internal analysis: resources, capabilities, and activities joe mahoney
TRANSCRIPT
![Page 1: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/1.jpg)
Internal Analysis: Resources, Capabilities,
and Activities
Joe Mahoney
![Page 2: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/2.jpg)
Internal Analysis: Inside the Firm
• Comparing two firms in same industry:
Internal focus
Core Competencies
Unique strengths deep inside that differentiate a firm
Can drive competitive advantage
Strategic Fit Internal strengths fit with the external
environment
![Page 3: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/3.jpg)
Creating Strategic Fit to Leverage Internal Strengths
4–3
![Page 4: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/4.jpg)
The Role of Strategy in Business is to Generate and Sustain Value via the Linkages Between
Positioning, Organization, and Resources & Capabilities
Positioning
Organization Resources & Capabilities
4–4
![Page 5: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/5.jpg)
Positioning
• Scope of the Firm:
Geographic scope
Product-market scope: Choice of businesses (corporate portfolio analysis)
Product market positioning within a business
Vertical integration (value chain) decisions
![Page 6: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/6.jpg)
Organization
• Structure Formal definition of authority Conflict resolution
• Systems Rules, routines, evaluation and rewards
• Processes Informal communication, networks, and recruitment
4-6
![Page 7: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/7.jpg)
Resources and Capabilities
• Tangible resources e.g., physical capital
• Organizational capabilities e.g., routines and standard operating procedures
• Intangible resources e.g., trademarks, “know-how”
![Page 8: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/8.jpg)
IndividualIndividual OrganizationOrganization
ExplicitExplicit
TacitTacit
InformationFacts
Scientific kn.
DatabasesSystems & procedures
Intellectual property
Skills Organizationalcapabilities
CRAFTENTERPRISES
‘INDUSTRIAL’ ENTERPRISESTypes
ofKnowledge
Typesof
Knowledge
Levels of knowledgeLevels of knowledge
Knowledge Types and Knowledge ConversionKnowledge Types and Knowledge Conversion
4–8
![Page 9: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/9.jpg)
Linking Resources and Capabilities to Firm Performance
![Page 10: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/10.jpg)
Company Examples of Core Competencies and Applications
![Page 11: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/11.jpg)
Precision Mechanics
FineOptics
Micro-Electronics
35mm SLR cameraCompact fashion cameraEOS autofocus camera
Digital cameraVideo still camera
Plain-paper copierColor copier
Color laser copier Laser copierBasic fax
Laser faxMask aligners
Excimer laser alignersStepper aligners
Inkjet printerLaser printer
Color video printerCalculator
Notebook computer
Canon: Products and Core Technical CapabilitiesCanon: Products and Core Technical Capabilities
4–11
![Page 12: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/12.jpg)
Tangible and Intangible Resources
4–12
![Page 13: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/13.jpg)
Appraising ResourcesAppraising Resources
RESOURCE CHARACTERISTICS INDICATORS
Financial Borrowing capacity Debt/ Equity ratio
Internal funds/ generation Credit rating
Tangible Net cash flow
Resources Physical Plant and equipment: Market value of
size, location, technology fixed assets.
flexibility. Scale of plants
Land and buildings. Alternatives for fixed
Raw materials. assets
Technology Patents, copyrights, know how No. of patents owned.
R&D facilities. Royalty income
Intangible Technical and scientific R&D expenditure.
Resources employees R&D staff
Reputation Brands. Customer loyalty. Company Brand equity. Product
reputation (with suppliers, customers, price premium.
government) Recognition.
Human Training, experience, adaptability, Employee qualifications,
Resources commitment and loyability of customers pay rates, turnover.
![Page 14: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/14.jpg)
The Resource-based View
• Google Example
Tangible resources valued at $5 billion
Intangible brand valued at over $100 billion
Googleplex has both tangible and intangible aspects
• Competitive Advantage More Likely…..
From intangible resources4–14
![Page 15: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/15.jpg)
Two Critical Resource Dimensions in RBV
• Resource heterogeneity Bundles of resources and capabilities differ across firms Southwest Airlines and Alaska Airlines have different
resources SWA
– Higher employee productivity
– Informal organization, pilots help load luggage
• Resource immobility Resources tend to be “sticky” and do not move easily Southwest Airlines sustained advantage
Several decades superior performance Competitors have unsuccessfully imitated SWA model
4–15
![Page 16: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/16.jpg)
Applying RBV: Decision Tree Competitive Implications
![Page 17: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/17.jpg)
Scarcity
Relevance
Durability
Mobility
Replicability
Property rights
Relative bargainingpower
Embeddedness ofresources
THE EXTENT OF THE COMPETITIVE ADVANTAGE
ESTABLISHED
SUSTAINABILITY OF THE COMPETITIVE ADVANTAGE
APPROPRIABILITY
THE PROFITEARNING POTENTIALOF A RESOURCE OR
CAPABILITY
The Rent-Earning Potential of Resources and Capabilities
The Rent-Earning Potential of Resources and Capabilities
![Page 18: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/18.jpg)
The Value Chain
• Primary Activities Add value directly in transforming inputs into outputs
Raw materials through production to customers
• Support Activities Indirectly add value
Provide support to the primary activities Information systems, human resources, accounting, etc.
• Managers can see how competitive advantage flows from a system of activities (using activity-based accounting).
3-4Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
The Value Chain
Adapted from Exhibit 3.1 The Value Chain: Primary and Support Activities
Source: Adapted with permission of The Free Press, a division of Simon & Schuster, Inc., from Competitive Advantage: Creating and Sustaining Superior Performance by Michael E. Porter.
General administration
Human resource management
Technology development
Procurement
Inbound logistics
Operations Outbound logistics
Marketing and sales
Service
4–18
![Page 19: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/19.jpg)
Value Chain: Primary and Support Activities
![Page 20: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/20.jpg)
© 1999 Pankaj Ghemawat
Hostess’s Cost Components
0
10
20
30
40
50
60
70
80
Cen
ts p
er u
nit
Profit
Marketing: Promotions
Marketing: Advertising
Outbound logistics
Operations: Manufacturing
Operations: Packaging
Operations: Ingredients
![Page 21: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/21.jpg)
© 1999 Pankaj Ghemawat
Relative Cost Analysis
0
10
20
30
40
50
60
70
80
90
Hostess Little Debbie Ontario Baking Savory Pastries
Cen
ts p
er u
nit
Profit
Marketing: Promotions
Operations: Manufacturing
Operations: Packaging
Operations: Ingredients
Marketing: Advertising
Outbound logistics
![Page 22: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/22.jpg)
Value Chain Analysis
• Outsourcing activities can have the unintended consequence of damaging the firm’s potential to evaluate continuously its key assumptions, learn, and create new capabilities and core competencies. Thus, managers should verify that the firm does not outsource activities that stimulate the development of new capabilities and competencies.
4–22
![Page 23: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/23.jpg)
Strategic Coherence
The Logic of How The Business Fits Together:
•Southwest Airlines Low Price Short Routes
•No Frills•Point-to-Point•One Aircraft --
Boeing 737•High number of
Aircraft per Route•No Meals•Flexible/ Lower
Staffing
•American Airlines Premium Price Short, Long, & Int’l Variety
•Hub & Spoke System•Multiple Aircraft•Low number of
Aircraft per Route•Meals & Service•Higher Staffing
![Page 24: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/24.jpg)
24
Southwest Airline’s Activity System
Limitedpassengeramenities
Short-haul,point-to-pointroutes betweenmidsize cities
and secondaryairports
Highaircraft
utilization
Frequent,reliable
departures
Lean, highlyproductiveground andgate crews
Very lowticket prices
No meals
No seatassignments
No baggagetransfers
No connectionswith other
airlines
15-minutegate
turnarounds
Limited useof travelagents
Automaticticketingmachines
Standardizedfleet of 737
aircraft
Flexibleunion
contracts
High levelof employee
stockownership
“Southwest,the low-fare
airline”
Highcompensationof employees
![Page 25: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/25.jpg)
Strategic Coherence: Fit and Balance
• A fit among corporate, business, and functional strategy;
• A fit between strategy formulation and implementation;
• A balance of commitment and flexibility;
• A balance among stakeholders;
• A balance of competition and cooperation;
• A balance of hiding and diffusing information;
• A balance of centralization and decentralization; and
• A balance between stability and change.
4–25
![Page 26: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/26.jpg)
Strategic Coherence
• Combining activities that complement and reinforce one another. These activities dovetail together to help achieve the overall objectives of the firm.
• Such strategies, which may regarded as systems of activities are often more successful because they are more difficult to imitation. Thus, they can lead to a sustainable competitive advantage.
• Strategic coherence may not be a sufficient condition for attaining a competitive advantage, but it is often a necessary one.
4–26
![Page 27: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/27.jpg)
Strategic Coherence
• A sustainable competitive advantage often requires trade-offs. These tradeoffs arise for at least three reasons:
Inconsistencies in image or reputation.
Tradeoffs arising from the activities themselves.
Limits on internal coordination and control
• General management at its core is strategy:
Defining and communicating the company’s unique position; Making tradeoffs; Forging a dynamic fit among activities (i.e., strategic coherence). 4–27
![Page 28: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/28.jpg)
Dynamic Strategic Activity Systems
• A network of interconnected activities in the firm
• Evolve over time – external environment changes Add new activities & upgrade or remove obsolete
ones
• Vanguard Example A global investment firm - $1.4 trillion managed assets
Emphasis on low customer cost and quality service – Among the lowest expense ratios in the industry (0.20%)
Updated the activity system from 1997 to 2011 New customer segmentation core Two new support activities Permits customized offerings: long-term and more active traders
4–28
![Page 29: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/29.jpg)
Vanguard Group’s Activity System 1997
Legend
Core
Support
4–29
![Page 30: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/30.jpg)
Vanguard Group’s Activity System 2011
Legend
Core
Support
4–30
![Page 31: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/31.jpg)
Dynamic Capabilities Perspective
• A firm can modify its resource base to gain & sustain a competitive advantage
Advantage is gained from reconfiguring a firm’s resource base
Honda core competency in gas-powered engine design Could decrease in value
If consumers move toward electric-powered cars
BYD competency in batteries would gain advantage
• Dynamic capabilities are an intangible resource
• Resource stocks and flows are a useful view4–31
![Page 32: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/32.jpg)
Role of Inflows and Outflows in Building Stocks
4–32
![Page 33: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/33.jpg)
IBM Product Scope 1993 and 2010
In 1993, hardware accounted for 50% of IBM revenues
In 2010, software & (IT) services accounted for 80% of IBM revenues,
hardware was down to 18%
4–33
![Page 34: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/34.jpg)
How to Protect a Competitive Advantage
1. Better Expectations of Future Values Buy Resources at a low cost
Real Estate Development - highway expansion
2. Path Dependence Current alternatives are limited by past decisions
Honda’s core competency in gas engines took decades to build
4–34
![Page 35: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/35.jpg)
1948 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995
Founding ofHonda motor
company
50cc 2-cycle engine
4 cycle engines
405ccmotorcycle
Related products:ground tillers, marineengines, generators,pumps, chainsaws
First product: clip-on engine
for bicycles
The 50ccsuper-cub
N360 minicar
1000ccGoldwingtouring
motor cycle
Acura Cardivision
The Evolution of Honda Motor CompanyThe Evolution of Honda Motor Company
![Page 36: Internal Analysis: Resources, Capabilities, and Activities Joe Mahoney](https://reader035.vdocument.in/reader035/viewer/2022062309/5697bfd31a28abf838cac510/html5/thumbnails/36.jpg)
How to Protect a Competitive Advantage
3. Causal Ambiguity Cause of success or failure are not apparent
Why has Apple had such a string of successful products?– Role of Steve Jobs’ vision?– Unique talents of the Apple design team?– Timing of product introductions?
4. Social Complexity Two or more systems interact creating many possibilities
A group of 3 people has 3 relationships
A group of 5 people has 12 relationships
4–36