core competencies

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core competencies presentation

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Resources * Tangible * Intangible Capabilities Teams of Resources Sources of Core Competencies Competitive Advantage Strategic Competitiveness Above-Average Returns Competitive Advantage Gained through Core Competencies Discovering Core Competencies Discovering Core Competencies Criteria of Sustainable Advantages Value Chain Analysis Valuable Rare Costly to Imitate Nonsubstitutable * * * * * Outsource

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How do we assemble bundles of Resources, Capabilities and Core Competencies to create VALUE for customers? Will environmental changes make our core competencies obsolete? And... Are substitutes available for our core competencies? Are our core competencies easily imitated? Key Questions for Managers in Internal Analysis

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Resources * Tangible * Intangible Discovering Core Competencies

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What a firm has to work with: its assets , including its people and the value of its brand name What a firm Has ... Resources

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Resources represent inputs into a firm’s production process ... such as capital equipment, skills of employees, brand names, finances and talented managers What a firm Has ... What a firm has to work with: its assets, including its people and the value of its brand name Resources

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What a firm has to work with: its assets, including its people and the value of its brand name Resources represent inputs into a firm’s production process... such as capital equipment, skills of employees, brand names, finances and talented managers “Some genius invented the Oreo. We’re just living off the inheritance.” F. Ross Johnson, Former President & CEO, RJR Nabisco What a firm Has ... Resources

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Tangible Resources Financial * Physical * Human Resources * Organizational * What a firm Has ... What a firm has to work with: its assets, including its people and the value of its brand name Resources represent inputs into a firm’s production process... such as capital equipment, skills of employees, brand names, finances and talented managers Intangible Resources Technological * Innovation * Reputation * “Some genius invented the Oreo. We’re just living off the inheritance.” F. Ross Johnson , Former President & CEO, RJR Nabisco Resources

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Resources * Tangible * Intangible Capabilities Teams of Resources Discovering Core Competencies

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What a firm Does ... Capabilities represent: the firm’s capacity or ability to integrate individual firm resources to achieve a desired objective. Capabilities

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What a firm Does ... Capabilities develop over time as a result of complex interactions that take advantage of the interrelationships between a firm’s tangible and intangible resources that are based on the development, transmission and exchange or sharing of information and knowledge as carried out by the firm's employees. Capabilities represent: the firm’s capacity or ability to integrate individual firm resources to achieve a desired objective. Capabilities

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What a firm Does ... Capabilities represent: the firm’s capacity or ability to integrate individual firm resources to achieve a desired objective. Capabilities develop over time as a result of complex interactions that take advantage of the interrelationships between a firm’s tangible and intangible resources that are based on the development, transmission and exchange or sharing of information and knowledge as carried out by the firm's employees. Capabilities become important when they are combined in unique combinations which create core competencies which have strategic value and can lead to competitive advantage . Capabilities

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Resources * Tangible * Intangible Capabilities Teams of Resources Discovering Core Competencies Sources of Core Competencies Competitive Advantage Discovering Core Competencies

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What a firm Does ... that is Strategically Valuable “…are the essence of what makes an organization unique in its ability to provide value to customers.” Leonard-Barton, Bowen, Clark, Holloway & Wheelwright McKinsey & Co. recommends identifying three to four competencies to use in framing strategic actions. Core Competencies

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Resources * Tangible * Intangible Capabilities Teams of Resources Sources of Core Competencies Competitive Advantage Discovering Core Competencies Criteria of Sustainable Advantages Valuable Rare Costly to Imitate Nonsubstitutable * * * * Discovering Core Competencies * Outsource

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For a strategic capability to be a Core Competency, it must be: Core Competencies Valuable Rare Costly to Imitate Nonsubstitutable What a firm Does ... that is Strategically Valuable

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Core Competencies must be: Nonsubstitutable Capabilities that do not have strategic equivalents, such as firm-specific knowledge or trust-based relationships What a firm Does ... that is Strategically Valuable Core Competencies Valuable Rare Costly to Imitate Capabilities that other firms cannot develop easily, usually due to unique historical conditions, causal ambiguity or social complexity Capabilities that are possessed by few, if any, current or potential competitors Capabilities that either help a firm to exploit opportunities to create value for customers or to neutralize threats in the environment

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Resources * Tangible * Intangible Capabilities Teams of Resources Sources of Core Competencies Competitive Advantage Discovering Core Competencies Value Chain Analysis * Outsource Valuable Rare Costly to Imitate Nonsubstitutable * * * * Criteria of Sustainable Advantages Discovering Core Competencies

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Support Activities Primary Activities Value Chain Analysis Identifying Resources and Capabilities That Can Add Value

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Support Activities Primary Activities Inbound Logistics Value Chain Analysis Identifying Resources and Capabilities That Can Add Value

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Support Activities Primary Activities Inbound Logistics Operations Value Chain Analysis Identifying Resources and Capabilities That Can Add Value

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Support Activities Primary Activities Inbound Logistics Operations Outbound Logistics Value Chain Analysis Identifying Resources and Capabilities That Can Add Value

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Support Activities Primary Activities Inbound Logistics Operations Outbound Logistics Marketing & Sales Value Chain Analysis Identifying Resources and Capabilities That Can Add Value

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Support Activities Primary Activities Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Value Chain Analysis Identifying Resources and Capabilities That Can Add Value

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Support Activities Primary Activities Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Procurement Value Chain Analysis Identifying Resources and Capabilities That Can Add Value

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Support Activities Primary Activities Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Procurement Technological Development Value Chain Analysis Identifying Resources and Capabilities That Can Add Value

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Support Activities Primary Activities Technological Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Human Resource Management Value Chain Analysis Identifying Resources and Capabilities That Can Add Value

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Support Activities Primary Activities Technological Development Human Resource Management Firm Infrastructure Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Value Chain Analysis Identifying Resources and Capabilities That Can Add Value

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Support Activities Primary Activities Technological Development Human Resource Management Firm Infrastructure Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service MARGIN MARGIN Value Chain Analysis Identifying Resources and Capabilities That Can Add Value

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Support Activities Primary Activities Outsourcing Technological Development Human Resource Management Firm Infrastructure Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service MARGIN MARGIN Strategic Choice to Purchase Some Activities From Outside Suppliers

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Support Activities Primary Activities Technological Development Human Resource Management Firm Infrastructure Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service MARGIN Inbound Logistics Operations Outbound Logistics Service Marketing & Sales Technological Development Human Resource Management Procurement MARGIN Firms often purchase a portion of their value-creating activities from specialty external suppliers who can perform these functions more efficiently Outsourcing Strategic Choice to Purchase Some Activities From Outside Suppliers

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Lets company focus on broader business issues by having outside experts handle various operational details Strategic Rationales for Outsourcing Improve Business Focus Permits firm to redirect efforts from non-core activities toward those that serve customers more effectively Free Resources for Other Purposes Provide Access to World-Class Capabilities Accelerate Business Re-Engineering Benefits Share Risks The specialized resources of outsourcing providers makes world-class capabilities available to firms in a wide range of applications Achieves re-engineering benefits more quickly by having outsiders--who have already achieved world-class standards--take over process Reduces investment requirements and makes firm more flexible, dynamic and better able to adapt to changing opportunities

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Core Competencies--Cautions and Reminders Never take for granted that core competencies will continue to provide a source of competitive advantage All core competencies have the potential to become Core Rigidities Core Rigidities are former core competencies that sow the seeds of organizational inertia and prevent the firm from responding appropriately to changes in the external environment Strategic myopia and inflexibility can strangle the firm’s ability to grow and adapt to environmental change or competitive threats

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Resources * Tangible * Intangible Capabilities Teams of Resources Sources of Core Competencies Competitive Advantage Strategic Competitiveness Above-Average Returns Competitive Advantage Gained through Core Competencies Discovering Core Competencies Value Chain Analysis Valuable Rare Costly to Imitate Nonsubstitutable * * * * * Outsource Criteria of Sustainable Advantages Discovering Core Competencies