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RESOURCE, CAPABILITIES, CORE COMPETENCIES, AND ACTIVITY ANALYSIS. The fundamental building blocks for building winning strategies. Key Elements of Business Strategies: Understanding Resources, Capabilities, and Competencies is the key.

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resource capabilities core competencies and activity analysis

RESOURCE, CAPABILITIES, CORE COMPETENCIES, AND ACTIVITY ANALYSIS

The fundamental building blocks for building winning strategies

slide2
Key Elements of Business Strategies:Understanding Resources, Capabilities, and Competencies is the key
  • Selecting a business strategy that exploits valuable resources and distinctive competencies (ie. competitive advantages)
  • Ensuring that all resources and capabilities are fully employed and exploited
  • Building and regenerating valuable resources and distinctive competencies -- competitive advantages
rationale for the resource based approach to strategy
Rationale for the Resource-based Approach to Strategy
  • When the external environment is subject to rapid change, internal resources and capabilities offer a more secure basis for strategy than market focus
  • Resources and capabilities are the primary source of profitability. Firm-specific strategic differences account for 50-70 percent of observed differences in firms’ profits
resources capabilities and competitive advantage the basic relationships
Resources, Capabilities, and Competitive Advantage: The Basic Relationships

INDUSTRY

KEY

SUCCESS

FACTORS

COMPETITIVE

ADVANTAGE

STRATEGY

ORGANIZATIONAL

CAPABILITIES

RESOURCES

Tangible

Intangible

Human

slide5

Categories of Firm Resources

• Financial

$ ¥ £

• Physical

• Human

• Technological

• Reputational

valuable resources and competencies the key to competitive advantages
Valuable Resources and Competencies: The “key” to Competitive Advantages
  • Resources can be:
    • Physical ie the wiring into your home (ramp for the info highway)
    • Human ie. skilled and creative employees (Wal*Marts’ dedicated employees)
    • Intangible ie. brand names and technological know-how (Coca-Cola, Disney, Sharp LCDs)
    • Organizational Capabilities embedded in the business’ routines, processes, culture (Japanese auto makers)
defining organizational capabilities
Defining Organizational Capabilities

Organizational Capabilities = firm’s capacity for undertaking a particular activity. (Grant)

Distinctive Competence = things that an organization does particularly well relative to competitors. (Selznick)

Core Competence = capabilities that are fundamental to a firm’s strategy and performance. (Hamel and Prahalad)

slide8

What Makes a Resource Valuable?

Scarcity

Appropriability

Demand

Value creation zone

The dynamic interplay of three fundamental market forces determines the value of a resource.

Source: Collis and Montgomery, Corporate Strategy (1996)

slide9

Resource Imitability

Cannot be imitated:

Patents

Unique location

Unique assets

(e.g. Mineral rights)

Difficult to Imitate:

Brand Loyalty

Favorable cost position

Employee Satisfaction

Reputation for Fairness

Can be Imitated (but may not be):

Capacity Pre-emption

Economies of Scale

Easy to Imitate:

Cash

Commodities

Source: Collis and Montgomery, Corporate Strategy: Resources and the Scope of the Firm (1996).

first mover advantages in resource acquisition
First-Mover Advantages in Resource Acquisition
  • Patents
  • Brand Recognition
  • Reputation
  • Accumulated Learning
  • Attractive Locations
  • Installed Base
identifying a company s capabilities and value chain

• Capability in basic

e.g., IBM, AT&T,

research

Sony

• Ability to produce

• 3M

innovative products

• Canon

• Speed of new

product development

Identifying a Company’s Capabilities and Value Chain

Identifying a Company's Capabilities

Functional Area

Capability

Example

• Corporate head office

• Management information

• Research and development

• Manufacturing

• Product design

• Marketing

• Sales and distribution

Source: Robert M. Grant,

Contemporary Strategy Analysis

, Basil Blackwell, 1991.

summary key elements of resource based strategy
Summary: Key Elements of Resource-Based Strategy
  • Select a strategy that exploits principal resources and competencies.
  • Ensure that resources are fully employed and exploited.
  • Build a resource base.

Source : Hamel and Prahalad

strategic implications of competing on resources
Strategic Implications of Competing on Resources
  • Investing in resources, continually
  • Upgrading resources, creating or acquiring new resources, finding alternatives resources
  • Leveraging resources
  • Rapid redeployment of resources