THE INTERNAL ORGANIZATION RESOURCES, CAPABILITIES, CORE COMPETENCIES AND COMPETITIVE ADVANTAGES...

THE INTERNAL

ORGANIZATION

RESOURCES, CAPABILITIES,

CORE COMPETENCIES AND

COMPETITIVE ADVANTAGES

Lecturer :Pooneh Latifi

Ani Ardashtian

Nastaran Aliyazdi

Omid Ahmadi

INTERNAL MANAGEMANT PROCESS

Overview:

Importance of understanding internal organization

Value: Definition and importance

Tangible vs intangible resources

Capabilities: Definition and development

Core competencies: Criteria (N=4)

Value Chain Analysis

Outsourcing: Definition and “why?”

Importance of internal organization assessment

• Revenue : 70 € billion in 2007

• Profit : 14 € billion in 2007

• Proven gas reserve : 17 % in the world , over 60 % in Russia

• Gazprom has the most natural resources in the world

• Decreasing Gazprom’s market capitalization ( 350 to 90 in 2009 )

• State the desired objective.

• Use multiple points if necessary.

Crisis in Gazprom

While the credit in 2008 depressed oil prices

Internal Organization

External Enviornment

matches

What different perspectives are gained from external

compared to internal analyses of the firm?

External and internal analyses:

enviornment

sociocultral

technoligical

Competitor enviorment

Industry enviorment

By studying the external enviorment, firms identify what they might choose to do

Opportunities and threats

general

External and internal analyses:

What different perspectives are gained from external compared to internal analyses of the firm?

By studying the internal enviorment, firms identify what they can do

Unique Resources, Capabilities, and Competencies(required for sustainable competitive advantage)

The firm

No competitive advantage lasts for everOver time rivals use their own unique resources

,capabilities , and core competencies to duplicate the focal firm’s ability to create value for customers

With globalization ,sustainable competitive advantage is especially challenging

COMPETITIVE ADVANTAGE

KEY POINTS:

Firms must exploit their current advantages while simultaneously using their resources and capabilities to form new advantages that can lead to future competitive success

Innovation and people are critical resources for organizations in their quest for competitive advantage

COMPETITIVE ADVANTAGE

KEY POINTS:

What is an Internal Analysis ?

Identifies and evaluates resources, capabilities, and core competencies

Looks at the organization’s

Current vision Mission Strategic objectives Strategies

Case study

Ge builds management capabilities and shares them with others

GE was considerd one of the best organization for management talent in the world . Shareholders value. Extensive leadership and team based training . World class management development programme . Considering management development program as a core

competency for General Electic . Jack welshs success as CEO . Analyzing CEOs by University researches and scholars and

success of CEOs of General Electic Financial problems for GE

Case analysiss

Management development program

Jack Welsh as CEO

ANALYZING THE INTERNAL ORGANIZATION (IO)Challenge of Internal Analysis:

Learning• Generated by making and correcting mistakes ; can be important in creating new

capabilities and core competencies

Judgment is required under these condition• Decision makers often take intelligent risks

• With good judgment, successful strategic leaders achieve strategic competitiveness

Judgement

Judgment is required when there is no model for current problem to be solved or information is not reliable or incomplete

Judgement• Judgement as important source for core competency

• It builds strong reputation for organization

• General electronic made an effective judgment based on two reasons

Creating more value for shareholders over time than other companies

Managers of GE have been absorbed by other companies as CEOs

Resources, Capabilities and Core Competencies

Core competencies

Capabilities

Resources• Tangible• intangible

Bundles to created organizational capabilitiesTangible and intangible

Source of a firm’s core competencies and basis for CAPurposely integrated to achieve a specific task/set of tasks

Capabilities that serve as a source of CA for a firm over its rivalsDistinguish a company from its competitors – the personality

Capabilities


Core competencies


Resources

• Resorces cover a spectrum of individual, social and organizational phenomena .

• Having resources is not a core competencey .

• Bundling different resources can make a core competency for organization.

core competency

financial

resorces

physical resources

Intangible•Assets rooted deeply in the firm’s history, accumulated over time•In comparison to ‘tangible’ resources, usually can’t be seen or touched •Examples include knowledge, trusts, organizational routines, capabilities, innovation, brand name, reputationChallenge is to understand the strategic value of the firm’s Tangible and Intangible resources We can leverage them

Tangible•Assets that can be seen, touched and quantified•examples include financial resources, physical resources and technological resources •we can not leverage them


Resouces

tangible

finacial

borrowing capacity

ability to generate internal funds

organizational

formal reporting structure

and planning

controlling and

coordinating system

physical

sophistication and location of

firms plant

access to raw material

technological

stock of technologh

y

copyright trade

secrets

intangible

human

knowledge

trust

managerial capability

organizational routins

innovation

ideas

scientific capability

capacity to innovate

reputational resouces

reputation with customer

brand name

product quality

durability

reputation with suppliersw

effective interactions

Tangible resources

Intangible resouces

Nowadays companies focus onIntangible resorces becausethey grow during time basedon experience andcommunications beside that,they are hard to be imitated .

Intangible resouces can beleveraged like the knowledgetransferd between clients

Core competencies

Capabilities


Capabilities are what a does, and represent the fir’s capacity or ability to integrate individual firm resources to achieve a desired objective

The foundation of many capabilities lies in the skill and knowledge of firm’s employee and their functional expertise, hence value of human factor is very crucial in above

A company values derives not from tings but from knowledge , know how, intellectual assets and competencies –all of it embedded in people


Capability

Capability• development of human capital knowledge

• collectivism of knowledge

• GEs success in integrating knowledge of managers

Capability

Why Do an Internal Analysis ?

It is only way to identify an organization’s strengths and weakness

It’s needed for making good strategic decisions

ANALYZING THE INTERNAL ORGANIZATION (IO)

Context of Internal Analysis:

“Global Economy”The traditional sources of advantages can be overcome by competitors’ international

strategies and by the flow of resources throughout the global economy

“Global mindset”The ability to study an internal enviornment in ways that are not dependent on the assumptions of a single country, culture or context

“Analysis Outcome”Understanding how to leverage the firm’s bundle of heterogeneous resources and capabilities

Discovering core

competencies

Components of Internal Analysis:

Competitive advantage

Strategic competitiveness

Value chain

analysis

outsource

Four criteria of sustainable advantages

• Valuable• Rare• Costly to Imiate• Nonsubstituable

Core competencies

Capabilities


Context of Internal Analysis:


“Creating value”By innovatively bundling and leveraging their resources and capabilities ; by exploiting their core competencies or competitive advantages ,firms create value

Value is measured by: Product performance characteristic

Product attributes for which customers

Superior value above average returns


Challenge of Internal Analysis: How do we effectively manage current core competencies while simultaneously

developing new ones ?

How do we assemble bundles of resources , capabilities and core competencies to create value for customers ?

How do we learn to change rapidly ?

Challenge of Internal Analysis: Strategic decisions are non-routine, have ethical implications and influence the

organization’s above-average returns

• Involves identifying, developing, deploying and protecting firms’ resources, capabilites and core competencies

Managers face uncertainty on many fronts --• Proprietary technologies• Changes in economic and political trends, societal values and shifts in

customer demands• Environment – increases complexity

Intraorganizational conflict• Due to decisions about core competencies and how to nurture them

condition

condition

condition

UncertaintyExists about the characteristics of the firm’s

general and industry enviorment and customers’ needs

ComplexityResults from the interrelationships among

conditions shaping a firm

Intraorganizational conflictsMay exist among managers making

decisions as well as among those affected by the decisions


Conditions Affecting Managerial Decisions About Resources,

capabilities and Core competence

ANALYZING THE INTERNAL ORGANIZATION (IO)Challenge of Internal Analysis:

Learning• Generated by making and correcting mistakes ; can be important in creating new

capabilities and core competencies

Judgment is required under these condition• Decision makers often take intelligent risks

• With good judgment, successful strategic leaders achieve strategic competitiveness


Core competencies

Capabilities


Bundles to created organizational capabilitiesTangible and intangible

Source of a firm’s core competencies and basis for CAPurposely integrated to achieve a specific task/set of tasks

Capabilities that serve as a source of CA for a firm over its rivalsDistinguish a company from its competitors – the personality

Capabilities


Core competencies


Intangible•Assets rooted deeply in the firm’s history, accumulated over time•In comparison to ‘tangible’ resources, usually can’t be seen or touched •Examples include knowledge, trusts, organizational routines, capabilities, innovation, brand name, reputationChallenge is to understand the strategic value of the firm’s Tangible and Intangible resources

Tangible•Assets that can be seen, touched and quantified•examples include financial resources, physical resources and technological resources


Core competencies

Capabilities


Capabilities are what a does, and represent the fir’s capacity or ability to integrate individual firm resources to achieve a desired objective

The foundation of many capabilities lies in the skill and knowledge of firm’s employee and their functional expertise, hence value of human factor is very crucial in above

A company values derives not from tings but from knowledge , know how, intellectual assets and competencies –all of it embedded in people


Core competencies

Capabilities



Core competencies are resources and capabilities that serve as a source of competitive advantage over rivals

Core competencies distinguish a company competitively and make it distinctive

McKinsey and Co. recommends using three to four competencies when framing strategic actions

Emerge over time through an organizational process of accumulating and learning how deploy different resources and capabilities

Are activities that a firm performs especially well compared to competitors and through which firm adds unique value


Core competencies :

Building Core Competencies: Criteria and Value Chain Analysis

Four specific criteria of

sustainable (CA)

Value Chain Analysis

Two tools firms use to identify and build on their core competencies

Discovering core

competencies

Four criteria of sustainable advantages

• Valuable• Rare• Costly to Imiate• Nonsubstituable

Valuable :capabilities that help a firm neutralize threats or exploit opportunities

Rare : Are not possessed by many others

A. Historical: A unique and a valuable organizational culture or brand name

B. Ambiguous cause: The causes and uses of a competence are unclear

C. Social complexity: Interpersonal relationships, trust, and friendship among managers, suppliers and customers

Costly to imitate:

Nonsubstituable :No strategic equivalent

• Understanding about parts of operations

• The value chain is a template

• Using value chain for facilitating implementation of a chosen business-level strategy

• Value chain shows how a product moves from raw material stage to the final customer

Support activities provide the assistance necessary for primary activities to take place

Primary activities are involved with a product’s physical creation, its sale and distribution to buyers and its service after the sale

Operations

Outbound logistics

Inbound Logistics

Marketing and Sales

Service

Technological Development

Procurement

HRM

Firm Infrastructure includes activities such as general management, planning, finance and …. That are required to support the work of the entire value chain

Social capital the networks of relationships among people who live and work in a particular society, enabling that society to function effectively.

Factor for building social capital :

Trust between parties

Trust between parties means they allow each other to use their resources

What Drives Outsourcing Success?

THE INTERNAL ORGANIZATION RESOURCES, CAPABILITIES, CORE COMPETENCIES AND COMPETITIVE ADVANTAGES...

Documents

Transcript of THE INTERNAL ORGANIZATION RESOURCES, CAPABILITIES, CORE COMPETENCIES AND COMPETITIVE ADVANTAGES...