Lecture 3 Notes
Lecture 3 Notes
Internal analysis is important because the new competitive landscape makes it impractical and unrealistic for firms to expect they can sustain strategic competitiveness strictly by managing the costs of labor, capital, and raw materials. All firms can do this.
The I/O model presumes that resources and capabilities are distributed homogeneously among firms and easily move from one organization to another. (How firms react to the external environment is how firms differ.) The resource dependence model on the other hand, presumes a heterogeneous distribution of resources and capabilities and assumes they do not move freely between firms. By exploiting core competencies, firms can develop and perform value-creating strategies better than their competitors are either unwilling or unable to imitate.
Key questions for managers include:
- How do we bundle resources, capabilities, and core competencies to make value for customers.
- Will environmental changes make our competencies antiquated.
- Are there substitutes out there.
- Can others imitate them.
Uncertainty – Assessment of the general environment, competitor actions, changes in consumer tastes (Compaq case).
Complexity – Is increased do to the uncertain nature of interrelationships among the characteristics of the external environment.
Intraorganizational Conflict – Often develops as a result of uncertainty and complexity.
Firms have assets that are tangible and intangible.
Tangible: financial, physical, human and organizational (formal reporting structure and systems)
Intangible: technological & reputation or product name. These resources represent inputs into production of a good or service.
What the firm is capable of doing is important. Like a child, an organization's capabilities take time to develop. The firms ability to achieve a competitive advantage is reflected in its knowledge base and the ability of its human capital to successfully exploit its capabilities.
Some examples are:
- Wal-Mart's effective exploitation of its logistics.
- Wal-Mart's use of point-of-sale ordering system.
- Sony's ability to miniaturize components and products.
Core competencies are resources and capabilities that are a source of competitive advantage for the firm. They should be somewhat unique to that organization. These resources have Strategic Value when they contribute to the development of capabilities, core competencies, and ultimately to a competitive advantage.
Building Core Competencies
Resources and capabilities serve as the foundation upon which firms formulate and implement value-creating strategies, so that the organization can achieve strategic competitiveness and earn above-average returns. Not all of the firms resources and capabilities are strategic assets. They must be: valuable, rare, costly to imitate, and nonsubstitutable.
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