UNIT 5- The Organization Flashcards
Strategic capability
The resources and competences that an organization need to survive and prosper.
- resources (unique)- tangible or intangible
- core competences
- dynamic capabilities
- cost efficiency
Competitive advantage
based on: value, rarity, inimitability, and non substitutability
Tools
- value chain analysis,
- activity mapping
- benchmarking
- SWOT analysis
Core concepts- strategic capability
- Foundations- resources and competences
- Cost efficiency- ability to achieve and improve
- Sustainability- capability to sustain competitive
- Organizational knowledge- hoot generate competitive advantage
- Analysis- value chain, benchmarking, activity maps, SWOT
- Development- how generate strategic capabilities
Core competences
Core Competences are skills and abilities by which resources are deployed to achieve competitive advantage in ways that others cannot imitate or obtain.
- What is the core competence of Sony? Or apple?
- what makes your competence unique
- Problem with verticalizing your company- losing your core competences, lose your focus on what you are good at
Sources of cost efficiency
- Economies of scale- In production, marketing, or distribution
- Experience
- Product/process design
- Process optimization: capacity-fill, labor productivity, material yield, working capital utilization
- Product design: distribution or after-sales service (Eg.: Canon eroded Xerox’s advantage (which was built on service and a support network) by designing a copier that needed far less servicing. - Supply costs- Achieve lower costs of supply than competitors. Should I own my supplier? Should I be close to my supplier or my client?
The experience curve
How?
- cost should decline year by year;
- not economy of scale
- tend to reduce my cost as time goes by
- How can I be more cost competitive? - economy of scale and experience
- Advantage of being the first to move- the advantage is usually related to the experience curve, you are ahead of your competitors
Capabilities - achieving and sustaining competitive advantage
- Value
- Rarity
- Inimitable
- Substitution
- Dynamic
Value
Which activities are important for providing value for the strategic capabilities?
Models to help on the analysis:
- value chain,
- activity mapping
Rarity
Unique or rare capability (prime locations, patent, intellectual capital)
Competitive advantage:
-easy of transferability (who owns and how easily to transfer it)
- sustainability (temporary rarity),
- core rigidities (dangerous rigid capabilities).
Inimitable
Capabilities:
- complexity,
- organization’s culture,
- casual ambiguity (difficult to discern cause and effect)
Substitution
Might be a victim of substitution:
- in products
(goods and services),
- in competences or skills
(replaced by systems)
Dynamic
Ability to renew and recreate its strategic capabilities to meet the need of a changing environment.
Analyzing internally/ diagnosing strategic capability
- swot- a mix of internal and external
- value chain/value network
- activity mapping
- benchmarking= comparing yourself to the best reference in your sector
What is value chain?
The categories of activities within and around an organization, which together create a product or service.
The value chain consists of five primary activities (which are directly concerned with the creation or delivery of a product or service) and four support activities (which help to improve the effectiveness or efficiency of primary activities).
- primary activity and support activity
- focus it to my strategy- low cost etc
The value network
The network of all the value chains
A value network is the set of inter-organizational links and relationships that are necessary to
create a product or service.
Uses of the value chain
- A generic description of activities–understanding how the discrete activities (or clusters of linked activities) contribute to consumer benefit
- Identifying activities where the organisation has particular strengths or weaknesses
- Analysing the competitive position of the organisation using the VRIO criteria – thus identifying sources of sustainable advantage
- Looking for ways to enhance value or decrease cost in value activities (e.g. outsourcing)
Uses of the value system
*Understanding cost/ price structures across the value system – analysing the best area of focus and the best business model
- Identifying “profit pools” (i.e.The levels of profit in different parts of the system) – seeking ways to use existing capabilities in order to exploit these
- The “make or buy” decision–which activities to do “in-house” and which to outsource
- Partnering–deciding who to work with and the nature of these relationships.
Mapping activity systems
- Identify “higher order strategic themes” that is,
how the organisation meets the critical success factors in the market
*Identify the clusters of activities that underpin these themes and how they fit together
- Map this in terms of how activity systems are interrelated.
Lessons from activity maps
- Consistency and reinforcement- identify activities that create value to customers, pulling in the same direction and reinforcing the business performance
- Difficulties of imitation- it is more difficult to imitate a mix of linked activities (Ex. Plasco)
- Trade-offs- if imitation is possible- generate another difficult for the competitor
Approaches to benchmarking
- Historical benchmarking
- Industry/sector benchmarking
- Best-in-class benchmarking
