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Internal Analysis:
Resources,
Capabilities, and
Activities
McGraw-Hill/Irwin
42
Chapter Case 4
Circuit City
Strategic Fit
Internal
EXHIBIT 4.1
46
Positioning
Organization
Resources &
Capabilities
47
Positioning
Scope of the Firm:
Geographic scope
Product-market scope: Choice of businesses
within a business
Vertical integration
decisions
Organization
Structure
Formal definition of authority
Conflict resolution
Systems
Rules, routines, evaluation and rewards
Processes
Informal communication, networks, and recruitment
4-9
Organizational capabilities
e.g., routines and standard operating procedures
Intangible resources
e.g., trademarks, know-how
Knowledge
Knowledge Types
Types and
and
Knowledge
Knowledge Conversion
Conversion
Levels
Levelsof
ofknowledge
knowledge
Individual
Individual
Explicit
Explicit
Types
Types
of
of
Knowledge
Knowledge
Tacit
Tacit
Information
Facts
Scientific kn.
Organization
Organization
Databases
Systems & procedures
Intellectual property
INDUSTRIAL
ENTERPRISES
CRAFT
ENTERPRISES
Skills
Organizational
capabilities
411
EXHIBIT 4.2
EXHIBIT 4.3
413
Canon:
Canon: Products
Products and
and Core
Core Technical
Technical Capabilities
Capabilities
Precision
Mechanics
Fine
Optics
MicroElectronics
414
415
EXHIBIT 4.4
416
Appraising
Appraising Resources
Resources
RESOURCE
Tangible
Resources
CHARACTERISTICS
Financial
Borrowing capacity
Internal funds/ generation
Physical
Technology
Reputation
Employee qualifications,
pay rates, turnover.
Intangible
Resources
Human
Resources
INDICATORS
resources
SWA
Resource immobility
Resources tend to be sticky and do not move easily
Southwest Airlines sustained advantage
Several
EXHIBIT 4.5
The
The Rent-Earning
Rent-Earning Potential
Potential
of
of Resources
Resources and
and Capabilities
Capabilities
THE EXTENT OF THE
COMPETITIVE ADVANTAGE
ESTABLISHED
THE PROFIT
EARNING POTENTIAL
OF A RESOURCE OR
CAPABILITY
Scarcity
Relevance
Durability
SUSTAINABILITY OF THE
COMPETITIVE
ADVANTAGE
Mobility
Replicability
Property rights
APPROPRIABILITY
Relative bargaining
power
Embeddedness of
resources
STRATEGY
STRATEGY HIGHLIGHT
HIGHLIGHT 4.1
4.1
Nintendo
Wii
DS in 2004
consoles in 2007
49% of game console market in 2010
continues
123
Support Activities
Indirectly add value
Inbound
logistics
Operations
Marketing
and sales
Service
Adapted from Exhibit 3.1 The Value Chain: Primary and Support Activities
Source: Adapted with permission of The Free Press, a division of Simon &
Schuster, Inc., from Competitive Advantage: Creating and Sustaining
Superior Performance by Michael E. Porter.
Outbound
logistics
3-4
EXHIBIT 4.6
70
Profit
Marketing: Promotions
60
Marketing: Advertising
50
Outbound logistics
40
30
Operations: Packaging
20
Operations: Ingredients
10
Operations: Manufacturing
90
80
Profit
70
Marketing: Promotions
60
Marketing: Advertising
50
Outbound logistics
40
Operations: Manufacturing
30
20
Operations: Packaging
10
Operations: Ingredients
0
Hostess
Strategic Coherence
The Logic of How The Business Fits
Together:
Southwest Airlines
Low Price
Short Routes
No Frills
Point-to-Point
One Aircraft -Boeing 737
High number of
Aircraft per Route
No Meals
Flexible/ Lower Staffing
American Airlines
Premium Price
Short, Long, & Intl
Variety
No meals
No seat
assignments
Frequent,
reliable
departures
High
compensation
of employees
Flexible
union
contracts
15-minute
gate
turnarounds
Lean, highly
productive
ground and
gate crews
High level
of employee
stock
ownership
Limited
passenger
amenities
Limited use
of travel
agents
No
connections
with other
airlines
Standardized
fleet of 737
aircraft
Short-haul,
point-to-point
routes between
midsize cities
and secondary
airports
Automatic
ticketing
machines
Very low
ticket prices
High
aircraft
utilization
Southwest,
the low-fare
airline
31
Strategic Coherence
A fit among corporate, business, and functional strategy;
A fit between strategy formulation and implementation;
A balance of commitment and flexibility;
A balance among stakeholders;
A balance of competition and cooperation;
A balance of hiding and diffusing information;
A balance of centralization and decentralization; and
A balance between stability and change.
432
Strategic Coherence
Combining activities that complement and reinforce one
another. These activities dovetail together to help achieve
the overall objectives of the firm.
Such strategies, which may regarded as systems of
activities are often more successful because they are more
difficult to imitation. Thus, they can lead to a sustainable
competitive advantage.
Strategic coherence may not be a sufficient condition for
attaining a competitive advantage, but it is often a necessary
one.
433
Strategic Coherence
A sustainable competitive advantage often requires tradeoffs. These tradeoffs arise for at least three reasons:
Inconsistencies in image or reputation.
Tradeoffs arising from the activities themselves.
Limits on internal coordination and control
434
ones
Vanguard Example
A global investment firm - $1.4 trillion managed assets
Emphasis on low customer cost and quality service
Among the lowest expense ratios in the industry (0.20%)
Updated the activity system from 1997 to 2011
New customer segmentation core
Two new support activities
Permits customized offerings: long-term and more active traders
435
EXHIBIT 4.7
Legend
Core
Support
436
EXHIBIT 4.8
Legend
Core
Support
437
resource base
Honda core competency in gas-powered engine design
Could
If
decrease in value
BYD
EXHIBIT 4.10
439
STRATEGY
STRATEGY HIGHLIGHT
HIGHLIGHT 4.2
4.2
140
EXHIBIT 4.9
441
How to Protect a
Competitive Advantage
1. Better Expectations of Future Values
Buy Resources at a low cost
2. Path Dependence
Current alternatives are limited by past decisions
U.S. is the only industrial nation not on the metric system
Hondas core competency in gas engines took decades to build
443
The
The Evolution
Evolution of
of Honda
Honda Motor
Motor Company
Company
50cc 2-cycle engine
Founding of
Honda motor
company
1948 1950
First product:
clip-on engine
for bicycles
405cc
motor
cycle
4 cycle
engines
1955
Related products:
ground tillers, marine
engines, generators,
pumps, chainsaws
1960
The 50cc
super
-cub
1965
1970
N360 mini
car
1975
1980
1000cc
Goldwing
touring
motor cycle
1985
1990
Acura Car
division
1995
How to Protect a
Competitive Advantage
3. Causal Ambiguity
Cause of success or failure are not apparent
4. Social Complexity
Two or more systems interact creating many possibilities
A group of 3 people has 3 relationships
EXHIBIT 4.11
446