Breaking down Resources Capabilities .


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Analyzing Resources & Capabilities. OUTLINE. The role of resources and capabilities in strategy formulation. The resources of the firm Organizational capabilities Appraising the profit potential of resources and capabilities
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Examining Resources & Capabilities OUTLINE The part of assets and abilities in technique definition. The assets of the firm Organizational abilities Appraising the benefit capability of assets and capacities Putting asset and ability examination to work—a useful guide Creating new capacities.

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Shifting the Focus of Strategy Analysis: From the External to the Internal Environment THE FIRM Goals and Values Resources and Capabilities Structure and Systems THE INDUSTRY ENVIRONMENT Competitors Customers Suppliers STRATEGY The Firm-Strategy Interface The Environment-Strategy Interface

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Rationale for the Resource-based Approach to Strategy When the outside environment is liable to quick change, inner assets and abilities offer a more secure reason for technique than market center. Assets and capacities are the essential wellsprings of benefit

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The Evolution of Honda Motor Company Honda Technical Research Institute established 4-chamber 750cc bike 1 st gas controlled auto to meet US Low Emission Vehicle Standard Competes in Isle of Man TT bike races Civic Hybrid (double gas/electric) Portable generator Power items: ground tillers, marine motors, generators, pumps, cutting tools snowblowers Civic GS (characteristic gas controlled) 1 st cruiser: 98cc, 2-cycle Dream D 405cc engine cycle 1946 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 Acura Car division N360 scaled down auto Home co-era framework 4 cycle motor The 50cc Supercub 1000cc Goldwing visiting engine cycle Honda Civic Enters Indy auto hustling Enters Formula 1 Gran Prix dashing First item: Model A clasp on motor for bikes Honda FCX energy unit auto

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Canon: Products a nd Core Technical Capabilities Precision Mechanics Fine Optics Plain-paper copier Color copier Color laser copier Laser copier 35mm SLR camera Compact mold camera EOS self-adjust camera Digital camera Video still camera Basic fax Laser fax Inkjet printer Laser printer Color video printer Mask aligners Excimer laser aligners Stepper aligners Calculator Notebook PC Micro-Electronics

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Links between Products & Capabilities: Capability-Based Strategy at 3M Road signs & markings Videotape Sandpaper Carborundum mining Floppy plates & information stockpiling items Scotchtape Audio tape Acetate film Post-it notes Housewares/pack chen items PRODUCTS Surgical tapes & dressings Pharmaceuticals Materials sciences Flexible hardware Health sciences CAPABILITIES Microreplication New-item improvement & presentation Thin-film advances Abrasives Adhesives

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Evolution of Capabilities and Products: 3M Road signs & markings Videotape Sandpaper Carborundum mining Floppy circles & information stockpiling items Scotchtape Audio tape Acetate film Post-it notes Housewares/unit chen items PRODUCTS Surgical tapes & dressings Pharmaceuticals Materials sciences Flexible hardware Health sciences CAPABILITIES Microreplication New-item improvement & presentation Thin-film innovations Abrasives Adhesives

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Eastman Kodak\'s Dilemma Resources & Capabilities Businesses Chemical Imaging Organic Chemistry Polymer innovation Optomechtronics Thin-film coatings Brands Global Distribution Film Cameras 1980\'s Fine Chemicals Pharmaceuticals Diagnostics 1990\'s DIVESTS : Eastman Chemical, Sterling Winthrop, Diagnostics Need to fabricate computerized imaging ability Digital Imaging Products (e.g. Photograph CD System; Advantix cameras & film

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The Links between Resources, Capabilities and Competitive Advantage INDUSTRY KEY SUCCESS FACTORS COMPETITIVE ADVANTAGE STRATEGY ORGANIZATIONAL CAPABILITIES RESOURCES TANGIBLE INTANGIBLE HUMAN Financial Physical Skills/know-how Capacity for correspondence & coordinated effort Motivation Technology Reputation Culture

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Appraising Resources RESOURCE CHARACTERISTICS INDICATORS Financial Borrowing capacity Debt/Equity proportion Internal reserves generation Credit rating Tangible Net income Resources Physical Plant and equipment: Market estimation of size, area, technology fixed resources. flexibility. Scale of plants Land and buildings. Alternative uses for Raw materials. fixed resources Technology Patents, copyrights, know how No. of licenses claimed R&D facilities. Royalty salary Intangible Technical and scientific R&D use Resources employees R&D staff Reputation Brands. Client unwaveringness. Company Brand value reputation (with providers, customers, Customer maintenance government) Supplier steadfastness Human Training, background, adaptability, Employee capabilities, Resources commitment and dependability of employees pay rates, turnover.

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Firms with the Highest Ratios of Market Value to Book Value (December 2005)

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The World\'s Most Valuable Brands, 2006 Rank Company Brand Rank Company Brand v alue esteem ($bn.) ($bn.) 1 Coca-Cola 67.5 11 Mercedes Benz 20.0 2 Microsoft 59.9 12 Citi 20.0 3 IBM 53.4 13 Hewlett-Packard 18.9 4 GE 47.0 14 American Express 18.6 5 Intel 35.6 15 Gillette 17.5 6 Nokia 26.5 16 BMW 17.1 7 Disney 26.4 17 Cisco 16.6 8 McDonald\'s 26.0 18 Louis Vuitton 16.1 9 Toyota 24.8 19 Honda 15.8 10 Marlboro 21.2 20 Samsung 15.0 Source : Interbrand

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Identifying Organizational C apabilities: A Functional Classification FUNCTION CAPABILITY EXEMPLARS Corporate Financial management ExxonMobil, GE Management Strategic control IBM, Samsung Coordinating specialty units BP, P&G Managing acquisitions Citigroup, Cisco MIS Speed and responsiveness through Wal-Mart, Dell rapid data transfer Capital One R&D Research capability Merck, IBM Development of imaginative new products Apple, 3M Manufacturing Efficient volume manufacturing Briggs & Stratton Continuous Improvement Nucor, Harley-D Flexibility Zara, Four Seasons Design Design Capability Apple, Nokia Marketing Brand Management P&G, LVMH Quality reputation Johnson & Johnson Responsiveness to showcase trends MTV, L\'Oreal Sales, Distribution Sales Responsiveness PepsiCo, Pfizer & Service Efficiency and speed of distribution LL Bean, Dell Customer Service Singapore Airlines Caterpillar

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The Value Chain: The McKinsey Business System TECHNOLOGY PRODUCT DESIGN MANUFACTURING MARKETING DISTRIBUTION SERVICE

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The Porter Value Chain FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT PROCUREMENT INBOUND OPERATIONS OUTBOUND MARKETING SERVICE LOGISTICS LOGISTICS & SALES SU P PORT ACTIVITIES PRIMARY ACTIVITIES

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The Architecture of Organizational Capability ORGANIZATIONAL CAPABILITY SKILLS & KNOWLEDGE Organization Structure Management Systems VALUES & NORMS TECHNICAL SYSTEMS RESOURCES Human abilities & know-how Technology Culture (values, standards) MANAGERIAL SYSTEMS Dorothy Leonard "Center Capabilities & Core Rigidities" An adjusted view

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A Hierarchy of Capabilities: A Telecom Manufacturer CROSS FUNCTIONAL CAPABILITIES BROAD FUNCTIONAL CAPABILITIES ACTIVITY RELATED CAPABILITIES (Operations related just) SPECIALIZED CAPABILITIES (Manufacturing related just) SINGLE-TASK CAPABILITIES (Only those identified with PCB get together) INDIVIDUALS\' SPECIALIZED KNOWLEDGE

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The Rent-Earning Potential of Resources and Capabilities Scarcity THE EXTENT OF THE COMPETITIVE ADVANTAGE ESTABLISHED Relevance Durability THE PROFIT EARNING POTENTIAL OF A RESOURCE OR CAPABILITY SUSTAINABILITY OF THE COMPETITIVE ADVANTAGE Transferability Replicability Property rights Relative bartering power APPROPRIABILITY Embeddedness

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Two ways to deal with recognizing an association\'s assets and capacities Starting from within Starting from the outside Key Success Factors How do clients pick? What do we have to survive rivalry? What assets & abilities do we have to convey these KSFs?

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Importance VW\'s Relative Strength VW\'s Relative Strength R1. Fund 6 4 C1. Item advancement 9 4 R2. Innovation 7 5 C2. Buying 7 5 R3. Plant and hardware 8 C3. Building 7 9 R4. Area 7 4 C4. Producing 8 7 R5. Appropriation 8 5 C5. Budgetary administration 6 3 C6. R&D 6 4 C7. Promoting & deals 9 4 C8. Government relations 4 8 Assessing a Companies Resources and Ca pabilities: The Case of VW CAPABILITIES RESOURCES

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Appraising VW\'s Resources and Ca pabilities (Hypothetical just) 10 Key Strengths Superfluous Strengths C3 R3 C8 C4 C2 Relative Strength R2 R5 5 R1 C1 R4 C6 C7 C5 Zone of Irrelevance Key Weaknesses 1 5 10 Strategic Importance

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6 9 3 5 2 8 4 1 10 7 Appraising the Capabilities of a Business School (illustrative just) C1 Alumni relations C2 Student situation C3 Teaching C4.Administration C5 Course devlpmnt C6 Student enlistment C7 Research C8 Corporate relations C9 Marketing C10 IT C11 PR C12 HRM Superfluous qualities Key qualities Superior Relative Strength Parity Inconsequential shortcomings 12 11 Key shortcomings Deficient Not imperative Critically vital Importance

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6 9 4 5 2 11 3 1 10 1 8 Amoco\'s Appraisal of Organizational Capabilities (illustrative just) 1. Compelling arrangement making 2. Quick new item improvement 3. Steady cost shapes 4. Item quality 5. JV administration 6. Predominant EH&S administration 7. Overseeing socially assorted workforce 8. Quick choice mak

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