Ch3-1 The Internal Environment: Resources, Capabilities and Core Competencies

Ch3-2 External Environment What the Firm Might Do Internal Environment What the Firm Can Do SustainableCompetitiveAdvantage

Ch3-3 How do we assemble bundles of Resources, Capabilities and Core Competencies to create VALUE for customers? Will environmental changes make our core competencies obsolete? And... Are substitutes available for our core competencies? Are our core competencies easily imitated? Key Questions for Managers in Internal Analysis Key Questions for Managers in Internal Analysis

Ch3-4 Conditions Affecting Managerial Decisions About Resources, Capabilities and Core Competencies Uncertainty regarding characteristics of the general and the industry environments, competitor’s actions, and customer’s preferences. Uncertainty regarding characteristics of the general and the industry environments, competitor’s actions, and customer’s preferences. Complexity regarding the interrelated causes shaping a firm’s environments and perceptions of the environments Complexity regarding the interrelated causes shaping a firm’s environments and perceptions of the environments Intraorganizational Conflicts among people making managerial decisions and those affected by them Intraorganizational Conflicts among people making managerial decisions and those affected by them

Ch3-5 What a firm has to work with: its assets, including its people and the value of its brand name What a firm Has... Resources

Ch3-6 Tangible Resources Financial * * Physical * * Human Resources * * Organizational * * What a firm Has... What a firm has to work with: its assets, including its people and the value of its brand name Resources represent inputs into a firm’s production process... such as capital equipment, skills of employees, brand names, finances and talented managers Intangible Resources Technological * * Innovation * * Reputation * * “Some genius invented the Oreo. We’re just living off the inheritance.” F. Ross Johnson, Former President & CEO, RJR Nabisco Resources

Ch3-7 What a firm Does... Capabilities develop over time as a result of complex interactions that take advantage of the interrelationships between a firm’s tangible and intangible resources that are based on the development, transmission and exchange or sharing of information and knowledge as carried out by the firm's employees. Capabilities represent: the firm’s capacity or ability to integrate individual firm resources to achieve a desired objective. Capabilities

Ch3-8 What a firm Does... that is Strategically Valuable “…are the essence of what makes an organization unique in its ability to provide value to customers.” Leonard-Barton, Bowen, Clark, Holloway & Wheelwright McKinsey & Co. recommends identifying three to four competencies to use in framing strategic actions. Core Competencies

Ch3-9 Core Competencies must be: Nonsubstitutable Capabilities that do not have strategic equivalents, such as firm- specific knowledge or trust-based relationships What a firm Does... that is Strategically Valuable Core Competencies 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

Ch3-10 Core Competencies Resources Inputs to a firm’s production processInputs to a firm’s production process Core Competence A strategic capabilityA strategic capability The source of Capability Integration of a team of resourcesIntegration of a team of resources Does the capability satisfy the criteria of sustainable competitive advantage? YES NO Capability A nonstrategic team of resourcesA nonstrategic team of resources

Ch3-11 Support Activities Primary Activities Technological Development Human Resource Management Firm Infrastructure Procurement InboundLogistics Operations OutboundLogistics Marketing & Sales Service MARGIN MARGIN Value Chain Analysis Identifying Resources and Capabilities That Can Add Value

Ch3-12 Resources * * Tangible * * Intangible Capabilities Teams of Resources Teams of Resources Sources of Core Competencies Competitive Advantage Strategic Competitiveness Above-Average Returns Competitive Advantage Gained through Core Competencies Discovering Core Competencies Value Chain Analysis Valuable Rare Costly to Imitate Nonsubstitutable * * * * * Outsource Criteria of Sustainable Advantages Discovering Core Competencies