1. Identifying Organisational Competencies
Resource Audit & Value Systems

2. The Aims of this Session
Identify the importance of auditing a Business’ resources
Determine what are Business Resources
Consider methods of classifying resources
Introduce the idea of value systems
Explore the Value Chain model
Consider extensions to how value is determined in modern business

3. Activity
What steps would you consider to undertake a resource audit?

4. Identifying key issues Understanding strategic capability
Resource audit
Competences
In separate activities
Through linking activities
Some are ...
Comparisons
Historical
Industry norms
Benchmarking
Core competences
To outperform competition
To create new opportunities
Rigidities
Preventing change
Assessing balance
Resources
Competences
Business units
Identifying key issues
SWOT analysis
Critical success factors
Understanding strategic capability
Analysing strategic capability
Johnson, Scholes & Whittington, 2005

5. Category of Resource Tangible Intangible Organisational Capability
Often refers to physical aspects of the organisation
Equipment, buildings, etc.
Intangible
Concerned more with perception of value.
Organisational Capability
Considers the way in which an organisation performs its activities

6. What are Business Resources?
Physical
Human ?
Financial
Intangibles

7. Resource Based View – Seven Elements Lynch, R. (2006)
Prior or
Acquired
Resources
Innovative
Capability
Imitability
Sustainable
Competitve
Advantage
Truly
Competitive
Durability
Substitutability
Appropriability
Resource Based View – Seven Elements Lynch, R. (2006)

8. Resource Audit : Functional Areas
Finance
Production
Corporate/
HRM
Environmental
inputs
Environmental
outputs
Logistics
Marketing
R & D
MIS

9. Resource Audit PRODUCTS & SERVICES Technological Organisational
Capabilities
Organisational
Systems
Finance
Production
Corporate/
HRM
PRODUCTS
&
SERVICES
Environmental
inputs
Environmental
outputs
Logistics
Marketing
Physical
Resources
R & D
MIS
Intangible
Resources
Financial
Resources
Human
Resources

10. Better than competitors’
Same as competitors’ or
easy to imitate
Better than competitors’
and
difficult to imitate*
Necessary resources
Unique resources
RESOURCES
Threshold competences
Core competences
COMPETENCES
* Provides the basis to outperform competitors or demonstrably provide better value for money
Resources, competences and competitive advantage
Johnson, Scholes & Whittington, 2005

11. Functional Area Profile
R&D /
CORPORATE/
PERSONNEL/ MIS
ENGINEERING
MANUFACTURING
MARKETING
LOGISTICS
FINANCE
FINANCIAL
RESOURCES
PHYSICAL
RESOURCES
HUMAN
RESOURCES
ORG.
SYSTEMS
TECH.
CAPABILITIES
INTANGIBLE
RESOURCES
Products

13. Resource Audit: Remember!
Access Everything
Do not take things for granted
Uniqueness is the Key
Do you have the resources to support strategic intent?
Include resources which can be accessed not just those which are owned - networks, customers etc.
The more unique the resource, the more difficult to imitate.

14. Activity What are the Resources that Tesco would need to analyse?
What questions should the company be asking?

15. Balance of Resources Assessing the balance of resources
Balance of resources between different parts of an organisation
Balance of resources between products with different market potentials
Balance of skills and personalities
Balance of resources to cope with uncertainty (flexibility analysis)

16. Balance of Resources Assessing resource flexibility:
no single organisation operates in a perfectly static environment
the fast changing environment often requires firms to adapt. The question is: are all firms capable of doing so?
an important task in strategic analysis is therefore to assess if a firm has balanced resources to cope with sudden change in its environment

17. Balance of Resources Assessing resource flexibility - the procedure:
list and rank all areas with marked uncertainty, e.g. products, processes, demand, competition
examine whether or not and to what extent a firm’s available resources can cope with these prospective situations, e.g. a sudden increase or drop in demand by 30%, a new and powerful supplier entering the market

18. Value Systems

19. What is meant by ‘Strategic Value’?
“the degree to which a particular action or planned action is important or useful in relation to something that it wants to achieve”
Cambridge Dictionary
The perspective of value is inevitably shaped by the philosophy of the business, i.e. is it ‘low-cost’, ‘differentiation’
This starting point defines how value is achieved
Value systems are simply ways in which activities may enable the value to be realised

20. Value Chain Analysis Purpose:
To identify the key activities in an organisation - where the organisation gains value added
To identify the linkages between activities that add value
To identify the key activities outside the organisation

21. Human resource management Technology development
The original value chain
Firm infrastructure
Human resource management
Support activities
Technology development
Margin
Procurement
Margin
Inbound logistics
Operations
Outbound logistics
Marketing and sales
Service
Primary activities
Source: Adapted from M. E. Porter, Competitive Strategy, Free Press, 1985.
Used with permission of The Free Press, a division of Macmillan, Inc. Copyright 1985
Michael E. Porter

22. Value Chain Analysis Primary activities
Inbound logistics - receiving, storing, disseminating and distributing inputs to the conversion process
Operations - transforming inputs into outputs (differ from one industry to the next)
Outbound logistics - collecting, storing and physically distributing products to buyers
Marketing & sales - providing a means by which buyers can purchase the products and inducing them to do so
Service - activities provided to enhance or maintain the value of products

23. Value Chain Analysis Support activities
Procurement - acquiring resource inputs to the primary activities
Technology development - product, process, resourcing
HRM - recruiting, training, developing and rewarding
Infrastructure- general management & organisational structure, accounting, quality control ,etc.

24. Value Chain Analysis Value Creation vs Process Facilitation
Primary activities - create value by transforming inputs into outputs Support activities - facilitate and influence the processes whereby primary activities are performed - can create value too

25. Traditional Supply Chain approach

26. Value Chain: Resource Utilisation
• Identify : Value Activities
- Assign costs and added value
- identify critical activities
• Identify : Cost or Value Drivers
- Factors which determine cost or value of each activity
• Identify : Linkages
- Which reduce cost or add value
- Which discourage imitation

27. Value Chain: Sources of Cost Efficiency
Economies
of Scale
Experience
COST
EFFICIENCY
Supply Cost
Product/process
design

28. Value Systems
A danger with the Value Chain is that a linear process can be overly simplistic
The idea of more fluid structures has emerged in recent years with different labels:
Value Webs
Value Networks
Value ecologies
All build on the Value Chain but emphasis a need to reconsider the relationships involved

29. Value Networks

30. Value Chain Analysis Linkages between value activities
information systems form part of a firm’s infrastructure which integrate and coordinate all activities to ensure the creation of value for the company
better linkages between activities can often lead to reduced costs and improved corporate performance

31. Examples of Types of Linkage
Type of linkage Type of activity Example
Internal linkage Primary-primary Interdepartmental co-ordination
Primary-support Computer-based operational systems
Support-support Managing innovation through people
External linkage Vertical integration Extend ownership of activities in supply / distribution chain
Specification and checking ... of supplier / distributor performance
Total quality management Working with suppliers /distributors to improve
Merchandising activities their performance
Reconfigure value chain ... by deleting activities
Strategic alliances
Johnson, Scholes & Whittington, 2011

32. Activity Develop a Value System for Tesco Consider:
The activities that add or detract value
Linkages between activities
External links that are important to achieving value

33. Value Chain Analysis Key steps: study each type of activity in turn
examine whether it creates value for the company or simply adds to its costs
compare the value created by each type of activity against the costs of the resources it consumes
identify key activities that add value to the company
identify key activities that add only costs to the company

34. Value Chain Analysis Guide to practical application:
nature of organisation differs from one to the next
focus on important activities
identify where possible the contributions each support activity makes to the primary activities
link the analysis of activities to the prospect of increasing the perceived value (external measure)
examine the possibility of cost reduction (internal measure)
evaluate ways to increase value/reduce cost by forward/backward integration along the value system (to be considered in greater depth when discussing strategic options)