CH04-Internal Analysis

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Chapter 4 -- Internal Analysis: Resources, Capabilities, Competencies, and Competitive Advantage

Text by Charles W. L. Hill Gareth R. Jones
Multimedia Slides by Milton M. Pressley

Univ. of New Orleans
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
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Preview
Competitive Advantage Generic Building Blocks of Competitive Advantage Business Functions and the Value Chain Distinctive Competencies, Resources, and Capabilities Durability of Competitive Advantage Why Do Companies Fail? Avoiding Failure and Sustaining Competitive Advantage
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Competitive Advantage: Value Creation, Low Cost, and Differentiation

Competitive Advantage Sustained Competitive Advantage
Figure 4.1: PC Firms: Return on Capital Employed Relative to Industry Means

25 20 15 10 5 0 -5 -10 -15 Apple AST
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Compaq Dell
1994
1986
1987
1988
1989
1990
1991
1992
1993
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Figure 4.2: Value Creation
V-P V P-C
V=Value to Consumer P=Price C=Costs of Production V-P=Consumer Surplus P-C=Profit Margin
P C
C
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Figure 4.3: Generic Building Blocks of Competitive Advantage
Superior Efficiency
Competitive Advantage: Low Cost Differentiation
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Figure 4.3: Generic Building Blocks of Competitive Advantage

Superior Quality
Superior Efficiency
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Figure 4.4: The Impact of Quality on Profits

Increased Reliability Increased Quality Increased Productivity
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Increased Reliability Increased Quality Increased Productivity Lower Costs Higher Prices
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Increased Reliability Increased Quality Increased Productivity Lower Costs Higher Prices Higher Profits
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Figure 4.3: Generic Building Blocks of Competitive Advantage (Continued)

Superior Quality
Superior Efficiency
Superior Innovation
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Figure 4.3: Generic Building Blocks of Competitive Advantage (Continued)

Superior Quality
Superior Efficiency
Superior Customer Responsiveness
Superior Innovation
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Figure 4.5: Summary of the Impact of Efficiency, Quality, Innovation, and Customer Responsiveness on Unit Costs and Prices
Efficiency
Lower Unit Costs
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Efficiency
Lower Unit Costs Quality Higher Unit Prices
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Efficiency
Lower Unit Costs Quality Higher Unit Prices
Customer Responsiveness
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Efficiency
Lower Unit Costs Innovation Higher Unit Prices Quality
Customer Responsiveness
Business Functions, The Value Chain, and Value Creation

Figure 4.6: The Value Chain
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Inputs
Research and Development Primary Activities
Outputs

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Inputs
Research and Development
Production
Outputs
Primary Activities

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Inputs
Production
Marketing and Sales
Outputs
Primary Activities

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Inputs
Production
Marketing and Sales
Service
Outputs
Primary Activities

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Support Activities Materials Management
Inputs
Production
Marketing and Sales
Service
Outputs
Primary Activities

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Support Activities
Human Resources Materials Management
Inputs
Production
Marketing and Sales
Service
Outputs
Primary Activities

Company Infra-Structure Support Activities Human Resources Materials Management
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Inputs
Production
Marketing and Sales
Service
Outputs
Primary Activities
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Cross Functional Goals*
CEO
Corporate Headquarters Staff
*More Detail in Chapter 11

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Distinctive Competencies, Resources, and Capabilities

Figure 4.7: The Roots of Competitive Advantage
Distinctive Competencies
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Resources
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Resources Are:
Tangible
Land Buildings Plant Equipment
Intangible
Brand Names Reputation Patents Technical or Marketing Know-How
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Resources
Capabilities
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Resources Superior
Efficiency Quality Innovation Customer Responsiveness
Capabilities
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Resources Superior Differentiation
Low Cost
Capabilities
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Resources Superior Differentiation Value Creation Low Cost
Capabilities
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Resources Superior Differentiation Value Creation Low Cost Higher Profits
Capabilities

(Continued)
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Strategy and Competitive Advantage

Figure 4.8: The Relationship Between Strategies
Shape
Resources & Capabilities (Competencies) Build
Strategies
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(Continued)
The Role of Luck
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The Durability of Competitive Advantage

Barriers to Imitation
Imitating Resources Imitating Capabilities
Capability of Competitors
Strategic Commitment
Industry Dynamism
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Why Do Companies Fail?

Inertia
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Inertia
Prior Strategic Commitments

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The Icarus Paradox
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Avoiding Failure and Sustaining Competitive Advantage

Focus on the Building Blocks of Competitive Advantage Institute Continuous Improvement and Learning Track Best Industrial Practice and Use Benchmarking Overcome Inertia
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CH04-Internal Analysis

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CH04-Internal Analysis

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4-1

Chapter 4 -- Internal Analysis: Resources, Capabilities, Competencies, and Competitive Advantage

Multimedia Slides by Milton M. Pressley

Competitive Advantage: Value Creation, Low Cost, and Differentiation

Copyright 1998 by Houghton Mifflin Company. All rights reserved.

Figure 4.1: PC Firms: Return on Capital Employed Relative to Industry Means

Copyright 1998 by Houghton Mifflin Company. All rights reserved.

Figure 4.2: Value Creation

Copyright 1998 by Houghton Mifflin Company. All rights reserved.

Figure 4.3: Generic Building Blocks of Competitive Advantage

Competitive Advantage: Low Cost Differentiation

Copyright 1998 by Houghton Mifflin Company. All rights reserved.

Figure 4.3: Generic Building Blocks of Competitive Advantage

Competitive Advantage: Low Cost Differentiation

Copyright 1998 by Houghton Mifflin Company. All rights reserved.

Figure 4.4: The Impact of Quality on Profits

Copyright 1998 by Houghton Mifflin Company. All rights reserved.

Figure 4.4: The Impact of Quality on Profits

Copyright 1998 by Houghton Mifflin Company. All rights reserved.

Figure 4.4: The Impact of Quality on Profits

Copyright 1998 by Houghton Mifflin Company. All rights reserved.

Figure 4.3: Generic Building Blocks of Competitive Advantage (Continued)

Competitive Advantage: Low Cost Differentiation

Copyright 1998 by Houghton Mifflin Company. All rights reserved.

Figure 4.3: Generic Building Blocks of Competitive Advantage (Continued)

Competitive Advantage: Low Cost Differentiation

Superior Customer Responsiveness

Copyright 1998 by Houghton Mifflin Company. All rights reserved.

Lower Unit Costs

Copyright 1998 by Houghton Mifflin Company. All rights reserved.

Lower Unit Costs Quality Higher Unit Prices

Copyright 1998 by Houghton Mifflin Company. All rights reserved.

Lower Unit Costs Quality Higher Unit Prices

Lower Unit Costs Innovation Higher Unit Prices Quality

Business Functions, The Value Chain, and Value Creation

Research and Development Primary Activities

Copyright 1998 by Houghton Mifflin Company. All rights reserved.

Business Functions, The Value Chain, and Value Creation

Research and Development

Business Functions, The Value Chain, and Value Creation

Research and Development

Marketing and Sales

Business Functions, The Value Chain, and Value Creation

Research and Development

Marketing and Sales

Business Functions, The Value Chain, and Value Creation

Support Activities Materials Management

Research and Development

Marketing and Sales

Business Functions, The Value Chain, and Value Creation

Human Resources Materials Management

Research and Development

Marketing and Sales

Business Functions, The Value Chain, and Value Creation

Research and Development

Marketing and Sales

Business Functions, The Value Chain, and Value Creation

*More Detail in Chapter 11

Distinctive Competencies, Resources, and Capabilities

Copyright 1998 by Houghton Mifflin Company. All rights reserved.

Distinctive Competencies, Resources, and Capabilities

Copyright 1998 by Houghton Mifflin Company. All rights reserved.

Distinctive Competencies, Resources, and Capabilities