it
The resource or capability must allow the firm to perform a value-creating activity that competitors cannot perform
Outsourcing
Key Terms
Outsourcing – purchase of a value-creating activity from an external supplier
Outsourcing Viability
When a firm does not have the capabilities in the areas needed to succeed
When a firm lacks a resource or possesses inadequate skills needed to implement a strategy
When few organizations possess the resources and capabilities needed for competitive superiority in all primary and support activities necessary to compete
When extensive internal capabilities exist for effectively coordinating external sourcing and internal core competencies
Benefits of Outsourcing
Increased flexibility
Mitigation of risks
Reduced capital investments
Essential Skills for Outsourcing
Strategic thinking
Deal making
Partnership governance
Managing change
Core Competencies – Cautions
Never assume that core competencies will continue to provide a source of competitive advantage
All core competencies have the potential to become core rigidities
Core rigidities – former core competencies that now generate inertia and stifle innovation
Stakeholder Objectives and Power
Key Terms Economic Power – comes from the ability to
withhold economic support from the firm Political Power – results from the ability to
influence others to withhold economic support or to change the rules of the game
Formal Power – refers to laws or regulations that specify the legal relationship between a firm and a particular stakeholder group
Returns and Stakeholders
High economic returns – firm can more easily satisfy multiple stakeholders simultaneously
Average economic returns – firm is unable to maximize interests of all stakeholders
Below-average returns – firm must minimize the amount of support withdrawn by stakeholders
Measures of Firm Performance
Capital market performance
Product market performance
Organizational stakeholder performance
Measures of Firm Performance
Key Terms
Risk – investor uncertainty about the economic gains or losses that will result from a particular investment
Firm Performance from a Capital Market
Perspective
Other Measures of Firm Performance
Sustainable Development
Key Terms
Sustainable Development – business growth that does not deplete the natural environment or damage society
Ethical Questions
Can efforts to develop sustainable competitive advantages result in employees using unethical practices? If so, what unethical practices might be used to compare a firm’s core competencies to those held by rivals?
Ethical Questions
Do ethical practices affect a firm’s ability to develop a brand name as a source of competitive advantage? If so, how does this happen? Identify some brands that are a source of competitive advantage in part because of the firm’s ethical practices.
Ethical Questions
What is the difference between exploiting a firm’s human capital and using that capital as a source of competitive advantage? Are there situations in which the exploitation of human capital can be a source of advantage? If so, name such a situation, and explain whether it is a sustainable advantage. Why or why not?
Ethical Questions
Are any particular ethical dilemmas associated with outsourcing? If so, what are they? How would you deal with such ethical dilemmas?
Ethical Questions
What ethical responsibilities do managers have if they determine that certain employees have skills that are valuable only to core competencies that are becoming core rigidities?
Ethical Questions
Through the Internet, firms sometimes make a vast array of data, information, and knowledge available to competitors as well as to customers and suppliers. What ethical issues, if any, are involved when the firm finds competitively relevant information on a competitor’s website?
Ethical Questions
To what extent does a firm have a moral obligation to distribute value back to stakeholders based on their relative contributions to its creation? Does a firm have any legal obligations to do so?