Business planning and strategy chapter 3

Managing core competencies

1. Careful analysis of firms resources and capabilities. 2. Human knowledge is the most significant. 3. Capabilities more likely to become core competencies than individual resources.

What are the most important sources of competitive advantage?

1. Core competence 2. Product market position

Tangible resource primary categories

1. Financial 2. Organizational 3. Physical 4. Technological

Intangible resources

1. Human resources, 2. Innovation resources 3. Reputational resources.

When a capability is what it becomes core competency and source of competitive advantage

1. Rare 2. Valuable 3. Costly to imitate 4. Nonsubstitutable

What are the foundations of competitive advantage?

1. Resources 2. Capabilities 3. Core competencies.

What 2 tools help firms develop their core competency?

1. Sustainable competitive advantage: a. Valuable capabilities b. Rare capabilities c. Costly to imitate capabilities d. Nonsubstitutable capabilities 2. Value chain analysis a. Used to select the value creating competencies that should be maintained, upgraded or developed and those that should be outsourced.

Competitive advantage's sustainability is a function of what 3 factors

1. The rate of core competence obsolescence because of environmental changes. 2. The availability of substitutes for the core competence, 3. The imitability of the core competence.

What 3 conditions affect managers as they analyze the internal organization

1. Uncertainty 2. Complexity 3. Intra organizational conflict

Requirements for a capability and a core competence to be a source of competitive advantage

1. Valuable 2. Rare 3. Costly to imitate 4. Nonsubstitutable.

Four criteria of sustainable competitive advantage

1. Valuable capabilities 2. Rare capabilities - how many competitors possess these valuable capabilities. 3. Costly to imitate - causally ambiguous 4. Nonsubstitutable - Don't have strategic equivalents.

Describe four criteria used to determine whether resources and capabilities are core competencies.

1. Valuable capability 2. Rare capability 3. Costly to imitate capability 4. Nonsubstitutable capability

Value chain analysis

Allows firm to understand parts of its operation that create value and those that do not.

Explain how firms analyses their value chain for the purpose of determining where they are able to create value when using their resources, capabilities, and core competencies.

Allows firms to understand the parts of their business that create value and the parts that do not.

Value chain activities

Are activities or tasks the firm completes in order to produce products and then sell, distribute, and service those products in ways that create value for customers.

Discuss the importance of identifying internal strengths and weaknesses.

By analyzing firms are able to identify their strngths and weaknesses in resources, capabilities, and core competencies.

How is value created?

By innovatively bundling and leveraging thei resources to form capabilities and core competencies. Firms with a competitive advantage create more value than their competitors.

Define capabilities and discuss their development.

Capabilities are created by combining tangible and intangible resources. Capabilities are used to complete the organizational tasks.

Costly to imitate capabilities

Capabilities that other firms cannot easily develop

Resources

Combined to form capabilities

Who do you outsource to?

Companies possessing competitive advantage.

Consider outsourcing when?

Firm cannot create value in either a value chain or a value chain support activity.

Value chain analysis?

Identify and evaluate competitive potential of resources and capabilities.

Support functions

Include the activities or tasks the firm completes in order to support the work being done to produce, sell, distribute, and service the products the firm is producing

Outsourced jobs are returning due to

Increase wages in China and abundant energy and low natural gas prices.

Value

Is measured by a product's performance characteristics and by its attributes for which customers are willing to pay.

Outsourcing

Is the purchase of a value creating activity or a support function activity from an external supplier.

Define outsource and discuss reasons for its use

Is the purchases of a value creating activity or a support function activity from an external supplier. Use when their value chain activities and support functions are not a source of core competence.

Most significant organization capability?

Knowledge of the firms human capital.

How many organizational decisions fail?

One half

A Global mindset

Pg 74 Is the ability to analyze, understand and manage an internal organization in ways that are not dependent on the assumptions of a single country, culture or context

Outsourcing concerns

Potential loss of firms innovative ability and loss of jobs within a company.

Value chain activities

Produce, sell , distribute products of support functions.

Describe the differences between tangible and intangible resources

Tangeble are assets that can be observed and quantified. Intangible include assets that are rooted deeply in the firms history, accumulate over time, and are relatively difficult for competitors to analyze and imitate.

Explain why firms need to study and understand their internal organization

To match what a firm can do (a function of its resources, capabilities, and core competencies in the internal organization) with what it might do (a function of opportunities and threats in the external environment) is a process that yields insights the firm requires to select its strategies.

Value chain analysis

Used to identify and evaluate competitive potential of resource and capabilities.

Define value and discuss its importance

Value is measured by a products performance characteristics and by its attributes for which customers are willing to pay.

When is outsourcing considered?

When a firm cannot create value in either a value chain activity or support functions.

Discuss the importance of avoiding core rigidities.

When competition find a better way to serve customers, core competencies can become core rigidities.

Strategic competiveness and above average returns results?

When core competencies (identified by studying the firm's internal organization) are matched with opportunities (determined by studying the firm's external environment.

What do effective organizations recognize what drives strategic competiveness and above average return results?

When core competencies are matched with opportunities.

When are core competency provide competitive advantage?

When they allow the firm to create value by exploiting opportunities in its external environment.

Valuable capabilities

allow the firm to exploit opportunities or neutralize threats in its external environment

Rare capabilities

are capabilities that few, if any, competitors possess.

Tangible resources

assets that can be observed and quantified

Nonsubstitutable capabilities

capabilities that do not have strategic equivalents

Intangible resources

include assets that are rooted deeply in the firm's history, accumulate over time, and are relatively difficult for competitors to analyze and imitate