CHAPTER 9 Core Competencies and Resource Allocation Analyzing

CHAPTER 9 Core Competencies and Resource Allocation Analyzing Core Competencies By Anil Bilgihan for Dr. De. Micco

Student Learning Objectives On completion of this chapter, you will be able to; v Identify the role of core competencies in executing the delivery of competitive methods. v Describe the importance of the linkages between core competencies and competitive v methods in creating sustainable competitive advantage. Achieve a more practical understanding of frameworks for assessing the strengths and weaknesses of the firm’s competencies.

Key Concepts of the Chapter • • • Core Competencies The service exchange Linking core competencies Service production competencies Product production competencies Functional competencies Visioning competencies Organizational structure competencies Branding competencies Physical asset competencies Integrating competitive methods and core competencies

Objectives 1. Identify the role of core competencies in executing the delivery of competitive methods. v Please read pages 255 through 261 in the text book for further information.

Chapter Purpose • Until this chapter, we covered the co-alignment process proceeds from the scanning the environment to the selection of competitive methods. • The next step in the strategic thinking process is to ensure that resources are consistently allocated to those competitive methods that are determined to add the greatest value to the guest and, by extension, to the firm.

Strategic Management Model Long-term Objectives • Performance Measure • Action Plan • Resources Needed • Evaluation Timetable • Responsibility • Accountability • Rational Strengths and Weakness Analysis of Core Competencies · Functional analysis · Financial position · Visioning competencies · Physical assets · Structure · Production · Service · Branding Short-term Objectives Evaluation

Conducting an Internal Analysis • Analysis helps managers understand what is • strategically possible and choose the best strategy. A firm cannot successfully implement any strategy without the appropriate set of resources and capabilities. • Weaknesses—the firm’s resource and capability deficiencies that make it difficult for the firm to complete important tasks • Strengths—resources and capabilities that allow the firm to complete important tasks.

Conceptual Map of the Structure Construct Action Analysis A framework for analysis of core competencies Implementation Firm Structure Aligning CM and CC Strengths and weaknesses analysis

A Framework for Assessing the Firm Structure • There is an important connection between strategy choice and resource allocation. (Please refer to Exhibit 9. 3, page 257) • Exchange process • Core Competencies • Peripheral Competencies ◦ Please read pages 257 through 261 in the text book for further information.

Exchange Process • It is the heart of Competency Model • The process where all the products and services • that have been created by the firm, and blended together into a specific competitive method. Referred to as the moment of truth. • • Please read page 257 in the text book for further information. Please see Exhibit 9. 3 on page 257

Core Competencies • Capabilities that the firm emphasizes and performs • • • especially well while pursuing its vision. ——————————— Core competencies help the firm achieve a competitive advantage when the firm’s core competencies are different from those held by competitors. Core competencies enable a firm to complete activities effectively. Distinctive competencies provide products to customers that are superior to those provided by competitors.

Managing Resources to Develop Capabilities and Core Competencies

Examples: Core Competencies • Expertise in integrating multiple technologies to create families of new products • Know-how in creating operating systems for cost efficient supply chain management • Speeding new/next-generation products to market • Better after-sale service capability • Skills in manufacturing a high quality product • System to fill customer orders accurately and swiftly

Peripheral Competencies • They serve to support the continuing development and maintenance of the CCs. • The ability to acquire essential resources such as labor and capital is especially important in the contemporary environment of the hospitality industry. • Please read pages 259 through 261 in the text book for further information.

Competency Model of the Hospitality Enterprise Peripheral Competencies Human Resource Systems Core Competencies Business Operating Systems The Product/Service Transaction P Business Development Systems Sales & Marketing Systems P P Exchange Processes S S SS S Production Systems Financial Management Systems Cultural and Behavioral Systems Environment Scanning Systems

Resources and Capabilities Model of the Hospitality Enterprise P P Exchange Processes S S S Competitive Method A Sample list of core competencies for competitive advantage Superior execution Behavioral performance skills Information exchange skills Speed of transaction Workflow uncertainty management Quality control Service training programs Transaction cost efficiencies Employee competency Management competency

Frameworks for the Analysis of Core Competencies • Managers will always be on a quest to improve CCs so they can assure investors of a consistent delivery of a CM. • The first framework used to identify possible CCs is Service Production Competencies. • Please read page 261 in the text book for further information.

Service Production Competencies Categories of Service Transaction Type of Service Description Examples Self Service Minimal customer contract, simple service process, oriented towards speed and convenience, little behavioral needs from customer Quick service restaurant Maintenance Interactive Customers seek employee contact only when needed to solve problems, expect only limited assistance if needed, no need for customized service, customer seeks little recognition. Casual theme restaurants, limited service hotels Task Interactive Focus is on customized professional level of service, the need for trust exists, customer seeks recognition above basic elements of the service exchange, expect service personnel to make decisions on the spot Full service hotels, and restaurants Personal Interactive High customer attachment to service experience, high attachment to service employee by customer; high levels of information input, high level of trust, highly customized. Travel agent specializing in custom trips, concierge, consultant, masseuse, personal tour guide • Please read pages 261 and 261 in the text book for further information.

Production Competencies • Unlike the service intangibles, products represent the tangible portion of most portfolios. • Please refer to “The System Model of Product” in the text slide. • Please read pages 263 through 265 in the text book for further information.

The System Model of Product Feedback loop Input Output Transformation processes Raw materials Capital Labor Demand Functional capabilities Equipment Information Quality products Convenience Timing Price/value Production systems Quality control systems Production management systems Process improvement systems Maintenance systems Engineering systems Storage and inventory control systems Product distribution and handling

Functional Framework • Management is often viewed as a series of functions to be performed. ◦ Eg. Business school curricula have focused on enhancing student skills in what is referred to as the functional areas of management. • Please read pages 265 and 266 in the text book for further information.

Functional Areas for Core Competencies Development Functional Area Key Components Finance Asset management, capital budgeting, capital structure, financial analysis and planning, financial control and budgeting, asset valuation Marketing Product development, promotional activities, distribution, pricing, internal marketing, external marketing, communications, public relations, market research Human resources Organizational behavior, labor relations, hiring, developing, compensating, leadership, educating, high performance work practice systems. Administration Accounting management information systems, strategic planning, legal, risk/insurance, communications, process improvement Operations Cost control systems, production management, quality control, process improvement Research and Development New business opportunities, competitive intelligence, product testing, feasibility studies, business valuation

Other Competency Frameworks • Visionary/Creativity Competencies ◦ Capabilities that do not fit conveniently into the product-service or functional frameworks but, according to leading thinkers in the area of CCs, are important to achieving competitive advantage include such skills as creativity, vision, leadership, and innovation. ◦ A sample of the skills and capabilities within this framework and often stated as needed in tomorrow’s hospitality industry is provided in next slide. • Please read pages 266 and 267 in the text book for further information.

Skills and Capabilities Essential to Tomorrow’s Hospitality Manager • A visionary employing value adding strategies • Using and managing knowledge and technology for • • competitive advantage Spanning boundaries of skills and knowledge in a fast changing environment A leader in a dynamic and complex setting A synthesizer and blender of skills and knowledge in a fast changing environment A manager and motivator of the knowledge worker

Other Competency Frameworks(cont’d) • Organizational Structural Competencies ◦ Organizational factors • • Span of Market Share Market Coverage Geographic Dispersion Economies of Scale • Examples: Econolodge and Mc. Donald’s • Please read pages 267 and 268 in the text book for further information.

Other Competency Frameworks(cont’d) • Branding ◦ The power of the brand has long been considered an enormously valuable competitive advantage. ◦ The value of the brand in the hospitality industry has become an important resource for many companies and is now considered an important value-generating competency. • Please read page 268 in the text book for further information.

Other Competency Frameworks(cont’d) • Physical Assets ◦ The hospitality industry is well known for producing magnificent hotels, restaurants, and resorts. ◦ Given the capital and labor intensity of the industry, this is really an important core competency. ◦ Eg. Hyatt chain – atrium lobby • Please read page 269 in the text book for further information.

Other Competency Frameworks(cont’d) • Dimension of Firm Structure ◦ The construct of the firm structure refers to how an organization allocates resources throughout the firm and is made up several dimensions. ◦ It includes • • Decision making authority The number of rules and regulations The number of specializations or specific job functions How they all fit together to make the firm work along with being able to react quickly to changing environmental forces.

Organizational Structure Formalization • Standardization • Policies chart • Procedures • Rules • Performance reviews channels • Controls systems • Resource allocation systems • Employee handbooks • Policy manuals • Operating instructions • Communication • Management info • Budgets • Please read page 270 in the text book for further information.

Organizational Structure Centralization • Locus of control • Power • Authority • Accountability

Organizational Structure Complexity • Number of occupational specialties • Number of different functional areas • Number of positions • Number of distribution channels • Number of segments competing in • Number of levels of customer service • Geographic dispersion • Divisional integration • Matrix structure

Organizational Structure Configuration • Locus of decision making • Corporate • Divisional • Unit • Stratification • Delegation • Power • Control • Responsibility • Accountability

Organizational Structure Flexibility Core Processes of Transformation in Service Delivery

Financial Competencies • A manager must be constantly taking a measurement of how the firm is doing regarding the key financial indicators to be sure that capital can be raised when necessary and the reputation of the firm with respect to risk and return is strong. • Please read page 273 in the text book for further information.

Summary • In the presentation we have looked at the concepts to help you understand the illusive construct of structure.

Multiple Choice Questions 1) Which function is not included in business operating systems? • Accounting • Financing • Budgeting • Planning 2) Which of the following may not be included in the skills and capabilities essential for tomorrow's hospitality manager? • A visionary employing value-adding strategies • Using and managing knowledge and technology for competitive advantage • A leader in a dynamic and complex setting • Culinary skills 3) The brand is supposed to reflect the following in product/service choice decision, except: • standards. • quality. • value adding. • preferences. • consistency.

Multiple Choice Questions 4) The dimensions of firm structure refer to how an organization allocates resources throughout the firm and is made up of several dimensions. It includes the following, except: • centralization. • formalization. • sophistication. • complexity. • configuration. 5) Which is the one key indicator of financial competencies that shows the success of the firm? • ROE • ROI • P/E • WACC 6) The following are principles guiding the improvement of quality service, except: • quality is defined by the management. • quality is a journey. • quality is everyone's job. • quality and integrity are inseparable.

Multiple Choice Questions 7 ) Service quality depends upon the following, except: • proper training. • execution. • quality control. • sufficient resource allocation to attain and maintain leadership. • the competencies of the management. 8) In order to meet the challenge of millions of daily service encounters, managers must do the following, except: • understand how guests derive utility from the service. • understand how the organization must be managed to add value and produce the rate of return required. • understand how the organization can produce and deliver that utility. • understand how the organization can meet its objectives to both guests and employees.

Multiple Choice Questions 9) Services are different from products, in the hospitality industry, because of the following characteristics, except: • service is a performance not a physical object. • the guest is involved in production. • service delivery management — the guests desire to be served when and where they choose. • quality control is difficult. • service is tangible product. 10 Our definition of quality includes the following, except: • doing the right thing right and consistently. • doing the right thing right, consistently and continuously.

Multiple Choice Questions 11) The systems that core competencies focus on are the following, except: • business operating. • cultural and behavioral. • production. • sales and marketing. • intelligence. 12) The sample list of core competencies for competitive advantage include the following, except: • quality control. • service training program. • employee competency. • customer's product knowledge. 13) The characteristics of self service include the following, except: • minimal customer contact. • speed and convenience. • highly customization. • simplicity.

Multiple Choice Questions 14) The characteristics of maintenance interaction include the following, except: • customer seeks employee contact only when needed to solve problems. • customer expect only limited assistance if needed. • customer has no need for customized service. • customer seeks little recognition. • customer seeks recognition. 15) The characteristics of task interaction include the following, except: • focus is on customized professional level of service. • the need for the recognition exists. • customer seeks recognition above basic elements of the service exchange. • expect service personnel to make decisions on the spot. • expect only limited assistance if needed. 16) The characteristics of personal interaction include the following, except: • high customer attachment to service experience. • high attachment to service employee by customer. • expect service personnel to make decisions on the spot. • high level of trust, highly customized. • high involvement of customer.

Multiple Choice Questions 17) Examples of core competencies related to the service transaction include the following, except: • transaction cost efficiency. • political stability. • speed of transaction. • access to effective service personnel. • employee attitudes. 18) The input of resources represents the following, except: • raw materials. • labor. • capital. • the finished product.

Multiple Choice Questions 19) The output of resources represents the following, except: • quality products. • convenience. • price/value. • semi-finished products. 20) The transformation process of the systems model of product includes the following systems, except: • • production systems. human resources development systems. quality control systems. production management systems.

Case Study