Seminar3

Contentsofcoreslides
y Toexplainwhatarecorecompetencies y Presentframeworksforidentifyingcorecompetencies y Valuechainanalysis y Resourcebasedframeworktoevaluatesustainable competitiveadvantage

OverviewofInternalEnvironmentAnalysis
WHAT?
Identify what are the Resources /Capabilities that constitute the Core Competencies of the Firm

HOW?

WHY?
To identify the activities in the firm that create value and those that do not

Value-Chain Analysis

Resource-Based Framework

To evaluate whether the resources/capabilities meet the sustainable competitive advantage test

WhatareCoreCompetencies?
y Corecompetenciesarecapabilitiesthatserveasa

sourceofcompetitiveadvantageforafirmoverits rivals(Irelandetal.,2010).
y Resources
y y

Tangibleassets Intangibleassets integratedsetofresourcesthatareusedtoachieveaspecific taskorsetoftasks

y Capabilities
y

Ireland,Hoskisson &Hitt (2010).TheManagementofStrategy.9th Edition.

Resources
TangibleResources IntangibleResources

(assetsthatcanbeseen (assetsrootedinthe andquantified) firmshistoryand accumulatedovertime) Examples:

Financial Organizational Physical Technological

Examples:
Human Innovation Reputation

Capabilities
Functional Areas
Distribution Human Resources Management Information Systems Marketing Management Manufacturing Research & Development

Capabilities
Effective use of logistics management techniques Motivating, empowering, and retaining employees Effective and efficient inventory control Innovative merchandising, effective promotion of brand-name products, effective customer service Ability to envision the future, effective organization structure Design and production skills Innovative technology

Adapted from Ireland, Hoskisson & Hitt (2009). Strategic Management. 8th Edition.

ValueChainAnalysis
y 2mainwaystoincreasefirmreturns y Increasecustomerswillingnesstopay (byincreasingdifferentiation) y Lowercostsofsupplyingthe product/service y ValueChainAnalysis:Identifythe activitiesinthefirmthatcreatevalue andthosethatdonot. y Valuecreatingactivities arethosethat helptodothefollowingascheaplyas possible: y Differentiate theproduct/service y Lowercosts ofsupplyingthe product/service.

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Firm Returns

StepstoconductaValueChainAnalysis
y Dividethefirmintoachainofactivities,beginningatthepointwherethe

firmreceivesinputs(e.g.,rawmaterials)andendingatthepointofafter salesservicetocustomers y Primaryactivities y Supportactivities y Allocatethecostsofexecutingthoseactivities y Evaluatewhetherthoseactivities(resourcesand/orcapabilitiesrelating tothatactivity)helptodifferentiateand/orlowerthecostsofthefirms product/service y Differentiationdrivers y Costdrivers y Evaluateagainstcompetitors(benchmarking) y Canthefirmperformtheactivityinamannerthatissuperiortothat ofrivals? y Canthefirmperformavaluecreatingactivitythatrivalscannot?

Willingness to pay

Costs

GenericValueChain
Primary Activities Inbound logistics Operations Outbound logistics Marketing & Sales
Activities to provide the means through which customers purchase the product and to induce them to do so.

Service

Activities used to receive, store and disseminate inputs to a product,

Activities to convert the inputs into product form.

Activities to collect, store and distribute the product to customers.

Activities to enhance or maintain a products value.

PROFITMARGIN

Firm Infrastructure Support Activities

Activities such as general management, accounting, finance, legal support, etc.

Human resource management

Activities involved in recruiting, hiring, training, etc.

Technological development
Activities to improve a firms product and processes used to manufacture the product.

Procurement
Activities to purchase the inputs needed to produce a firms products.
AdaptedfromIreland,Hoskisson &Hitt (2010).TheManagementofStrategy.9th Edition.

ResourceBasedFramework: Testofsustainablecompetitiveadvantage
Valuable Rare Help to exploit opportunities or neutralize threats Not possessed by many others zUnique historical conditions zCausally ambiguous: causes and uses of competence unclear zSocially complex: interpersonal relationships and trust Do not have strategic equivalents (i.e., no other resources/capabilities that can provide the same value)
Adapted from Ireland, Hoskisson & Hitt (2009). Strategic Management. 8th Edition.

Costly-to-imitate

Nonsubstitutable

CompetitiveConsequences
Competitive Consequences
No No No No Competitive Disadvantage Competitive Parity Temporary Competitive Advantage Sustainable Competitive Advantage

Performance Implications
Below Average Returns

Yes

No

Yes/ No No Yes/ No

Average Returns Above Average to Average Returns Above Average Returns

Yes

Yes No

Yes

Yes Yes

Yes

Adapted from Ireland, Hoskisson & Hitt (2009). Strategic Management. 8th Edition.