Resources, Competences and Strategic Capability

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Resources, Competences and Strategic Capability
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Learning Outcomes
At the end of this session you should be able to

• Describe the procedure for analysing strategic
  capability
• Define unique resources and core competences
• Draw up a value chain for an organisation and the
  industry in which it operates
• Identify sources of cost efficiency and added
  value for an organisation
• Explain how linkages can underpin competitive
  advantage
• Explain the purpose of benchmarking and portfolio
  analysis

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Strategic Capability

• Successful strategies depend (among other things)
  upon the organisation having the strategic
  capability to perform at the level required for
  success
• Strategic capability is related to the
• resources available to the organisation
• competence with which the activities are
  performed, and
• balance of resources, activities and business
  units in the organisation

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Figure 4.1 Analysing strategic capability
Resource audit
Competences
In separate activities
Through linking activities
Some are ...
Comparisons
Rigidities
Core competences
Historical
To outperform competition
Industry norms
Preventing change
To create new opportunities
Benchmarking
Assessing balance
Resources
Competences
Business units
Identifying key issues
SWOT analysis
Critical success factors
Understanding strategic capability
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Fig 4.2 Resources, Competences and Competitive
Advantage
LINK TO COMPETITIVE ADVANTAGE
Same as competitors or Easy to imitate
Better than competitors and Difficult to
imitate

Unique resources
Necessary resources
RESOURCES
Core competences
Threshold competences
COMPETENCES
Provides the basis to outperform competitors
or demonstrably provide better value for money.
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Resource Audit
identifies and classifies the resources that an
organisation owns or can access to support its
strategies

• Physical resources
• Human resources
• Financial resources
• Intangibles

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Unique Resources

• are those which create competitive advantage
  and are difficult to imitate (e.g. a patented
  product)

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Fig 4.3 Analysing competences and core
competences
Identifying competences
Value chain analysis
Organisational competences
Bases of competences
Cost efficiency
Value added
Managing linkages
Robustness
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Value Chain Analysis

• describes the activities in and around an
  organisation, and relates them to an analysis of
  the competitive strength of the organisation
• Primary activities are directly concerned with
  the creation or delivery of a product or service
• Support activities help to improve the
  effectiveness or efficiency of primary activities

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Figure 4.4 The value chain
Firm infrastructure
Margin
Human resource management
Support activities
Technology development
Procurement
Outbound logistics

Marketing and sales
Inbound logistics
Operations
Service
Margin
Primary activities
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Figure 4.5 The value system
Channel value chains
Supplier value chains
Customer value chains
Org's value chain
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Core Competences

• are those competences which critically underpin
  the organisations competitive advantage

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Figure 4.7 Sources of Cost Efficiency
Economies of scale
Experience
Cost Efficiency
Supply costs
Product/Process design
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Efficiency and Effectiveness

• Cost efficiency is a measure of the level of
  resources needed to create a given level of value
• Effectiveness is a measure of the level of value
  which can be created from a given level of
  resources

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Analysing Value-Added - Assessing Effectiveness
Customer requirements

• Product attributes

• Service expectations

• Price sensitivity

Degree of matching
Value-added features

• Product features

• Service performance

• Communication

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Managing Linkages

• Leverage is a measure of the improvement in
  performance achieved through the management of
  linkages between separate resources and activities

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Fig 4.9 Core competences through managing
linkages
Internal linkage
Type of Activity
Example
Primary-primary
Interdepartmental co-ordination
Computer-based operational systems
Primary-support
HRM for new technologies
Support-support
External linkage
Type of Activity
Example
Extend ownership of activities in
supply/distribution chain
Vertical integration
.....of supplier/distributor performance
Specification and testing
Working with suppliers/distributors to improve
their performance
Total quality management Merchandising activities
.....by deleting activities
Reconfigure value chain
will be covered later
Strategic alliances
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Sustainability of Competitive Advantage

• Depends on
• Robustness of the competences
• Extent to which they can be imitated
• Extent to which they are embedded in routines,
  tacit knowledge and culture

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Competences and Core Competences

• Competences exist in activities
• Resources are deployed to create competences
• Core competences underpin competitive advantage
• only some competences are core
• core varies with strategy
• core varies with time
• core can be exploited in several ways
• Mismatches resolved by
• changing core competences
• changing strategy

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Fig 4.6 How core competences change over time
the world automobile industry
Market access
Global network

Overseas plants
Quality/Reliability
Production processes
Supplier management
Product features (at low volume)
Life-style niche marketing
'Agile' production
??
Source Based on G. Hamel and A. Heene (eds.),
Competence-based Competition, Wiley, 1994, pp
16-18.
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Comparisons

• Historical
• Industry norms
• Benchmarking
• ideally should seek to assess the competences of
  the organisation against the best-in-class

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Fig 4.10 Benchmarking - at Three Levels
Level of benchmarking
Through
Examples of measures
Resources
Resource audit

• Quantity of resources, e.g.
• revenue
• capital intensity

• Quality of resources, e.g.
• qualifications of employees
• age of machinery
• uniqueness (e.g. patents)

Competences in separate activities
Sales calls/sales person Output/employee Materials
wastage
Analysing activities
Competences through managing linkages
Market share Profitability Productivity
Analysing overall performance
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Assessing the Balance - Product Portfolio
Matrices

(a) The original Boston Consulting Group Matrix
(BCG)
MARKET SHARE
Low
High
High
Question marks
Stars
MARKET GROWTH
Cash cows
Dogs
Low
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Product Portfolio Matrices
(b) Attractiveness Matrix
COMPETITIVE POSITION
Strong Avg. Weak
High
INDUSTRY ATTRACTIVENESS
Med
Low
Also known as the 'Directional Policy Matrix'
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Portfolio Analyses

• Over-coming some pitfalls
• Defining high and low (growth or share) can
  be difficult
• Plot SBUs not products
• Apply to market segments not whole markets
• Assess the role of each SBU
• Consider wider resource implications - not just
  cash
• Dogs may have a positive role