Analysis of the Internal Environment
CHAPTER 3 CHAPTER 3 Analysis of the Internal Analysis of the Internal Environment Environment S S TRATEGIC TRATEGIC M M ANAGEMENT ANAGEMENT I NPUTS I NPUTS Strategic Management Strategic Management Management of Strategy Management of Strategy Competitiveness and Globalization: Competitiveness and Globalization: Concepts and Cases Concepts and Cases Seventh edition Concepts and Cases
© © The University of West Alabama The University of West Alabama PowerPoint Presentation by Charlie Cook PowerPoint Presentation by Charlie Cook 2007 Thomson/South 2007 Thomson/South Western. Western. - - Concepts and Cases All rights reserved. Michael A. Hitt All rights reserved.
- • R. Duane Ireland • Robert E. Hoskisson
© 2007 Thomson/South-Western. All rights reserved. 3 K K NOWLEDGE NOWLEDGE O O BJECTIVES BJECTIVES 1.
1. Explain the need for firms to study and understand their Explain the need for firms to study and understand their internal environment. internal environment.
2.
2. Define value and discuss its importance.
Define value and discuss its importance.
3.
3. Describe the differences between tangible and Describe the differences between tangible and intangible resources. intangible resources.
4.
4. Define capabilities and discuss how they are Define capabilities and discuss how they are developed. developed.
5.
5. Describe four criteria used to determine whether Describe four criteria used to determine whether resources and capabilities are core competencies.
resources and capabilities are core competencies.
Studying this chapter should provide you with the strategic
management knowledge needed to:© 2007 Thomson/South-Western. All rights reserved. 3 K K NOWLEDGE NOWLEDGE O O BJECTIVES BJECTIVES (cont
(cont ’
’
d)
d) 6.
6. Explain how value chain analysis is used to identify and Explain how value chain analysis is used to identify and evaluate resources and capabilities. evaluate resources and capabilities.
7.
7. Define outsourcing and discuss the reasons for its use.
Define outsourcing and discuss the reasons for its use.
8.
8. Discuss the importance of identifying internal strengths Discuss the importance of identifying internal strengths and weaknesses. and weaknesses.
Studying this chapter should provide you with the strategic
management knowledge needed to:- Acquired.
- Bundled.
- Leveraged.
© 2007 Thomson/South-Western. All rights reserved. 3 Competitive Advantage Competitive Advantage
Firms achieve strategic competitiveness and Firms achieve strategic competitiveness and earn above earn above
average returns when their core average returns when their core competencies are effectively: competencies are effectively:
Acquired.
Bundled.
Leveraged.
Over time, the benefits of any value Over time, the benefits of any value
creating creating strategy can be duplicated by competitors. strategy can be duplicated by competitors.
- The rate of core competence obsolescence due to
© 2007 Thomson/South-Western. All rights reserved. 3 Competitive Advantage (cont Competitive Advantage (cont
’ ’
d)
d)
Sustainability of a competitive advantage is a Sustainability of a competitive advantage is a function of: function of:
The rate of core competence obsolescence due to environmental changes. environmental changes.
The availability of substitutes for the core
The availability of substitutes for the core competence. competence.
The difficulty competitors have in duplicating or
The difficulty competitors have in duplicating or imitating the core competence. imitating the core competence.
© 2007 Thomson/South-Western. All rights reserved. 3 External Analyses External Analyses
’ ’
Outcomes Outcomes
By studying the external environment, firms
By studying the external environment, firms
identify what they
identify what they might choose to do. might choose to do.
Opportunities
Opportunities
and threats
and threats
© 2007 Thomson/South-Western. All rights reserved.
3
Set Set
heterogeneous resources and capabilities.
’ s bundle of s bundle of
’
Understanding how to leverage the firm
Understanding how to leverage the firm
Analysis Outcome Analysis Outcome
that are not dependent on the assumptions of a single country, culture, or context. country, culture, or context.
that are not dependent on the assumptions of a single
The ability to study an internal environment in ways
Global Mind Global Mind
flow of resources throughout the global economy.
flow of resources throughout the global economy.
’ international strategies and by the international strategies and by the
’
by competitors
by competitors
Traditional sources of advantages can be overcome
Traditional sources of advantages can be overcome
Global Economy Global Economy
- The ability to study an internal environment in ways
© 2007 Thomson/South-Western. All rights reserved. 3 The Context of Internal Analysis The Context of Internal Analysis
heterogeneous resources and capabilities. FIGURE FIGURE 3.1 3.1 Components of Internal Analysis Leading to Components of Internal Analysis Leading to Competitive Advantage and Strategic Competitiveness Competitive Advantage and Strategic Competitiveness © 2007 Thomson/South-Western. All rights reserved. 3
© 2007 Thomson/South-Western. All rights reserved. 3 Creating Value Creating Value
By exploiting their core competencies or By exploiting their core competencies or competitive advantages, firms create value. competitive advantages, firms create value.
Value is measured by: Value is measured by:
Product performance characteristics
Product performance characteristics
Product attributes for which customers are willing to
Product attributes for which customers are willing to
pay
pay
Firms create value by innovatively bundling and
Firms create value by innovatively bundling and
leveraging their resources and capabilities. leveraging their resources and capabilities.Superior value Superior value
Above Above
average returns average returns
© 2007 Thomson/South-Western. All rights reserved. 3 Creating Competitive Advantage Creating Competitive Advantage
Core competencies, in combination with product Core competencies, in combination with product
market positions, are the firm market positions, are the firm
’ ’ s most important s most important sources of competitive advantage. sources of competitive advantage.
Core competencies of a firm, in addition to its Core competencies of a firm, in addition to its
analysis of its general, industry, and competitor
analysis of its general, industry, and competitor
environments, should drive its selection of environments, should drive its selection of strategies. strategies.- Are non
- routine.
- Have ethical implications.
- average returns.
- Significantly influence the firm
© 2007 Thomson/South-Western. All rights reserved. 3 The Challenge of Internal Analysis The Challenge of Internal Analysis
Strategic decisions in terms of the firm Strategic decisions in terms of the firm
’ ’ s s resources, capabilities, and core competencies:
resources, capabilities, and core competencies:
Are non
routine.
Have ethical implications.
Significantly influence the firm
’
’
s ability to earn above
s ability to earn above
average returns.
- Courage
- Self
accountable for their work
A willingness to hold people (and themselves)
A willingness to hold people (and themselves)
The capacity to deal with uncertainty and complexity
The capacity to deal with uncertainty and complexity
Integrity
Integrity
confidence
confidence
Self
Courage
To develop and use core competencies, To develop and use core competencies, managers must have: managers must have:
d)
d)
’ ’
© 2007 Thomson/South-Western. All rights reserved. 3 The Challenge of Internal Analysis (cont The Challenge of Internal Analysis (cont
accountable for their work FIGURE FIGURE
3.2 Conditions Affecting Managerial Decisions about
3.2 Conditions Affecting Managerial Decisions about Resources, Capabilities, and Core Competencies Resources, Capabilities, and Core Competencies assets and organizational rent, Strategic Management Journal, 14: 33. Source: Adapted from R. Amit & P. J. H. Schoemaker, 1993, Strategic © 2007 Thomson/South-Western. All rights reserved. 3 Resources, Capabilities and Core Competencies Resources, Capabilities and Core Competencies
Resources Resources
Discovering Core
Discovering Core Are the source of a firm s
Are the source of a firm s
’
’
Competencies Competencies capabilities.
capabilities.
Are broad in scope.
- Are broad in scope.
Cover a spectrum of
Cover a spectrum of
Core Core Competencies Competencies individual, social and
individual, social and
organizational
organizational
Capabilities Capabilities phenomena.
phenomena.
Alone, do not yield a
Alone, do not yield a
competitive advantage.
Resources Resources competitive advantage.
Tangible Tangible
Intangible Intangible © 2007 Thomson/South-Western. All rights reserved. 3
Types of Resources Types of Resources
- Financial resources
process, such as:
process, such as:
Capital equipment
Skills of employees Skills of employees
Brand names Brand names
Financial resources Financial resources
Talented managers
Tangible resources
Tangible resources
Financial resources
Physical resources Physical resources
- Organizational
- Capital equipment
- Intangible resources
- Reputation resources
- Talented managers
Technological Technological resources resources
Organizational resources resources
Intangible resources
Human resources Human resources
Innovation resources Innovation resources
s production
s production
’
s assets,
© 2007 Thomson/South-Western. All rights reserved. 3 Resources Resources
Resources Resources
Are a firm
Are a firm
’
’
s assets,
including people and
’
including people and
the value of its brand
the value of its brand name. name.
Represent inputs into
Represent inputs into
a firm
a firm
Reputation resources
- The firm’s borrowing capacity
- The firm’s ability to generate internal
funds
- The firm’s formal reporting structure and its formal planning, controlling, and coordinating systems
- Sophistication and location of a firm’s plant and equipment
- Access to raw materials
- Stock of technology, such as patents, trademarks, copyrights, and trade
secrets
© 2007 Thomson/South-Western. All rights reserved. 3 TABLE TABLE
3.1
Tangible Resources Financial Resources
3.1 Tangible Resources
Organizational Resources
Physical Resources
Technological Resources
Sources: Adapted from J. B. Barney, 1991, Firm resources and sustained competitive advantage, Journal of Management, 17: 101; R. M. Grant, 1991, Contemporary Strategy Analysis, Cambridge, U.K.: Blackwell Business, 100 –102.
TABLE TABLE Intangible Resources
3.2 Intangible Resources
3.2 Human Resources
• Knowledge
• Trust • Managerial capabilities- Organizational routines
Innovation Resources
- Ideas • Scientific capabilities
- Capacity to innovate
Reputational Resources
- Reputation with customers
• Brand name
- Perceptions of product quality, durability, and reliability
- Reputation with suppliers
- For efficient, effective, supportive, and mutually beneficial interactions and 13: 136 –139; R. M. Grant, 1991, Contemporary Strategy Analysis, Cambridge, U.K.: Blackwell Business, 101–104. Sources: Adapted from R. Hall, 1992, The strategic analysis of intangible resources, Strategic Management Journal,
relationships © 2007 Thomson/South-Western. All rights reserved. 3
© 2007 Thomson/South-Western. All rights reserved. 3 Resources, Capabilities and Core Competencies Resources, Capabilities and Core Competencies
Capabilities Capabilities
Represent the capacity to deploy Represent the capacity to deploy resources that have been resources that have been purposely integrated to achieve a purposely integrated to achieve a desired end state desired end state
Emerge over time through complex Emerge over time through complex interactions among tangible and interactions among tangible and intangible resources intangible resources
Often are based on developing, Often are based on developing, carrying and exchanging carrying and exchanging information and knowledge through information and knowledge through the firm the firm
’ ’ s human capital s human capital
Discovering Core Discovering Core Competencies Competencies Resources Resources
Tangible Tangible
Intangible Intangible Capabilities Capabilities Core Core Competencies Competencies
’ ’ s s employees employees
Tangible Tangible
Discovering Core Discovering Core Competencies Competencies Resources Resources
functional areas or as part of a functional area. of a functional area.
functional areas or as part
developed in specific
developed in specific
Capabilities are often
Capabilities are often
The functional expertise of The functional expertise of those employees those employees
The unique skills and The unique skills and knowledge of a firm knowledge of a firm
capabilities lies in:
capabilities lies in:
The foundation of many
The foundation of many
d)
d)
’ ’
Capabilities (cont Capabilities (cont
© 2007 Thomson/South-Western. All rights reserved. 3 Resources, Capabilities and Core Competencies Resources, Capabilities and Core Competencies
Intangible Intangible Capabilities Capabilities Core Core Competencies Competencies TABLE Examples of Firms Capabilities TABLE
3.3 Examples of Firms Capabilities
3.3 ’ ’
Functional Areas Capabilities Distribution Effective use of logistics management techniques Human resources Motivating, empowering, and retaining employees Management Effective and efficient control of inventories through information systems point-of-purchase data collection methods Marketing Effective promotion of brand-name products Effective customer service
Innovative merchandising Management Ability to envision the future of clothing Effective organizational structure Manufacturing Design and production skills yielding reliable products Product and design quality Miniaturization of components and products
Research & Innovative technology development Development of sophisticated elevator control solutions Rapid transformation of technology into new products and processes © 2007 Thomson/South-Western. All rights reserved. Digital technology 3
to
Tangible Tangible
Nonsubstitutability Discovering Core Discovering Core Competencies Competencies Resources Resources
Nonsubstitutability
imitate
imitate
to
Costly
Costly
Rarity
Rarity
Value
Value
Four criteria for Four criteria for determining strategic determining strategic capabilities: capabilities:
© 2007 Thomson/South-Western. All rights reserved. 3 Resources, Capabilities and Core Competencies Resources, Capabilities and Core Competencies
Intangible Intangible Capabilities Capabilities Core Core Competencies Competencies
Distinguish a company Distinguish a company competitively and reflect its
Tangible Tangible
Discovering Core Discovering Core Competencies Competencies Resources Resources
how to deploy different resources and capabilities. resources and capabilities.
how to deploy different
accumulating and learning
accumulating and learning
organizational process of
organizational process of
Emerge over time through an
Emerge over time through an
competitively and reflect its personality. personality.
competitive advantage:
competitive advantage:
s
s
’
’
are the sources of a firm
are the sources of a firm
Resources and capabilities that
Resources and capabilities that
Core Competencies Core Competencies
© 2007 Thomson/South-Western. All rights reserved. 3 Resources, Capabilities and Core Competencies Resources, Capabilities and Core Competencies
Intangible Intangible Capabilities Capabilities Core Core Competencies Competencies
- Activities through which the firm Activities through which the firm
© 2007 Thomson/South-Western. All rights reserved. 3 Resources, Capabilities and Core Competencies Resources, Capabilities and Core Competencies
Core Competencies Core Competencies
Activities that a firm performs
Activities that a firm performs
especially well compared to especially well compared to competitors.
competitors.
adds unique value to its goods
adds unique value to its goods
or services over a long period of
or services over a long period of time. time.
Discovering Core Discovering Core Competencies Competencies Resources Resources
Tangible Tangible
Intangible Intangible Capabilities Capabilities Core Core Competencies Competencies
Costly to imitate Costly to imitate
Rare Rare
Valuable Valuable
Nonsubstituable Discovering Core Discovering Core Competencies Competencies
Nonsubstituable
Costly to imitate
Costly to imitate
Rare capabilities
Rare capabilities
Valuable capabilities
Valuable capabilities
Advantage Advantage
Sustainable Competitive Sustainable Competitive
Four Criteria of Four Criteria of
© 2007 Thomson/South-Western. All rights reserved. 3 Building Core Competencies Building Core Competencies
Nonsubstitutable Nonsubstitutable Four Criteria of Four Criteria of Sustainable Sustainable Advantages Advantages
3.4 The Four Criteria of Sustainable Competitive Advantage
- Help a firm neutralize threats or exploit opportunities
- Are not possessed by many others
- Historical: A unique and a valuable organizational culture or brand name
- Ambiguous cause: The causes and uses of a competence are unclear
- Social complexity: Interpersonal relationships, trust, and friendship among managers, suppliers, and customers
- No strategic equivalent
© 2007 Thomson/South-Western. All rights reserved. 3 TABLE TABLE
3.4
The Four Criteria of Sustainable Competitive Advantage Valuable Capabilities
Rare Capabilities
Costly-to-Imitate Capabilities
Nonsubstitutable Capabilities
- Are not possessed by
© 2007 Thomson/South-Western. All rights reserved. 3 Building Sustainable Competitive Advantage Building Sustainable Competitive Advantage
Valuable capabilities Valuable capabilities
Help a firm neutralize
Help a firm neutralize
threats or exploit
threats or exploit opportunities. opportunities.
Rare capabilities Rare capabilities
Are not possessed by many others. many others.
Discovering Core Discovering Core Competencies Competencies
Valuable Valuable
Rare Rare
Costly to imitate Costly to imitate
Nonsubstitutable Nonsubstitutable Four Criteria of Four Criteria of Sustainable Sustainable Advantages Advantages Building Sustainable Competitive Advantage Building Sustainable Competitive Advantage
- Costly to Imitate Capabilities
Costly to - Imitate Capabilities -
Historical
Historical
Discovering Core Discovering Core Competencies
Competencies A unique and a valuable
A unique and a valuable
- organizational culture or brand
organizational culture or brand name name
Four Criteria of Four Criteria of Ambiguous cause
Ambiguous cause
Sustainable Sustainable The causes and uses of a The causes and uses of a
Advantages Advantages competence are unclear competence are unclear
Social complexity
Social complexity
Interpersonal relationships, Interpersonal relationships,
Valuable Valuable
Rare trust, and friendship among
- trust, and friendship among
- Rare
Costly to Imitate Costly to Imitate managers, suppliers, and managers, suppliers, and
Nonsubstitutable Nonsubstitutable customers customers © 2007 Thomson/South-Western. All rights reserved. 3
- Organizational culture
© 2007 Thomson/South-Western. All rights reserved. 3 Building Sustainable Competitive Advantage Building Sustainable Competitive Advantage
Nonsubstitutable Nonsubstitutable
Capabilities Capabilities
No strategic equivalent
No strategic equivalent
Firm Firm
specific knowledge specific knowledge
Organizational culture
Superior execution of the Superior execution of the chosen business model chosen business model
Discovering Core Discovering Core Competencies Competencies
Valuable Valuable
Rare Rare
Costly to imitate Costly to imitate
Nonsubstitutable Nonsubstitutable Four Criteria of Four Criteria of Sustainable Sustainable Advantages Advantages
© 2007 Thomson/South-Western. All rights reserved. 3 Outcomes from Combinations Outcomes from Combinations of the Four Criteria of the Four Criteria
Va lu ab le ? R ar e? C os tly to Im ita te ? N on su bs tit ut ab le ? Competitive
Consequences
PerformanceImplications No No No No No No No No Competitive Disadvantage Competitive Disadvantage Below Average Returns Below Average Returns Yes Yes No No No No Yes/ No Yes/ No Competitive Parity Competitive Parity Average Returns Average Returns Yes Yes Yes Yes No No Yes/ No Yes/ No
Temporary Com-
petitive Advantage
Temporary Com-
petitive Advantage
Above Average to Average Returns Above Average to Average Returns Yes Yes Yes Yes Yes Yes Yes Yes
Sustainable Com-
petitive AdvantageSustainable Com-
petitive Advantage
Above Average Returns Above Average Returns
3.5 Outcomes from Combinations of the Criteria for Outcomes from Combinations of the Criteria for
© 2007 Thomson/South-Western. All rights reserved. 3 Table Table
3.5
Sustainable Competitive Advantage Sustainable Competitive Advantage
- Understand their cost position.
- Identify multiple means that might be used to facilitate Identify multiple means that might be used to facilitate
- level strategy.
© 2007 Thomson/South-Western. All rights reserved. 3 Value Chain Analysis Value Chain Analysis
Allows the firm to understand the parts of its Allows the firm to understand the parts of its
operations that create value and those that do
operations that create value and those that do not. not.A template that firms use to: A template that firms use to:
Understand their cost position.
implementation of a chosen business
implementation of a chosen business
level strategy.
Provide the assistance necessary for the primary
Support Activities Support Activities
s service after the sale
’ ’ s service after the sale
The product
The product
’ s sale and distribution to buyers s sale and distribution to buyers
’
A product
A product
’ s physical creation s physical creation
’
A product
A product
Primary activities involved with: Primary activities involved with:
d)
d)
’ ’
© 2007 Thomson/South-Western. All rights reserved. 3 Value Chain Analysis (cont Value Chain Analysis (cont
Provide the assistance necessary for the primary
activities to take place. activities to take place.To be a source of competitive advantage, a To be a source of competitive advantage, a resource or capability must allow the firm: resource or capability must allow the firm:
cannot complete
creating activity that competitors
creating activity that competitors
To perform a value
To perform a value
the way competitors perform it, or
the way competitors perform it, or
To perform an activity in a manner that is superior to
To perform an activity in a manner that is superior to
material stage to the final customer. stage to the final customer.
material
Shows how a product moves from the raw
Shows how a product moves from the raw
Value Chain Value Chain
d)
d)
’ ’
© 2007 Thomson/South-Western. All rights reserved. 3 Value Chain Analysis (cont Value Chain Analysis (cont
cannot complete FIGURE FIGURE
3.3
3.3 The Basic Value
The Basic Value Chain Chain © 2007 Thomson/South-Western. All rights reserved. 3 Table Creating Potential of Primary Activities - Examining the Value
3.6 Examining the Value Creating Potential of Primary Activities - Table
3.6 disseminate inputs to a product. Activities, such as materials handling, warehousing, and inventory control, used to receive, store, and Inbound Logistics Operations Machining, packaging, assembly, and equipment maintenance are examples of operations activities. Activities necessary to convert the inputs provided by inbound logistics into final product form. processing. Examples of these activities include finished goods warehousing, materials handling, and order Activities involved with collecting, storing, and physically distributing the final product to customers. Outbound Logistics them to do so. To effectively market and sell products, firms develop advertising and promotional Activities completed to provide means through which customers can purchase products and to induce
campaigns, select appropriate distribution channels, and select, develop, and support their sales force. Marketing and Sales Activities designed to enhance or maintain a product Service Each activity should be examined relative to competitors related activities, including installation, repair, training, and adjustment. ’s value. Firms engage in a range of service- activity as superior, equivalent, or inferior. ’ abilities. Accordingly, firms rate each © 2007 Thomson/South-Western. All rights reserved. Advantage: Creating and Sustaining Superior Performance, by Michael E. Porter, pp. 39 Source: Adapted with the permission of The Free Press, an imprint of Simon & Schuster Adult Publishing Group, from Competitive –40, Copyright © 1985, 1998 by Michael E. Porter. 3 Table Creating Potential of Support Activities - Examining the Value
3.7 Examining the Value Creating Potential of Support Activities
- Table3.7 Activities completed to purchase the inputs needed to produce a firm Procurement assets items fully consumed during the manufacture of products (e.g., raw materials and supplies, as well as fixed ’s products. Purchased inputs include —machinery, laboratory equipment, office equipment, and buildings). Activities completed to improve a firm Technological Development development takes many forms, such as process equipment, basic research and product design, and servicing procedures. ’s product and the processes used to manufacture it. Technological Activities involved with recruiting, hiring, training, developing, and compensating all personnel. Human Resource Management Through its infrastructure, the firm strives to effectively and consistently identify external opportunities and support, and governmental relations that are required to support the work of the entire value chain. Firm infrastructure includes activities such as general management, planning, finance, accounting, legal Firm Infrastructure threats, identify resources and capabilities, and support core competencies.
Each activity should be examined relative to competitors ’ abilities. Accordingly, firms rate each activity as superior, equivalent, or inferior. Advantage: Creating and Sustaining Superior Performance, by Michael E. Porter, pp. 40 Source: Adapted with the permission of The Free Press, an imprint of Simon & Schuster Adult Publishing Group, from Competitive © 2007 Thomson/South-Western. All rights reserved. –43, Copyright © 1985, 1998 by Michael E. Porter. 3
- Activities involved with collecting, storing, and
physically distributing the product to customers
Activities involved with collecting, storing, and
Outbound Logistics Outbound Logistics
inbound logistics into final product form
inbound logistics into final product form
Activities necessary to convert the inputs provided by
Activities necessary to convert the inputs provided by
inputs to a product
Operations Operations
inputs to a product
Activities used to receive, store, and disseminate
Activities used to receive, store, and disseminate
Inbound Logistics Inbound Logistics
Activities Activities
Creating Potential of Primary Creating Potential of Primary
© 2007 Thomson/South-Western. All rights reserved. 3 The Value The Value
physically distributing the product to customers
- Activities designed to enhance or maintain a
- Each activity should be examined relative to competitor
Each activity should be examined relative to competitor
abilities and rated as superior, equivalent or inferior.
’ s s
’
s value
s value
’
’
product
product
Activities designed to enhance or maintain a
which customers can purchase products and to
induce them to do so. induce them to do so.Service Service
which customers can purchase products and to
Activities completed to provide the means through
Activities completed to provide the means through
Marketing and Sales Marketing and Sales
d)
d)
’ ’
Activities (cont Activities (cont
Creating Potential of Primary Creating Potential of Primary
© 2007 Thomson/South-Western. All rights reserved. 3 The Value The Value
abilities and rated as superior, equivalent or inferior.
- Activities completed to improve a firm Activities completed to improve a firm
- Activities involved with recruiting, hiring, training,
Human Resource Management Human Resource Management
the processes used to manufacture it.
s product and s product and the processes used to manufacture it.
’
’
Technological Development Technological Development
s products.
produce a firm
’ ’ s products.
produce a firm
Activities completed to purchase the inputs needed to
Activities completed to purchase the inputs needed to
Procurement Procurement
Activities: Support Activities: Support
Creating Potential of Primary Creating Potential of Primary
© 2007 Thomson/South-Western. All rights reserved. 3 The Value The Value
Activities involved with recruiting, hiring, training,
developing, and compensating all personnel. developing, and compensating all personnel.Effectively and consistently identify external
s abilities and rated as superior,
’
’
competitor
competitor
Each activity should be examined relative to
Identify resources and capabilities
Identify resources and capabilities
opportunities and threats
opportunities and threats
Effectively and consistently identify external
accounting, legal, government relations, etc.)
accounting, legal, government relations, etc.)
chain (general management, planning, finance,
chain (general management, planning, finance,
Activities that support the work of the entire value
Activities that support the work of the entire value
Firm Infrastructure Firm Infrastructure
d)
d)
’ ’
Activities: Support (cont Activities: Support (cont
Creating Potential of Primary Creating Potential of Primary
- Support core competencies Support core competencies
- Each activity should be examined relative to
© 2007 Thomson/South-Western. All rights reserved. 3 The Value The Value
s abilities and rated as superior, equivalent or inferior. equivalent or inferior. Figure Figure
3.4
3.4 Prominent
Prominent Applications of Applications of the Internet in the Internet in the Value Chain the Value Chain p. 75. Copyright © 2001 by the Michael E. Porter, March 2001, “Strategy and the Internet” by of Harvard Business Review from Harvard Business School Source: Reprinted by permission © 2007 Thomson/South-Western. All rights reserved. reserved. Publishing Corporation; all rights 3
© 2007 Thomson/South-Western. All rights reserved. 3 Outsourcing Outsourcing
The purchase of a value The purchase of a value
creating activity from an creating activity from an external supplier external supplier
Few organizations possess the resources and
Few organizations possess the resources and
capabilities required to achieve competitive
capabilities required to achieve competitive superiority in all primary and support activities. superiority in all primary and support activities.
By performing fewer capabilities: By performing fewer capabilities:
A firm can concentrate on those areas in which it can