Strategic capability Flashcards
Internal analysis
Internal analysis is used to identify an organisation’s strengths and weaknesses.
Part of this analysis should be to understand the competences which need to be
developed in order to achieve success.
Critical success factors
Critical success factors (CSFs) are a small number of key goals vital
to the success of an organisation.
Those product features that are particularly valued by a group of
customers, and, therefore, where the organisation must excel to
outperform the competition (Johnson, Scholes and Whittington).
Identifying critical success factors will help the organisation to identify the resources
and competences that are needed to succeed.
Internal analysis
Critical success factors
What product features are valued by
customers and where must the
organisation excel?
Resources and core competences
What resources and competences will
enable the organisation to achieve its
critical success factors?
Resources
Threshold resources are the basic resources needed by all firms in
the market.
Unique resources are those resources which are better than those of
the competition and difficult to replicate, giving the firm a sustainable
competitive advantage
9Ms model
The 9Ms model can be used as a checklist when performing a resource audit.
The 9Ms model can be used to identify the resources which are available to the
business and those resources may need to be addressed to achieve CSFs.
Men (Human resources)
Number, skills, motivation, potential, attitudes of staff.
Machines
Premises, location, productive capacity, age of machinery.
Money (Financial resources)
Existing finance available and access to future funding from investors.
Materials
Relations with suppliers, access to key inputs.
Markets
Existing customers, locals where represented, distribution systems.
Management
Quality, skills, leadership style of managers.
Methods
Activities and processes that the business has adopted.
Management Information Systems
Quality of systems to assist in marketing, production R&D.
Make-up
Attitudes, culture, structure.
Human capital
Human capital considers the collective attributes of an organisation’s
human resources. This includes the capabilities, creativity, skills and
knowledge of the workforce and how these combine to create economic
value.
An organisation’s workforce can be a unique resource and many organisations
develop programmes specifically to enhance the value attained from their workforce.
These typically involve:
Education and training
Allowing creativity
Infrastructure
Recognising the intellectual property
Motivation
Competition
Participation in activities.
Recent developments allow the workforce to be more flexible, which should
maximise the benefits generated from them.
These include:
Flexible workplace arrangements
Home working
Improvements in technology, such as cloud computing.
Technological resources
Technology is a resource in many different ways and used correctly can enhance a
company’s processes and improve profit margins. Although, technology failure can
damage a company’s reputation on a huge scale.
Core competences
Core competences are the critical activities and processes which
enable the firm to meet the critical success factors and therefore
achieve a sustainable competitive advantage.
The core competences must be better than those of competitors and
difficult to replicate.
Kay’s core competences model
Kay’s model can be used to assess the core competences of an organisation.
Kay outlined three main sources of competences
Reputation
The reason that customers are
attracted to the organisation
Competitive architecture
The network of relationships within and around a business
Innovative ability
The ability to develop new products and services
Kay’s core competences model: Competencies lead to:
Internal
architecture
Relationships with employees
External architecture
Relationships with suppliers, customers and intermediaries
Network architecture
Relationships between collaborating businesses
Value chain analysis
A value chain identifies the relationships between the company’s
resources, activities and processes that link the business together and
create a profit margin.
Porter’s value chain analysis
Value chain analysis can be used to analyse the sequence of business
activities which add value to the products or services produced by a
company.
The value (or margin) is measured by the difference between the cost of the
activities and sales revenue created by sales to customers.
Also, non-value adding activities can be identified and reduced or eliminated
Support activities:
Firm infrastructure
Human resources management
Technology development
Procurement
Inbound logistics
Primary activities:
Inbound logistics
Operations
Outbound logistics
Marketing and sales Services
All together create margin
Performing a value chain analysis
The start point for value
chain analysis is to identify
the generic strategy
Cost leadership:
Seeking to be the lowest cost
producer in the industry
The value chain should be
consistent with the generic
strategy.
So a cost leader should seek
cost advantages throughout
their value chain.
Differentiation:
Creating tangible and
intangible product features
that the customer is willing to
pay more for
The value chain should be
consistent with the generic
strategy.
So a differentiator should seek
quality advantages throughout
their value chain.
Performing a value chain analysis: Cost Drivers
The factors that cause costs to be incurred. Important for a cost leader
who is trying to reduce costs.
Performing a value chain analysis: Value drivers
Potential sources of value. These are important for differentiators who
are trying to generate quality advantages in their value chain.
Performing a value chain analysis: Primary activities
The primary activities are those that create value and are directly concerned with
providing the product or service.
Inbound logistics are activities concerned with receiving, storing and
distributing the inputs to the product.
Operations transform these various inputs into the final product.
Outbound logistics relate to collecting, storing and distributing the final
product.
Marketing and sales informing customers about the product, persuading them
to buy it, and enabling them to do so.
Service: After sales services such as installation, repair, training and customer
service.
