Chapter 5 Analysing Resources Capacities Prof Luciano Thom

2 © 2013 Robert M. Grant www. contemporarystrategyanalysis. com

Analysing Resources & Capacities OUTLINE • The role of resources and capabilities in strategy

Shifting the Focus of Strategy Analysis: From External to Internal Environment © 2013 Robert

Rationale for Resource-Based Approach to Strategy • When the industry environment is volatile, internal

Project-Based Evolution at Honda Motor Company © 2013 Robert M. Grant www. contemporarystrategyanalysis. com

Canon: Products & Core Technical Capabilities Precision Mechanics Fine Optics 35 mm SLR camera

3 M: Evolution of Products & Capabilities Carborundum mining PRODUCTS Road signs & markings

The Links Between Resources, Capabilities & Competitive Advantage © 2013 Robert M. Grant www.

Appraising Resources Resource Tangible Resources Intangible Resources Characteristics Financial Borrowing capacity Internal funds generation

Large Companies with the Highest Ratios of Market Capitalization to Book Value, March 2012

The World’s Most Valuable Brands, 2011 Rank 1 2 3 4 5 6 7

Functional Area Identifying Organizational Capabilities: A Functional Classification CORPORATE FUNCTIONS INFORMATION MANAGEMENT Capability Financial

The Porter Value Chain © 2013 Robert M. Grant www. contemporarystrategyanalysis. com 14

Integrating Resources to Create Organizational Opportunity © 2013 Robert M. Grant www. contemporarystrategyanalysis. com

A Hierarchy of Capabilities: A Telecom Manufacturer © 2013 Robert M. Grant www. contemporarystrategyanalysis.

Two Approaches to Identifying an Organization’s Resources & Capabilities Starting from the inside Starting

Appraising the Strategic Importance of Resources & Capabilities © 2013 Robert M. Grant www.

The Framework for Appraising Resources & Capabilities © 2013 Robert M. Grant www. contemporarystrategyanalysis.

The Resources & Capabilities of Ducati Motor © 2013 Robert M. Grant www. contemporarystrategyanalysis.

Summary: The Framework for Analyzing Resources and Capabilities © 2013 Robert M. Grant www.

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Chapter 5 Analysing Resources & Capacities Prof. Luciano Thomé e Castro

Analysing Resources & Capacities OUTLINE • The role of resources and capabilities in strategy formulation • Identifying resources and capabilities • Appraising resources and capabilities • Developing strategy implications © 2013 Robert M. Grant www. contemporarystrategyanalysis. com 3

Rationale for Resource-Based Approach to Strategy • When the industry environment is volatile, internal resources and capabilities offer a more stable basis for strategy than an industry or market focus • Resources and capabilities are the primary sources of profitability © 2013 Robert M. Grant www. contemporarystrategyanalysis. com 5

Canon: Products & Core Technical Capabilities Precision Mechanics Fine Optics 35 mm SLR camera Compact fashion camera EOS autofocus camera Digital camera Video still camera Video security systems Camcorders Mask aligners Excimer laser aligners Stepper aligners Micro. Electronics Basic fax Laser fax Scanners Calculator Notebook computer © 2013 Robert M. Grant www. contemporarystrategyanalysis. com 7 Plain-paper copier Color laser copier Laser copier Binoculars Inkjet printer Laser printer Color video printer Digital commercial printer

3 M: Evolution of Products & Capabilities Carborundum mining PRODUCTS Road signs & markings Videotape Floppy disks & Scotch tape data storage Audio tape products Acetate Post-it notes Housewares/kitfilm chen products Surgical tapes & dressings Pharmaceuticals Sandpaper Materials sciences Health sciences CAPABILITIES Flexible circuitry Microreplication Abrasives 8 © 2013 Robert M. Grant www. contemporarystrategyanalysis. com Adhesives Thin-film technologies New-product development & introduction

Appraising Resources Resource Tangible Resources Intangible Resources Characteristics Financial Borrowing capacity Internal funds generation Debt/Equity ratio Credit rating Net cash flow Physical Plant and equipment: Size, location, technology flexibility. Land buildings Raw materials Market value of fixed assets. Scale of plants Alternative uses for fixed assets Technology Patent, copyrights, know how, R&D facilities Technical and scientific employees No. Of patents owned Royalty income R&D expenditure R&D staff Reputation Brands. Customer loyalty, company reputation (with suppliers, customers, government) Brand equity Customer retention Supplier loyalty Training, experience, adaptability, commitment and loyalty of employees Employee qualifications, Pay rates, turnover Human Resources 10 Indicators © 2013 Robert M. Grant www. contemporarystrategyanalysis. com

Large Companies with the Highest Ratios of Market Capitalization to Book Value, March 2012 Company Ratio Country of Listing Company Ratio Hindustan Unilever Colgate Palmolive Yum! Brands Altria Boeing Priceline Coach Amazon B. Sky Broadcasting Glaxo. Smith Kline Tingyl Starbucks 31. 51 India Country of Listing 7. 81 USA 19. 25 USA 7. 71 UK 17. 54 16. 76 15. 4 13. 36 11. 90 10. 88 10. 83 USA USA USA UK 7. 37 6. 63 UK USA 9. 02 UK 8. 49 8. 42 Hong Kong USA Intuitive Surgical Br. American Tobacco Diageo Medco Health Solutions Infosys Apple Celgene Shire Nike SAP Coca-Cola Pepsi. Co 6. 43 6. 22 5. 99 5. 89 5. 25 5. 23 5. 04 4. 96 USA USA UK USA Germany USA © 2013 Robert M. Grant www. contemporarystrategyanalysis. com 11

The World’s Most Valuable Brands, 2011 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 12 Brand Coca-Cola IBM Microsoft Google General Electric Mc. Donald’s Intel Apple Disney Hewlett-Packard Toyota Mercedes Benz Cisco Nokia BMW Gillette Samsung Louis Vuitton Honda Oracle © 2013 Robert M. Grant www. contemporarystrategyanalysis. com Value $bn Change from 2010 Country of Origin 71. 86 69. 91 59. 09 55. 32 42. 81 35. 59 35. 22 33. 49 29. 02 28. 48 27. 76 27. 45 25. 31 25. 07 24. 55 23. 99 23. 43 23. 17 19. 43 17. 26 + 2% + 8% - 3% + 27% + 0% + 6% + 10% + 58% + 1% + 6% + 9% - 15% + 10% + 3% + 20% + 6% + 5% + 16% US US US Japan Germany US Finland Germany US South Korea France Japan US Source: Interbrand

Functional Area Identifying Organizational Capabilities: A Functional Classification CORPORATE FUNCTIONS INFORMATION MANAGEMENT Capability Financial control Management development Strategic innovation Multidivisional coordination Acquisition management International management Corporate Social Responsibility Integration of IT with decision making Research capability RESEARCH & DEVELOPMENT New product development Fast-cycle new product development Operational efficiency OPERATIONS Continuous improvement Flexibility and speed of response DESIGN Product design capability Brand management Building reputation for quality MARKETING Responding to consumer requirements Exemplars Exxon. Mobil, Pepsi. Co General Electric, Shell Google, Haier Unilever, Shell Cisco Systems, Luxottica Shell, Banco Santander Johnson & Johnson, Danone Wal-Mart, Capital One, Cemex IBM, Merck Apple, 3 M Canon, Inditex (Zara) Briggs & Stratton, UPS Toyota, Wal-Mart Four Seasons Hotels Apple, Alessi Procter & Gamble, Altria Johnson & Johnson L'Oréal, Amazon Effective sales promotion and execution Pepsi. Co, Pfizer SALES AND DISTRIBUTION SERVICE 13 Efficient, fast order processing Speed of distribution Customer service © 2013 Robert M. Grant www. contemporarystrategyanalysis. com L. L. Bean, Dell Computer Amazon. com Singapore Airlines, Caterpillar

Two Approaches to Identifying an Organization’s Resources & Capabilities Starting from the inside Starting from the outside Key Success factors • How do customers choose? • What do we need to survive competition? What resources & capabilities do we need to deliver these KSFs? © 2013 Robert M. Grant www. contemporarystrategyanalysis. com 17