Strategy: Analysis and Practice Slide 1 ©The McGraw-Hill Companies, Competitive strategy: The analysis of strategic capability

Strategy: Analysis and Practice Slide 2 ©The McGraw-Hill Companies, 2005 Outline ● The resource-based view of the firm ● The language of resources and capabilities ● The importance of intangibles ● Determining the value of competences ● Linking the market-based and resource-based views ● Competence-based competition ● Competitive strategy in practice

Strategy: Analysis and Practice Slide 3 ©The McGraw-Hill Companies, 2005 Introduction

Strategy: Analysis and Practice Slide 4 ©The McGraw-Hill Companies, 2005 The Resource-based View of the Firm Resource-based View Firm as a bundle of resources and capabilities. Distinct resources and capabilities underpin competitive advantage. Specific combination and coordination of resources critical. Strategy based on skilled diagnosis and creative solutions. Market-based View Firm as a unit in a market. Distinct position in market underpins competitive advantage. Detailed knowledge of market and competitive conditions critical. Strategy based competitive analysis and appropriate value creation.

Strategy: Analysis and Practice Slide 5 ©The McGraw-Hill Companies, 2005 The Language of Resources and Capabilities ● Resources: inputs into a firm’s operations so as to produce goods and services. ● Capabilities: The ability to perform a task or activity that involves complex patterns of coordination and cooperation. ● Rents: a surplus of revenue over cost. ● Strategic assets / Core competencies: resources and capabilities that can earn rents.

Strategy: Analysis and Practice Slide 6 ©The McGraw-Hill Companies, 2005 Core Competence Core Competences Collective knowledge of how to coordinate skills and technologies Prahalad & Hamel (1990) Distinctive Capabilities Business processes connected to customer needs Stalk, Evans & Shulman (1992) Strategic Assets Capacity to deploy resources to effect a desired end Amit & Shoemaker (1993) = = The underlying capability that is the distinguishing characteristic of the organization

Strategy: Analysis and Practice Slide 7 ©The McGraw-Hill Companies, 2005 Identifying Intangibles ● Intellectual property rights of patents, trademarks, copyright and registered designs ● Trade secrets ● Contracts and licenses ● Databases ● Information in the public domain ● Personal and organizational networks ● The know-how of employees, advisers, suppliers and distributors ● The reputation of products and of the company ● The culture of the organization

Strategy: Analysis and Practice Slide 8 ©The McGraw-Hill Companies, 2005 The Value of a Core Competence

Strategy: Analysis and Practice Slide 9 ©The McGraw-Hill Companies, 2005 Identifying Key Success Factors

Strategy: Analysis and Practice Slide 10 ©The McGraw-Hill Companies, 2005 Strategic Industry Factors and Core Competences

Strategy: Analysis and Practice Slide 11 ©The McGraw-Hill Companies, 2005 Matching Resources and Markets

Strategy: Analysis and Practice Slide 12 ©The McGraw-Hill Companies, 2005 Resources and Capabilities

Strategy: Analysis and Practice Slide 13 ©The McGraw-Hill Companies, 2005 Positioning the Business for Growth

Strategy: Analysis and Practice Slide 14 ©The McGraw-Hill Companies, 2005 Assessing Feasibility

Strategy: Analysis and Practice Slide 15 ©The McGraw-Hill Companies, 2005 Concluding Remarks ● Competitive advantage defines the market- based view – the positioning of the firm in terms of competitors ● Core competence defines the resource-based view – the underlying capability that is the distinguishing characteristic of the organization.

Strategy: Analysis and Practice Slide 16 ©The McGraw-Hill Companies, 2005 Concluding Remarks (continued) ● Core competence underpins market positioning and thus competitive advantage. ● The resource-based view demands attention to processes, resource leverage and intangibles. ● Resources are linked to competitive advantage through key success factors.