Internal AnalysisTEAM B

Agenda

• Gary Hamel & C.K. Prahalad

• The Resource-Based Model

• Resources, Capabilities and Core Competencies

• Value Chain Analysis2

Gary HamelC.K. PrahaladNicolò RavinaSatu Kukkonen-Omar

• American management expert• Born 1954 in USA• Graduate of Andrews University (1975) and the Ross

School of Business at the University of Michigan (1990)• Started his working life as a hospital administrator• Has worked for companies as General Electric, Time

Warner, Nokia, Nestle, Shell, Best Buy, Procter & Gamble, 3M, IBM, and Microsoft

Gary Hamel -Background

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• Originator of Core competencies together with C.K Prahalad

• Fortune Magazine called him “the world’s leading expert on business strategy” ‘

• Pioneering concepts such as “strategic intent,” “core competence,” “industry revolution,” and “management innovation” have changed the practice of management in companies around the world.

Gary Hamel - Landmarks

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• Father of the concept of Core competency• Born 1941 in India• Studied Physics at university before working for Union Carbide

chemicals company• Wrote Doctoral thesis at Harvard Business school• Professor at University of Michigan where he met Gary Hamel• In 1993 the Wall Street Journal named him as one of the top

ten teachers in the world• In 1994 received an award from Indo-American Society for

promoting goodwill between India and the United States

C.K. Prahalad - Background

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• Prahalad was co-founder and became CEO of Praja Inc

• Many of his ideas on competitive analysis argue against the supremacy of traditional strategic thinking

• Focus on the concepts of “Core competence”, “strategic intent” and “the bottom of the pyramid”

• The book Fortune at the bottom of the pyramid was voted top business book of the year 2004 by www.amazon.com

C.K. Prahalad - Landmarks

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The Resource-Based ModelPhilipp VejchodaEva WottgeJulie Couderc

The Resource-Based Model• Inside-Out approach – starting point is the internal

environment

• Alternative perspective to Outside-In approaches such as Porter’s 5 forces

• Resource-Based View emphasizes the internal capabilities of the organization in formulating strategy to achieve a sustainable competitive advantage

• Internal capabilities determine the strategic choices a company makes in competing in the external environment 9

Resources• Definition• Resources are inputs that enable an organization to carry out its

activities

• Confer no value to companies – only when they are put to some productive use the value follows• Tangible Resources

Physical assets that a company possesses like plants and machinery, finance and human capital

• Intangible ResourcesRoutines and practices that have developed over time within an organization including reputation, culture, knowledge, brands 10

Competencies• Definition:• Competencies are attributes that firms require in order to be able

to compete in the marketplace

• Prerequisite to compete within an industry

• Competencies themselves do not confer any competitive advantage for the organization

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Core Competencies• Definition:• A cluster of attributes that an organization possesses which in

turn allows to achieve competitive advantage

• Derive from collective learning of individual members within an organization• Associated with Organizational Learning

• They should• Provide access to a wide variety of markets (Honda’s engine

desing and production)• Make a significant contribution on the customer benefits (BMW

engineering capabilites)• Be difficult to imitate for competitors

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Case Study Toyota• Toyota Prius represents core competence

of Toyota

• master fuel-saving technologies in a faster way than rivals

• hope for cutting costs for the engine to the half

• Effect on competitors:• jump on this hype and• play catch me if you can (if they want to or not)

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Distinctive Capabilities• Definition:• Are important in providing an organization with competitive

advantage

• Derive from 3 areas• An organization‘s architecture (internal, external, networks)• Innovation and • Reputation

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Case Study Apple• Organizational architecture

• Innovation

• Reputation

!!Your turn!!

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GRANT’s model (1991)- Capabilities are the main source of competitive

advantage- They are about ability to coordinate resources i.e

inputs (as capital, human resources, brands, financial)

- He propose a strategy formulation in 5 stages:- >Identify and classify resources- >Identify capabilities- >Appraise rent-generating of resources and capabilities by

their potential for sustainable competitive advantage and appropriability of their returns

- >Exploits resources and capabilities relative to the external environment

- >Identify whether any resource gaps exist which need to be filled

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Identify Sustainable Competitive Advantage

• To obtain a sustainable competitive advantage a company has to improve a valuable strategy that its competitors will unable to duplicate. Barney (1991)

• To be sustainable, a competitive advantage need to achieve those 4 features:

> Valuable > Rare> Difficult to imitate i.e unique location, path

dependency, usual ambiguity and social complexity> No strategic substitute for this product

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Resources, Capabilities and Core CompetenciesMikaela RimailaRiitta Varhelo

Strategic role

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Perforance ResultsCompetitive advantage

Distinctive capabilities

Resources Capabilities Core Competencies

Strategic role- Can be used in

variety ways

- Contributes to superior customer value

- Is difficult for compettitors to imitate 21

• Distinctive capabilities

Main questions

•What strengths and weaknesses are in my responsibility area?•Which strengths provide my customers

with added value?•Which of the company strengths will boost

our competitive edge?• How can I strategially manage theses areas

to high levels of performance?22

Main questions

•Which things are done poorly, or not at all, in our organization?•Are we focusing on our core

competences?•Are we doing too many things around

the core things we should be doing?

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Value Chain AnalysisMarkku TomperiMiika Kostamo

Value Chain Analysis

Organization infrastructure

Human Resource

Management

Technology development Procurement

Inbound Logistics Operations Outbound

LogisticsMarketing and Sales Services

Primary Activities

Support Activities

Margins

Micheal Porter 1985. Competitive Advantages. 25

Value Analysis for an activity

Activity

Important for Sales?

Answers to customer need?

Real value to the customer

Needed for company operations?

Real value to the company

Operation with little value to

customer/company

NoNo

No

YesYes

Yes

ADDED VALUE = MARGIN

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• http://garyhamel.com/• http://www.garyhamel.com/doc/hamel_cv.pdf• The Economist, http://www.economist.com/node/12311358• www.wikipedia.com• www.amazon.com• http://books.google.com/books?id=ifCmWeOgvQsC&pg• http://

www.openlearningworld.com/books/Introduction%20to%20Strategic%20Management/Alternative%20Models%20of%20Developing%20Strategic%20Competitiveness/The%20Resource-Based%20Model.html

• http://en.wikipedia.org/wiki/Robert_McQueen_Grant• Henry, Anthony: Understanding Strategic Management,

Second Edition, Oxford 2011

Sources

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