INDIVIDUAL ASSIGNMENT ON READING SUMMARY

CHAPTER 3 AND READING MATERIAL 6:

THE INTERNAL ORGANIZATION: RESOURCES, CAPABILITIES, CORE
COMPETENCIES, AND COMPETITIVE ADVANTAGES
AND
A RESOURCE-BASED VIEW OF COMPETITIVE ADVANTAGE AT THE PORT
OF SINGAPORE

By
Shelly Deviana Hakim
(29113362)
YP50B

MASTER OF BUSINESS ADMINISTRATION

SCHOOL OF BUSINESS AND MANAGEMENT
INSTITUT TEKNOLOGI BANDUNG
2015

Competitive advantages and the differences they create in firm performance are often strongly
related to the resources firms hold and how they are managed. To identify and successfully use
resources over time, those leading firms need to think constantly about how to manage them to
increase the value for customers who are arbiters of value as they compare firms goods and
services against each other before making a purchase decision. People are an especially critical
resource for helping organizations learn how to continuously innovate as a means of achieving
successful growth.
The fact that over time the benefits of any firms value-creating strategy can be duplicated by
its competitors is a key reason for having employees who know how to manage resources. In
general, the sustainability of a competitive advantage is a function of three factors: (1) the rate
of core competence obsolescence because of environmental changes, (2) the availability of
substitutes for the core competence, and (3) the imitability of the core competence.15 The
challenge for all firms, then, is to effectively manage current core competencies while
simultaneously developing new ones. Resources and capabilities are not inherently valuable,
but they create value when the firm can use them to perform certain activities that result in a
competitive advantage.

Analyzing the Internal Organization

The Context of Internal Analysis
In the global economy, traditional factors such as labor costs, access to financial resources and
raw materials, and protected or regulated markets remain sources of competitive advantage,
but to a lesser degree. One important reason is that competitors can apply their resources to
successfully use an international strategy as a means of overcoming the advantages created by
these more traditional sources. A global mind-set is the ability to analyze, understand, and
manage (if in a managerial position) an internal organization in ways that are not dependent on
the assumptions of a single country, culture, or context.

Creating Value
By exploiting their core competencies to meet if not exceed the demanding standards of global
competition, firms create value for customers. Firms create value by innovatively bundling and
leveraging their resources and capabilities. Ultimately, creating value for customers is the
source of above-average returns for a firm.

The Challenge of Analyzing the Internal Organization

The strategic decisions managers make about the components of their firms internal
organization are nonroutine, have ethical implications, and significantly influence the firms
ability to earn above-average returns. Difficult managerial decisions concerning resources,
capabilities, and core competencies are characterized by three conditions: uncertainty,
complexity, and intraorganizational conflicts.

Resources, Capabilities, and Core Competencies

Resources, capabilities, and core competencies are the foundation of competitive advantage.
Resources are bundled to create organizational capabilities. In turn, capabilities are the source
of a firms core competencies, which are the basis of competitive advantages.

Resources
Some of a firms resources are tangible while others are intangible. Tangible resources are
assets that can be observed and quantified. Production equipment, manufacturing facilities,
distribution centers, and formal reporting structures are examples of tangible resources.
Intangible resources are assets that are rooted deeply in the firms history and have accumulated
over time. Knowledge, trust between managers and employees, managerial capabilities,
organizational routines, scientific capabilities, the capacity for innovation, brand name, and the
firms reputation for its goods or services and how it interacts with are intangible resources.
The four types of tangible resources are financial, organizational, physical, and technological.
The three types of intangible resources are human, innovation, and reputational.

Capabilities
Capabilities exist when resources have been purposely integrated to achieve a specific task or
set of tasks. These tasks range from human resource selection to product marketing and
research and development activities.

Core Competencies
Core competencies distinguish a company competitively and reflect its personality. Core
competencies emerge over time through an organizational process of accumulating and
learning how to deploy different resources and capabilities.

Building Core Competencies

The first consists of four specific criteria of sustainable competitive advantage that firms can
use to determine those capabilities that are core competencies. Because the capabilities have
satisfied these four criteria, they are core competencies. The second tool is the value chain
analysis. Firms use this tool to select the value-creating competencies that should be maintained,
upgraded, or developed and those that should be outsourced.

Outsourcing
Outsourcing is the purchase of a value-creating activity from an external supplier. Firms
engaging in effective outsourcing increase their flexibility, mitigate risks, and reduce their
capital investments. Outsourcing can be effective because few, if any, organizations possess
the resources and capabilities required to achieve competitive superiority in all primary and
support activities.

Competencies, Strengths, Weaknesses, and Strategic Decisions

At the conclusion of the internal analysis, firms must identify their strengths and weaknesses
in resources, capabilities, and core competencies. Therefore, firms need to have the appropriate
resources and capabilities to develop the desired strategy and create value for customers and
other stakeholders such as shareholders. Moreover, decision makers sometimes become more
focused and productive when their organizations resources are constrained.

A Resource-based View of Competitive Advantage at the Port of Singapore

The Port of Singapore has achieved a sustainable competitive advantage relative to other
locations by carefully building a set of resources that other Ports would find very difficult to
match. Some of these resources are natural, some can be replicated at a significant cost, and
some are particularly valuable in Singapore. The data for this paper came from a number of
sources and the result of interviews and information about different Port and Singapore
government initiatives to look for linkages among the resources.
1. The Port of Singapore
Singapore's most important natural resources include its large, protected harbor, its location
on major trade routers, and the skills of its well-educated work force. A Port particularly as
shipping became containerized, requires massive infrastructure development including
berths, cranes, trucks, storage and warehousing, anchorages, tugboats, pilot launches, etc.
Number one transshipment port in the world is PSA, It not simply because of its strategic
location but because of its efficiency. Exporters and importers in many countries find it

more convenient and cost-effective to transship through Singapore rather than ship direct
to their final destination. PSA anticipated global containerization in the late 1960s and built
the first container Port in the region. PSA is expanding its terminal facilities in meeting the
advent of globalization in the next millennium, and the anticipated cross-border trade
growth that accompanies it. PSA has invested heavily in information and operations
technology, both to solve immediate operating problems and to remove constraitns on the
growth of container traffic. The company provides high standards of service. Efficient
operations and support from IT allow Singapore to increase the number of containers
handled without a proportionate increase in space.
2. Analyzing PSA's strategy
The resources in company must be rare, valuable, inimitable and nonsubstitutable to confer
an advantage in the first place. There no guarantee that set of resources that one provided a
competitive advantage will continue to do so indefinitely. The initial resource are
Singapore's location and its harbor. To develop and exploit these natural resources,
Singapore has developed man-made resources of capital, information and operations
technology, and developed IT management skills. The Singapore experiences shows how
IT can reduces the consequences of disadvantages. The flexibility allow PSA to enlarge the
capacity of the Port to handle more compareble to physical infrastructure.
3. Conclusions
Singapore began with two natural resources: its location and a large, protected deep-water
Port. The management of PSA saw operations and information technologies as a way to
solve problems and expand the capacity of the Port. An organization can never assume that
an advantage will last; competitors do not give up easily. In response to the loss of these
carriers, PSA dropped the handling rate for empty containers by 50% and is considering
giving operators a stake in PSA's operations.
4. Implications for management
PSA supplemented limited natural resources with man-made resources, including
operations and information technology, to build one of the leading ports in the world. Not
all important resources are under the control of an organization, so one must (1) identify
external resources that can be used to one's advantage and (2) build internal resources
capable of enhancing those external resources. The case point out an important
characteristic of operations and information technology. Technology helps the firm utilize
assets more effectively. Operation and information technology offer the manager the ability
to increase capacity without adding physical assets.