ch03.ppt
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This document discusses the internal environment of firms and how they can gain competitive advantage. It covers resources, capabilities, core competencies and using value chain analysis to identify areas that can add value. Core competencies must be valuable, rare, costly to imitate and non-substitutable. The value chain looks at primary and support activities. Firms can also outsource some activities. Value chains are part of a total value system involving suppliers, the firm, channels and buyers.
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- 1. Transparency 3-1 The Internal Environment: Resources, Capabilities and Core Competencies Michael A. Hitt R. Duane Ireland Robert E. Hoskisson ©1999 South-Western College Publishing
- 2. Transparency 3-2 What the Firm Might Do What the Firm Can Do Chapter 2 External Environment Five Forces Analysis Chapter 3 Internal Environment Resources, Capabilities and Core Competencies
- 3. Transparency 3-3 What the Firm Might Do What the Firm Can Do Chapter 2 External Environment Five Forces Analysis Chapter 3 Internal Environment Resources, Capabilities and Core Competencies Sustainable Competitive Advantage
- 4. Transparency 3-4 Resources * Tangible * Intangible Capabilities Teams of Resources Sources of Core Competencies Competitive Advantage Strategic Competitiveness Above-Average Returns Competitive Advantage Gained through Core Competencies Discovering Core Competencies Discovering Core Competencies
- 5. Transparency 3-5 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 Resources
- 6. Transparency 3-6 Resources * Tangible * Intangible Capabilities Teams of Resources Sources of Core Competencies Competitive Advantage Strategic Competitiveness Above-Average Returns Competitive Advantage Gained through Core Competencies Discovering Core Competencies Criteria of Sustainable Advantages Value Chain Analysis Discovering Core Competencies Valuable Rare Costly to Imitate Nonsubstitutable * * * * Outsource *
- 7. Transparency 3-7 Capabilities What a firm Does... Capabilities represent... the firm’s capacity or ability to integrate individual firm resources to achieve a desired objective.
- 8. Transparency 3-8 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
- 9. Transparency 3-9 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
- 10. Transparency 3-10 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
- 11. Transparency 3-11 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
- 12. Transparency 3-12 Support Activities Primary Activities Value Chain Analysis To identify which resources and capabilities can add value
- 13. Transparency 3-13 Support Activities Primary Activities Value Chain Analysis Inbound Logistics helps to identify which resources and capabilities can add value
- 14. Transparency 3-14 Support Activities Primary Activities Value Chain Analysis Inbound Logistics Operations helps to identify which resources and capabilities can add value
- 15. Transparency 3-15 Support Activities Primary Activities Value Chain Analysis Inbound Logistics Operations Outbound Logistics helps to identify which resources and capabilities can add value
- 16. Transparency 3-16 Support Activities Primary Activities Value Chain Analysis Inbound Logistics Operations Outbound Logistics Marketing & Sales helps to identify which resources and capabilities can add value
- 17. Transparency 3-17 Support Activities Primary Activities Value Chain Analysis Inbound Logistics Operations Outbound Logistics Marketing & Sales Service helps to identify which resources and capabilities can add value
- 18. Transparency 3-18 Support Activities Primary Activities Value Chain Analysis Inbound Logistics Operations Outbound Logistics Marketing & Sales Service helps to identify which resources and capabilities can add value Procurement
- 19. Transparency 3-19 Support Activities Primary Activities Value Chain Analysis Inbound Logistics Operations Outbound Logistics Marketing & Sales Service helps to identify which resources and capabilities can add value Procurement Technological Development
- 20. Transparency 3-20 Support Activities Primary Activities Value Chain Analysis helps to identify which resources and capabilities can add value Technological Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Human Resource Management
- 21. Transparency 3-21 Support Activities Primary Activities Value Chain Analysis Technological Development Human Resource Management Firm Infrastructure Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service helps to identify which resources and capabilities can add value
- 22. Transparency 3-22 Support Activities Primary Activities Value Chain Analysis Technological Development Human Resource Management Firm Infrastructure Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service helps to identify which resources and capabilities can add value
- 23. Transparency 3-23 Support Activities Primary Activities Technological Development Human Resource Management Firm Infrastructure Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Inbound Logistics Operations Outbound Logistics Service Marketing & Sales Technological Development Human Resource Management Procurement Firms often purchase a portion of their value-creating activities from specialty external suppliers who can perform these functions more efficiently Outsourcing - strategic choice to purchase some activities from outside suppliers Outsourcing - strategic choice to purchase some activities from outside suppliers
- 24. Transparency 3-24 To capitalize on the usefulness of the Value Chain concept... it is important to recognize that...
- 25. Transparency 3-25 Value Chains are part of a Total Value System Supplier Value Chain Firm Value Chain Channel Value Chain Buyer Value Chain
- 26. Transparency 3-26 Value Chains are part of a Total Value System Firm Value Chain Channel Value Chain Buyer Value Chain Supplier Value Chain Upstream Value Perform valuable activities that complement the firm’s activities
- 27. Transparency 3-27 Value Chains are part of a Total Value System Supplier Value Chain Firm Value Chain Buyer Value Chain Downstream Value Channel Value Chain Each firm must eventually find a way to become a part of some buyer’s value chain
- 28. Transparency 3-28 Value Chains are part of a Total Value System Supplier Value Chain Firm Value Chain Channel Value Chain Buyer Value Chain Ultimate basis for differentiation is the ability to play a role in a buyer’s value chain This creates VALUE!!
- 29. Transparency 3-29 Resources * Tangible * Intangible Capabilities Teams of Resources Sources of Core Competencies Competitive Advantage Strategic Competitiveness Above-Average Returns Discovering Core Competencies Value Chain Analysis Discovering Core Competencies Outsource * Valuable Rare Costly to Imitate Nonsubstitutable * * * * Criteria of Sustainable Advantages
- 30. Transparency 3-30 Comparative Market Share (%) by Installed Units 0 2 4 6 8 10 12 14 16 1988 1989 1990 1991 IBM Apple NEC Compaq
- 31. Transparency 3-31 Industry Growth (in $billions) 0 5 10 15 20 25 30 35 40 45 1982 1986 1990 1994 Desktops Portables Servers TOTAL
- 32. Transparency 3-32 Cost of Processing (MIPS) $75,000 $10,000 $2,000 $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 1980 1985 1991 Cost of Processing
- 33. Transparency 3-33 Comparative Profitability -5 0 5 10 15 20 25 1991 ROS (%) Apple IBM Compaq Dell Intel Microsoft
- 34. Transparency 3-34 5-Forces Model of Computer Industry Suppliers • O/S • Processors • Application Software • Memory Devices Buyers • Price Sensitive • Mass Merchandisers • Mail Order Substitutes • Workstations • Palm-tops/ PDA’s Potential Entrants • Low Entry Barriers Rivalry • New Products • More Marketing • Price Cutting • Outsourcing • Windows
- 35. Transparency 3-35 Strategic Group Map Pre-Windows Price Premium Low Strategic Focus - Differentiation Broad Narrow Apple IBM Sun Clones Compaq
- 36. Transparency 3-36 Strategic Group Map Post-Windows Price Premium Low Strategic Focus - Differentiation Broad Narrow Apple IBM Sun Clones Compaq Weakness
- 37. Transparency 3-37 Support Activities Primary Activities Value Chain Analysis Technological Development Human Resource Management Firm Infrastructure Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service How to Create Value in the PC Industry?
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