Foundations of Strategy Chapter 3: Resources and Capabilities Brooks Garner, Alex Mills, Grayson Watson 10:00am Team 4 Ford Motor Company 423110

Resourced-Based View of the Firm Resources and capabilities are the principal basis of strategy Market-based strategies are no longer viable Products die, capabilities can endure Honda engines Canon lenses, microelectronics Kodak failure

Resources Tangible Intangible Human Resources are not productive without Core Capabilities of a firm. Deploying resources in a way the firm is most capable to produce a profit.

Tangible Resources Easiest to identify and evaluate Financial resources and physical assets Great to compare to other companies in similar industries Includes things like cash, equipment, land and borrowing capacity

Ford Toyota 2,840,000

Intangible Resources Technology- Ford Sync, BLIS (Blind Spot Information System with Cross- traffic assist), Lane keeping system, Pre-Collision assist with automatic emergency braking, park assist, auto high-beam headlights, and many more. Reputation- Customer focused, wide variety, affordable. Culture- Aim to achieve consistency and synergy world-wide. Foster Functional and Technical Excellence, Own working together, role model Ford values, and Deliver results.

Human Resources Ford Labor Relations saved the company In 2006 Ford met with UAW Worked out a deal that incorporated voluntary buyouts instead of involuntary downsizing, brand restructuring ONE Ford Plan One Team, One Plan, One Goal Restructured the company Refocused on employees and maximizing resources and capabilities

Human Resources Charts Labor Market Share Number of Employees by Region Number of Employees 1992 - 2018

Organizational Capabilities Firm’s ability to deploy resources for a desired end result. Functional Analysis Value Chain Analysis 2015 Ford Motor Company Resources and Capabilities

Porter’s Value Chain Breaks the value chain down further Allows resources to be tied to specific links in the value chain

Appraising Resources and Capabilities What is the strategic importance of different resources and capabilities? Potential to generate substantial streams of profit. Based on 3 factors: Establishing Competitive Advantage Sustaining Competitive Advantage Appropriating the Returns to Competitive Advantage

Establishing Competitive Advantage Scarcity- if a resource is widely available within an industry, it may be necessary to compete, but NOT be a sufficient basis for competitive advantage. Relevance- A resource or capability must be relevant to the KSF’s in the market.

Sustaining Competitive Advantage Competitive advantage tends to diminish over time, here is how to sustain it. Durability- the more durable a resource is, the greater ability to support competitive advantage in the long run. Transferability- resources that can be bought and sold easily. ex. Finance, raw materials, components, machines produced by equipment suppliers, and employees with generic skills. Replicability- If a firm can’t by a resource or capability, it must build it. Most new products are easy to replicate.

Appropriating the Returns to Competitive Advantage Who gains the returns generated by superior resources and capabilities? The owner, but hard to determine. Employees provide skill and effort The Firm provides the processes and culture

Appraising the Relative Strength of a Firm’s Resources and Capabilities Most organizations tend to focus on past glories, hopes for the future, and wishful thinking. Leads to hubris- over confidence or pride in something. Hubris for your business or resources and capabilities most always leads to the self destruction of your business. Benchmarking- comparing your business to your competitors and seeing how you line up with them.

Ford Obtaining and Sustaining Competitive Advantage Science is they key to make bets for the future and to make cars and come up with new technology to meet everyone’s needs and to help conserve the planet by going green, or coming up with more solutions to cut down on emissions. Ford Focus EV- new electric car. 2011 Ford Explorer with the EcoBoost Engine improves fuel efficiency by 25%.

Exploiting Key Strengths Ensure firm’s critical strengths are deployed to the greatest effect Core Competence If few unique key strengths adopt niche strategy Ex. Harley Strategy

Managing Key Weaknesses Converting weakness into strength is likely a long term task A company is usually stuck with a set amount of resources and capabilities Often the most successful solution- Outsource Vertical integration is a structure where a company owns the entire supply chain for its product

Superfluous Strengths Particular strengths that don’t appear to be important for competitive advantage Two Options 1. Lower the level of investment into these 2. Turn into Key Strategy differentiators

Appraising Resources and Capabilities

Choosing the Industry Context Choice of industry context is a matter of judgement Best to use very broad industry context Strategy Sustainable Competitive Advantage Capabilities Recourses

Ford’s Key Strengths Strong brand image Global supply chain Pickup Truck F-Series

The best-selling trucks in the United States in 2018 (in units)

Key Weaknesses Limited global scope of production network 2. Higher costs compared to competitors 3. Slow innovation processes

Leading car brands in the United States in 2017, based on vehicle sales (in units)

Leading motor vehicle manufacturers worldwide in 2017, based on global sales (in million units)

Chapter Summary Focus has been shifted from external to internal environment of the firm Internal environment focuses on what the firm can do Comprised of scanning the firm and seeing how resources combine to create capabilities Main goal is to establish a competitive advantage