RESOURCE CAPABILITIES CORE COMPETENCIES AND ACTIVITY ANALYSIS The

RESOURCE, CAPABILITIES, CORE COMPETENCIES, AND ACTIVITY ANALYSIS The fundamental building blocks for building winning strategies

EXAMPLES Disney n Honda n Dell n Sony n Apple n

Key Elements of Business Strategies: Understanding Resources, Capabilities, and Competencies is the key Selecting a business strategy that exploits valuable resources and core competences n Ensuring that all resources and capabilities are fully employed and exploited n Building and regenerating valuable resources and core competences n

Rationale for the Resource-based Approach to Strategy n Resources and capabilities are the primary source of profitability. Firmspecific strategic differences account for 50 -70 percent of observed differences in firms’ profits

Resources, Capabilities, and Competitive Advantage: The Basic Relationships COMPETITIVE ADVANTAGE STRATEGY INDUSTRY KEY SUCCESS FACTORS ORGANIZATIONAL CAPABILITIES RESOURCES Tangible Intangible Human

Categories of Firm Resources • Financial • Physical • Human • Technological • Reputational $ ¥ £

Defining Organizational Capabilities = firm’s capacity for undertaking a particular activity. (Grant) Distinctive Competence = things that an organization does particularly well relative to competitors. (Selznick) Core Competence = capabilities that are fundamental to a firm’s strategy and performance. (Hamel and Prahalad)

What Makes a Resource Valuable? Scarcity Appropriability Demand Value creation zone The dynamic interplay of three fundamental market forces determines the value of a resource. Source: Collis and Montgomery, Corporate Strategy (1996)

Resource Imitability Cannot be imitated: Patents Unique location Unique assets (e. g. Mineral rights) Difficult to Imitate: Brand Loyalty Favorable cost position Employee Satisfaction Reputation for Fairness Can be Imitated (but may not be): Capacity Pre-emption Economies of Scale Easy to Imitate: Cash Commodities Source: Collis and Montgomery, Corporate Strategy: Resources and the Scope of the Firm (1996).

Identifying a Company’s Identifying a Company's Capabilities and Value Chain Functional Area Capability Example • Corporate head office • Management information • Research and development • Manufacturing • Product design • Marketing • Capability in basic research Genentech, Google • Ability to produce innovative products 3 M Canon • Speed of new product development • Sales and distribution Source: Robert M. Grant, Contemporary Strategy Analysis, Basil Blackwell, 1991.

Summary: Key Elements of Resource-Based Strategy n Select a strategy that exploits principal resources and competencies. n Ensure that resources are fully employed and exploited. n Build and upgrade a resource base. Source : Hamel and Prahalad (1990)