DISCUSSION POST DUE

Week 1 Addendum

Outsource

Discovering Core Competencies

The challenge of the internal analysis is not being honest in identifying what the firm’s core competencies are and selecting resources and capabilities that do not yield a competitive advantage.

Functional Areas	Capabilities	Examples of Firms
Distribution	Effective use of logistics management techniques	Wal-Mart
Human Resources	Motivating, empowering, and retaining employees	Microsoft Corp.
Management Information Systems	Effective and efficient control of inventories through point-of-purchase data collection methods	Wal-Mart
Marketing	Effective promotion of brand-name products	Gillette Co. Polo Ralph Lauren Corp. McKinsey & Co.
	Effective customer service	Nordstrom Inc. Solectron Corporation Norrell Corporation
	Innovative merchandising	Crate & Barrel
Management	Ability to envision the future of clothing	Gap Inc.
	Effective organizational structure	PepsiCo
Manufacturing	Design and production skills yielding reliable products	Komatsu
	Product and design quality	Gap Inc.
	Miniaturization of components and products	Sony
Research & Development	Innovative technology Development of sophisticated elevator	Caterpillar Otis Elevator Co.
	control solutions
	Digital technology	Thomson Consumer Electronics

“…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:

The Four Criteria of Sustainable Competitive Advantage
Valuable Capabilities	Helps a firm neutralize threats or exploit opportunities
Rare Capabilities	Are not possessed by many others
Costly-to-Imitate Capabilities	Historical: A unique and valuable organizational culture or brand name Ambiguous cause: The causes and uses of a competence are unclear Social complexity: Interpersonal relationships, trust, and friendship among managers, suppliers, and customers
Nonsubstitutable Capabilities	No strategic equivalent

Outcomes from Combinations of the Criteria for Sustainable Competitive Advantage