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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