Internal Analysis: Resources, Capabilities and Core Competencies Internal Analysis: Resources, Capabilities and Core Competencies

Key Questions What is a resource? What is a capability? What’s the difference: –Potential vs. Kinetic energy? How do resources and/or capabilities contribute to competitive advantage?

Resources represent inputs into a firm’s production process... such as capital equipment, skills of employees, brand names, finances and talented managers What a firm Has... Resources

Capabilities What a firm Does... Capabilities represent... the firm’s capacity or ability to integrate individual firm resources to achieve a desired objective.

Core Competencies What a firm Does... that is Strategically Valuable Core Competencies must be: Valuable Capabilities that either help a firm to exploit opportunities to create value for customers or to neutralize threats in the environment

Core Competencies Core Competencies must be: Valuable Rare Capabilities that are possessed by few, if any, current or potential competitors Capabilities that either help a firm to exploit opportunities to create value for customers or to neutralize threats in the environment What a firm Does... that is Strategically Valuable

Core Competencies Core Competencies must be: Valuable Rare Costly to Imitate Capabilities that other firms cannot develop easily, usually due to unique historical conditions, causal ambiguity or social complexity Capabilities that are possessed by few, if any, current or potential competitors Capabilities that either help a firm to exploit opportunities to create value for customers or to neutralize threats in the environment What a firm Does... that is Strategically Valuable

Core Competencies Core Competencies must be: Valuable Rare Nonsubstitutable Capabilities that do not have strategic equivalents, such as firm- specific knowledge or trust-based relationships Capabilities that other firms cannot develop easily, usually due to unique historical conditions, causal ambiguity or social complexity Capabilities that are possessed by few, if any, current or potential competitors Capabilities that either help a firm to exploit opportunities to create value for customers or to neutralize threats in the environment What a firm Does... that is Strategically Valuable Costly to Imitate

Support Activities Primary Activities Value Chain Analysis To identify which resources and capabilities can add value

Support Activities Primary Activities Value Chain Analysis Inbound Logistics helps to identify which resources and capabilities can add value

Support Activities Primary Activities Value Chain Analysis InboundLogistics Operations helps to identify which resources and capabilities can add value

Support Activities Primary Activities Value Chain Analysis InboundLogistics Operations Outbound Logistics helps to identify which resources and capabilities can add value

Support Activities Primary Activities Value Chain Analysis InboundLogistics Operations OutboundLogistics Marketing & Sales helps to identify which resources and capabilities can add value

Support Activities Primary Activities Value Chain Analysis InboundLogistics Operations OutboundLogistics Marketing & Sales Service helps to identify which resources and capabilities can add value

Support Activities Primary Activities Value Chain Analysis InboundLogistics Operations OutboundLogistics Marketing & Sales Service helps to identify which resources and capabilities can add value Procurement

Support Activities Primary Activities Value Chain Analysis InboundLogistics Operations OutboundLogistics Marketing & Sales Service helps to identify which resources and capabilities can add value Procurement Technological Development

Support Activities Primary Activities Value Chain Analysis helps to identify which resources and capabilities can add value Technological Development Procurement InboundLogistics Operations OutboundLogistics Marketing & Sales Service Human Resource Management

Support Activities Primary Activities Value Chain Analysis Technological Development Human Resource Management Firm Infrastructure Procurement InboundLogistics Operations OutboundLogistics Marketing & Sales Service helps to identify which resources and capabilities can add value

Support Activities Primary Activities Value Chain Analysis Technological Development Human Resource Management Firm Infrastructure Procurement InboundLogistics Operations OutboundLogistics Marketing & Sales Service helps to identify which resources and capabilities can add value MARGIN MARGIN

Examples What are key sources of competitive advantage for following companies: Honda McDonald’s ESPN Dell Procter & Gamble Steinway Pianos Wal-Mart The Grateful Dead Toyota