strategic mgmt hw

Chapter 3 : The Internal Organization: Resources, Capabilities, Core Competencies and Competitive Advantages Questions : - Do those companies have the same success in the marketplace? - Do the external environment factors explain the difference in terms of success ? - Are there other factors explain the difference in terms of success? Lenovo Mobile Phone Industry Nokia Motorola Apple Samsung Huawei Introduction Figure: External & Internal Environment Analysis Analyzing macro -environment and micro environment . (General, industry, and competitive analysis ) Analyzing resources and capabilities. Making good decisions/actions Acquiring a competitive advantage Identifying Opportunities and Threats Identifying Strengths and Weaknesses External Analysis Internal Analysis Resource -Based View (RBV) - Managers need to understand how their organizations are different from their rivals in ways that may be the basis of achievin g competitive advantage and superior performance. - These concepts underlie what has become known as the Resource -Based View (RBV) of strategy. Resource -based View (RBV) - The competitive advantage and superior performance of an organization are explained by the distinctiveness of its resources a nd capabilities. - RBV is a management device used to assess a company’s assets which based on the idea that the effective and efficient use of a company’s assets enable it to build a competitive advantage and improve its performance. Competitive advantage: Anything that a firm does especially well compared to its competitors. Components of Internal Analysis Resources -Tangible -Intangible Core Competencies Capabilities Competitive Advantage Discovering Core Competencies Value Chain Analysis VRIN Figure: Components of internal analysis leading to competitive advantage Internal Analysis is a powerful tool for evaluating a company’s assets and determining whether the assets can support a sustainable competitive advantage over market rivals. Resources: - The firm’s assets that provide the firm the means to perform its activities and achieve its goals . - Assets owned by a firm . - What firm possesses .  Categories of resources :Tangible and intangible  Tangible Resources:  Financial resources • Cash flow, suppliers of funds,  Physical resources • Machines, buildings, raw materials, firm location,  Technological resources • Superior production technology, patents , copyrights,  Organizational resources • The firm’s structure, strategy process, coordinating system, communication and information systems, controlling system, Components of Internal Analysis  Intangible Resources  Human resources • Experienced and skilled workforce • Managerial know -how and skills • Talented employees in key areas  Reputational resources • Brand, image, reputation, • Perceptions of product quality, durability, and reliability • Relationship with customers, employees, suppliers  Company culture • Innovation -oriented culture : Creativity, risk -taking, innovation, • Employee -oriented culture : involvement, development, engagement, empowerment, • Customer -oriented culture : “Customer is king” • Ethical culture : Trust, fairness , integrity, ….. Components of Internal Analysis Capabilities: • … refer to the firm’s capacity to deploy its resources to achieve a desired purpose . • … are the ways those assets are used or deployed effectively . • What firm does .  Improves over time (practice/learning)  Requires investment to create and sustain The terms “ resources ” and “ capabilities ” are used interchangeably and often in parallel . Components of Internal Analysis Components of Internal Analysis 1) Form a group of three persons . 2) Choose a Kuwaiti company . 3) Identify the company’s resources and capabilities . 4) Share and discuss those resources and capabilities with your classmates . In -class Assignment Core Competencies:  Resources and capabilities that serve as a source of a firm’s competitive advantage . Components of Internal Analysis Examples : - Strong research and innovation - High quality - Low pricing - Strategic assets - High volume production - Customer satisfaction - Employee satisfaction and skills - ….. How discovering Core Competencies? Four Criteria (VRIN )  V aluable  R are  Inimitate  N on -substitutable Chain Value Analysis VRIN Framework Four Criteria : VRIN Four Criteria VRIN Rare How rare or limited are the resources? Non -substitutable Are the resources supported by different organizational systems? Valuable Do the resources allow you to take advantage of opportunities or neutralize threats? Inimitable How difficult is it to imitate the resources? Examples:

- Apple (Innovation) / Microsoft (Motivating, empowering, and training employees) - Wal -Mart (Cost reduction) / Volkswagen (High quality, reasonable price) Four Criteria : VRIN Value Chain Analysis Inbound Logistics Operations Outbound Logistics Marketing and Sales Service Firm Infrastructure Human Resource Management Technological Development Procurement -The value chain was developed in 1985 by Michael Porter . -It describes the categories of activities within an organization which, together, create a product . -It is a perspective in which business is seen as a chain of activities that should create value for customers . -These activities include :Primary activities and support activities . Inputs Outputs Value Chain Analysis  Inbound logistics : Activities such as materials handling, warehousing, inventory control ,used to receive, store, and distribute inputs to a product .  Operations : Activities necessary to convert the inputs provided by inbound logistics into final product form (machining, packaging, assembly, testing, etc .)  Outbound logistics : Activities involved with collecting, storing, and physically distributing the final product to customers (finished goods warehousing, order processing, distribution, etc .)  Marketing and sales : Activities completed to provide means through which customers can purchase products and to induce them to do so .To effectively sell products, firms develop advertising campaigns ,select appropriate distribution channels ,etc .  Service : Activities designed to enhance or maintain a product’s value (installation, repair, training, adjustment, etc .) Primary activities  Firm infrastructure : Activities that support the work of the entire value chain such as planning , finance, accounting, quality control, information management and organizational structure .  Technological development : Activities completed to improve a firm’s product and the processes used to manufacture it such as Research and Development, product design, etc .  Human resource management : Activities involved with recruiting, managing, training, developing, and rewarding people within the organization .  Procurement : Activities completed to purchase the inputs needed to produce a firm’s products such as raw materials, machines, buildings, etc . Each activity should be examined relative to competitors’ abilities and rated as superior ,equivalent or inferior . Support activities  Value Chain Analysis: Allows the firm to identify the activities that create value and those that do not . Value creation: Value is measured by a product’s performance characteristics and by its attributes for which customers are willing to pay. Value creation is the performance of activities/actions that increase the worth of goods, services or even a business. - Without Value -Creation , a business can’t exist: “Purpose of a company”. - Every successful business creates something of value. - The best businesses in the world are the ones that create the most value for other people . People: - Customers : High quality, innovative products, customer service,….. - Shareholders :To see their stake appreciate in value, ….. - Employees : Development, benefits, ….. Value Chain Analysis How an activity does not create customer value : - Poor quality products (Operation activity) - No R&D, No innovation (Technology development) - Low quality of raw materials (Inbound logistics) - Old machines (Procurement) - Unskilled and incompetent employees (Human resource Management) - People are not motivated, engaged, ambitious,… (Human resource Management) - Poor image and reputation (Marketing & sales) - Poor advertising (Marketing & sales) - Late delivery (Outbound logistics ) - …. Value Chain Analysis Definition :  Outsourcing one or some of its activities :to concentrate on the activities creating value . • The most frequently Outsourced Business Activities: Customer Support, Accounting, R&D, Data Entry, Computer Programming, Web Design, Manufacturing, Advertising,….. Outsourcing Offshoring: Refers to getting some activities of a company done in a different country. Reasons: lower labor costs, have access to customers, more favorable economic conditions , low tax rates,…..

Examples:

- Manufacturing/assembly activity in China . - France Telecom (Orange ): Call center in Morocco and Tunisia to serve French consumer. clients . - Dell Company: Customer service center in India to serve American clients. Outsourcing is a practice used by different companies by getting some of their activities done by others companies rather than completing them internally. Video: Business of offshoring and outsourcing. https ://www.youtube.com/watch?v=dZlcbGNC_3g Not having the necessary resources to do the activity well.

Doing the activity is very costly. The activity is not creating value. Outsourcing that activity SWOT Analysis SWOT analysis is a framework that enables organizations to identify and analyze both internal and external influences . THANK YOU!