4-1© 2006 by Nelson, a division of Thomson Canada Limited. The Internal Environment: Resources, Capabilities, and Core Competencies Chapter Four

4-2© 2006 by Nelson, a division of Thomson Canada Limited. Resources, Capabilities & Core Competencies

4-3© 2006 by Nelson, a division of Thomson Canada Limited. Resources, Capabilities & Core Competencies

4-4© 2006 by Nelson, a division of Thomson Canada Limited. Core Competencies For a strategic capability to be a Core Competency, it must be: O rganized to be Exploited The firm must be organized appropriately to obtain full benefits of the resources in order to realize a competitive advantage. R are R are Possessed by few, if any, current and potential competitors. V aluable V aluable Allow a firm to neutralize threats or exploit opportunities in its external environment. Costly to I mitate When other firms either cannot obtain them or must obtain them at a much higher cost. $ *

4-5© 2006 by Nelson, a division of Thomson Canada Limited. Primary Activities Outsourcing Strategic choice to purchase some activities from outside suppliers Support Activities InboundLogistics Operations OutboundLogistics Marketing & Sales Procurement Technological Development Human Resource Management Firm Infrastructure Service MARGIN MARGIN Firms often buy a portion of their value-creating activities from specialty external suppliers who can perform these functions more efficiently.

4-6© 2006 by Nelson, a division of Thomson Canada Limited. Never take for granted that core competencies will continue to provide a source of competitive advantage. All core competencies have the potential to become Core Rigidities. Core Rigidities They are former core competencies that sow the seeds of organizational inertia. Prevent the firm from responding appropriately to changes in the external environment. Core Competencies--Cautions and Reminders