Tal start Great by choice by jim collins Tal A Presentation by: Thomas Hutcheson, Kristina Giamportone , Stevie Kreidler, Brittney McQuesten, and Kevin Jones

6 OBJECTIVES Role of a firms resources and capabilities as a basis of strategy Identity and appraise the resources and capabilities of a firm Evaluate the potential for a firms resources and capabilities to competitive advantage Tal 1-8 Kevin 9-16 Brittaney 17-24 Stevie 25-28 Christina – 29 (Harley )

6 OBJECTIVES Use resources and capabilities to formulate strategies that exploit internal strengths Identify the means through which a firm can develop its resources and capabilities Recognize the difficulties that managers face in developing resources and capabilities of an organization

Rise of hyundia

Hyundai's Case New Ceo Chung Mong Koo faced two key problems in 1999. Building the companies production and research capabilities abroad. Enhancing company’s market knowledge and marketing skills. The case which the entire chapter is formed around.

Solution Began opening production plants all over the world and customized their products based on locations culture. Plush rear seats in China because most families have chauffeurs. Adjusted structure and height of cars in India due to road conditions.

Chapter Focus Defining the difference between strategy and the internal environment. A firms resources A firms capabilties

Internal Environment As the environment becomes unstable, the internal resources are a more secure base for formulating strategy. Competitive advantage is the primary source of profitability rather than industry attractiveness.

How can resources be used? When a company is facing a downfall with its major product, it can focus its resources towards another market. Ex. Honda Motors Ex. Canon Inc. Honda Motors primary resource is engines. Honda relied on the sales of motorcycles for a long time but when the market began to decline the company used their resources of engines and began creating a wide array of gasoline engine products. Canon inc. main resource is precision mechanics, micro electronics and fine optics. When the market for cameras became extremely competitive and turning away from their product, Canon began expanding their market to fax machines and semiconductors. KEVIN

Resources vs. Capabilties Resources are the productive assets of the firm. Come in 3 kinds, tangible, intangible, and human resources. Capabilities are things that the company can do with its resources.

Fig 3.4

Tangible Resources Economizing asset usage and the control of resources being used within a firm. As well as cash and all receivable accounts. Employing existing assets more profitably. Redeploying assets elsewhere. Ex. British Airways. British Airways began utilizing planes for cargo carrying to make sure that all of their assets and resources where being profitable.

Intangible Resources Reputation : Name or brand of the company, or how the company is viewed by consumers. Technology : Intellectual property, patents, copyrights, and trade secrets. The value of intangible resources is huge. These are resources that can easily jump to other markets if a change is made inside of a firm.

Human Resources The ability to recruit and retain talented employees is critical to the company’s success and strategy. At the same time, labor costs must be kept low to remain competitive.

Organizational Capability Capabilities that can provide a basis for competitive advantage. Distinctive Competences Core Competences Ex. The success of Sony Distinctive Competences are things that a firm does well compared to competitors. Core Competences are capabilities fundamental to a firms strategy. Makes a contribution to ultimate customer value Provides a basis for entering a new market. Ex. Sony failed with making video tape systems in its early years, so it continued to focus on its core competence of video technology and started in the new market in other video products.

Functional Analysis Identifies capabilities in relation to functional areas of the firm. Ex. Corporate, Management info, R&D, Operations, Product design, Marketing, Sales. Capabilities can be analyzed in two ways.

Value Chain Analysis Separates activities into a sequential chain, then you can analyze the capabilities within each activity. Brittaney

3 Factors that profits from the internal environment depend on Fig 3.6

Establishing Competitive Advantage In order to establish advantage, two conditions must be present. Scarcity: If the resources are not widely available, then the firm has a competitive advantage. Relevance: The resources the firm chooses to use must be relevant to the current market in order to be competitive.

Sustaining Competitive Advantage Durability over time in order to survive technological changes within the industry. Transferability or the mobility of the resources used so that it can be traded amongst companies. Replicability so that if the resource cannot be bought, then it can be made within the firm.

Appropriating the returns Defining who the “owner” is so that returns may be accrued. However, capabilities rely heavily on the skills and efforts of employees, who may be seen as partial owners. Dependent on the expertise required in each employee.

3 Steps in Appraising resources and capabilities, then guiding a strategy formulation 1. Identify key resources and capabilties. 2. Appraising resources and cabailities. 3. Develop strategy implications.

Identify key resources and capabilities Look in each activity of the firm. Within each activity, find what makes the certain activity successful. Finally, look for factors within the firm as a whole that separate the firm from other competitors.

Appraising Resources and Capabilities Relies on two criteria: Importance: which components are most important in ensuring the firm has a competitive advantage. Strengths: What are the firms strongest assets and what are the weaknesses that could improve. (Relies on the use of benchmarking, or comparing performance to competitors)

Develop Strategy Formulation Step by step process: Exploit firms strengths Upgrade or remove firms weaknesses Employ inconsequential strengths anywhere possible Stevie

Developing Resources and Capabilties In order to be a successful firm, you have to continue to try to develop new resources and capabilities. Capabilities are not simply an outcome of the resources on which they are based. Ex. GM vs. Honda, Pixar vs. Disney, Cisco vs. Alcatel

Organizational Capabilities Capabilities are usually a direct result of the history of the firm. Early struggles or decisions shape the future capabilities. Ex. Wal-Mart Walmart who started up in Arkansas and Oklahoma had early struggle with suppliers being unable to reach their stores. So they developed their on supply centers, which then lead to supply chain logistics being their key capability today.

Rigid? Or not? Most argue that Organizational Capabilities are rigid because they inhibit the firm from major changes or developing new capabilities. However, the successful firms argue in two ways. Flexibility in routines Dynamic Capability Stevie

Intel Fab 42 Will be completed in 2013 Most advance semiconductor manufacturing facility in the world 10 xers good to great $5 Billion dollar plant. Intel builds chips that power 80% of the world’s PCs Fab 42 $5 billion project. Will create at least 1,000 new jobs Will be the highest volume chip plant in the world Intel is investing in their resource: tangible being the actual facility, intangible being expanding their brand name, and human by giving their employees the opportunity to create new technology. Intel is a 10X from Great by Choice the development of their resources and capabilities played a major role in their ability to become the powerful 10X at that time. Christina

Harley-Davidson Case History of Harley-Davidson: Fall and Rise 1903 Founded 1969 Acquired by AMF 1981 Buyout of AMF’s Harley Davidson subsidiary 1996 opened new plants, launched new models and began to explore international markets The Brand Image and the loyalty are Harley’s greatest assets The value that Harley represents-individuality, freedom and adventure-can be traced back to the cowboy and frontiersman of yesterday and before that to the quest that brought people to America in the first place The Product Falls behind its competitors in the application of automotive technologies Active in new product development Every Harley rider has their own unique, personalized motorcycle Harley offers a wide price range Distribution Dealers have to carry a full line of Harley replacement parts/accessories and msust perform services on Harley bikes Harley offers new services to customers Other Products General merchandise represents 20% of total revenue in 2008

Harley-Davidson Case Closing Case On May 1, 2009 Keith Wandell took over as CEO of Harley-Davidson, Inc. Demand for luxury leisure products costing between $8,000 and $26,000 will continue to be subdued Harley’s core market is the baby-boomer generation which is moving towards retirement homes than outdoor sports The question the company now faces is whether they should stay focused on what they do best or make smaller more affordable bikes that are more appealing to younger riders and overseas markets?