Internal resources, capabilities and

competences
Dec 2007
Q1 (a) Using the information provided in the scenario, evaluate the
strengths and weaknesses of ONA and their impact on its performance.
Please note that opportunities and threats are NOT required in your
evaluation. marks
June 2009
Q1 (a) Evaluate the current strategic position of green Tech using a SWOT
analysis. 12 marks

December 2009
Q2

(a) Analyse the primary activities of the value chain for the product range
at IL. 10 marks
(b) Evaluate what changes IL might consider to the primary activities in the
value chain to improve their competitiveness, whilst continuing to meet
their charitable objectives. 15 marks
Strategic Capabilities
Threshold capabilities. These are the minimum
capabilities needed for the organisation to be able
to compete in a given market. They consist of
threshold resources and threshold competences
the resources and competences needed to meet
customers minimum requirements.

An EXAMPLE of a THRESHOLD RESOURCE would

be a supermarket owning enough space to be able to
provide a selection of products to its customers.

An EXAMPLE of a THRESHOLD COMPETENCE

would be an electronics store being able to train its
staff to give advice on the latest products.
CAPABILITIES For Competitive
Advantage. The capabilities that allow an
organisation to beat its competitors. These
capabilities must meet the needs and
expectations of its customers. Unique
capabilities are not enough they must be
valued by the customers.
 Unique resources are those resources that create
competitive advantage and that others cannot imitate or
obtain.
Examples of unique resources are:
brand
situation, for example, near a source of raw material
or a source of cheap labour
right to use a patented process.

Core competences are the activities, processes and

methods through which an organisation uses its resources
effectively, in ways that others cannot imitate or obtain.
Examples of core competences are:
sophisticated IT that, for example, enables complex
and accurate demand forecasting
a corporate culture that fosters innovation
 Illustration

The CocaCola Corporation has, for many years, maintained

a very strong position in the soft drinks market. Consider its
flagship product, Coca Cola. This has largely survived
competition from supermarkets Own label colas. There is no
great secret in how to make a reasonable imitation (though
purists would maintain the imitations are not as good) and
the resources needed are not demanding. The own label
colas sell at much lower prices, so high volume production
resources, capable of producing flavored carbonated water
do not seem to be important in keeping production prices
down. So how has CocaCola managed to keep its dominant
position?
It has been argued above that physical resources do not
seem to be important. Therefore, the answer must lie in
nonphysical Resources (such as a very powerful brand) and
core competences. The core competences lie in managing
Sustaining competitive advantage
Rarity of strategic capabilities. Competitive
advantage will not be attained if competitors
have identical strategic capabilities. Unique or
rare resources or competences are needed to
allow the organisation to outperform its rivals.
Robustness of strategic capabilities.
Capabilities for competitive advantage should be
robust, meaning that they are hard to imitate.
Therefore, competitive advantage is not so often
sustained through physical/tangible resources as
these can be copied/acquired over time.
Value of strategic capabilities. The
strategic capability must be one that is of
value to the customer. A distinctive capability
is not enough: the strategic capability must be
able to generate what customers value in
terms of products or services.
Illustration
Dyson vacuum cleaners have sold well for
many years, at relatively high prices, in the
face of competition from large, more
established manufacturers such as Hoover
and Philips. The sources of their sustained
competitive advantage are.
Dyson vacuum cleaners Ordinary
vacuum cleaners
Rarity: high amounts spent on research and
development.
Other manufacturers might have a vested
interest in selling dust bags at high profit
margins and are reluctant to innovate.
Robustness: patented process to centrifuge
dust into the collection container.
Value: innovative, bag-less, hi-tech styled.
Resources (Ms Model)
If an organisation does not have sufficient
resources to carry out its plans to achieve
long term success and competetitive
advantage, then it must either:

Make good the resource deficit

Change its operations and plans.
Porters Value Chain
Primary activities:

Inbound logistics receiving, storing and handling raw

material inputs.
Operations transformation of the raw materials into
finished goods and services. For example, using skilled
craftsmen could give a quality advantage.
Outbound logistics storing, distributing and
delivering finished goods to customers. For example,
outsourcing delivering could give a cost advantage.
Marketing and sales for example, sponsorship of a
sports celebrity could enhance the image of the product.
Service all activities that occur after the point of sale,
such as installation, training and repair, e.g. Marks &
Spencers friendly approach to returns gives it a
perceived quality advantage.
Secondary activities:
Firm infrastructure how the firm is organised. For
example centralized or decentralized, tall or wide.
Technology development how the firm uses
technology. For example, the latest computer
controlled machinery gives greater flexibility to tailor
products to individual customer specifications.
Human resources development how people
contribute to competitive advantage. For example,
employing expert buyers could enable a supermarket
to purchase better or cheaper than competitors.
Procurement purchasing, but not just limited to
materials. For example, buying a building out of town
could give a cost advantage over high street
competitors.
M&S KWIK
M&S KWIK
M&S KWIK
M&S KWIK
Value Networks
Product life cycle model
Illustration

PCs
Introduction And Growth Initially, there were relatively few
significant producers. The product was innovative, non
standardised, of inconsistent quality and expensive. Once it
looked as though it would be a successful product many
producers were attracted into the market. Mass production
lowered prices. The range of technologies used narrowed.
Intense competition developed as firms fought for dominance
and market share.
Maturity means that the product has become a commodity.
The industry will be left with just a few large players (Dell,
Hewlett Packard, etc.). Efficiency is very important to maintain
margins. New entrants will be rare as there is little point in
entering an old market.
Decline Some companies will find that their exit costs are high
and will be willing to manufacture so long as marginal revenue
exceeds marginal costs. Price wars are likely.
Benchmarking
Benchmarking

Benchmarkingisisthe
Benchmarking theprocess
processofofsystematic
systematic
comparison of a service, practice or
comparison of a service, practice or process. process.
Itsuse
Its useisistotoprovide
provideaatarget
targetfor
foraction
actionininorder
order
totoimprove
improvecompetitive
competitiveposition.
position.
 It involves answering the
It involves answering the
questions:
questions:

How do we compare?
Who performs better?
Why are they better?
What actions do we need to take in order to
improve our performance?
Types of benchmarking
Historical
Internal

This method examines past performance over a period of time to

determine trends and best performances, which can than be used as
a benchmark for other processes.
e.g. from business units located in different areas. Rank Xerox
radically improved time taken to develop its new products by
benchmarking against Xeroxs Japanese subsidiary, Fuji Xerox.

Strategic

Comparisons are made between actual and budget (note that the
budget should be set at a level so that meeting the budget should
mean the critical success factor is achieved).
Competitive Benchmarking

Focuses its observation and investigation of

business processes with a goal of identifying
and observing the best practices from other
firms in the same industry or sector.

E.g. For example many of the Car

manufacturer buy cars of competitors and by
reverse engineering tries to find how their
product could be improved.
Activity Benchmarking

Activity analysis will be required where the

objective is to benchmark cost and efficiency,
method is to look at other organizations, not
necessarily competitors, who are performing
similar activities.

E.g. if a Supermarket vendor wants to improve

its delivery time it may look into processes of
FedEx or DHL to find what is the best practice
for that
Generic Benchmarking

Is used where processes might be so unique

that there may not be competitive or activity
benchmarks available, in this case
conceptually similar processes is sought as
benchmark

E.g. tunneling for exploration of volcanic

crusts was use as benchmark at Japan by a
construction company for construction of an
under sea tunnel for transport
Dangers of benchmarking
You get what you measure managers may learn to
direct attention at what gets benchmarked rather
than at what is important strategically
Benchmarking does not always reveal the reasons for
good/poor performance
Managers need to be aware that a benchmarking
exercise can appear to threaten staff where it
appears that benchmarking is designed to identify
weaknesses in individual performance rather than
how the process itself can be improved.
Out of date solution;- solving today's problem with
yesterdays solution may not provide you competitive
advantage
Identifies effects rather than causes:- sometimes
indicates how well or bad we are performing rather
than indicating causes
Availability of information
 Culture
Organizationalcultureis thesumtotal of
anorganization'spast
andcurrentassumptions,experiences,
philosophy, and values that hold it together, and
is expressed in its self-image, innerworkings,
interactions with the outside world, and
futureexpectations.
It is based on sharedattitudes,beliefs,customs,
express orimplied contracts, and written and
unwrittenrulesthat the organizationdevelops
over time and that haveworkedwell enough to
be consideredvalid.
Charles Handy - types of
culture
Power Heavily centralized with few
decision-makers. Allows quick responses
to changes in the environment.
Role Lots of formalized procedures. Can
be very useful in an environment that is
stable.
Task Emphasis on getting the job done
rather than following rules. Works well in
complex, unstable environments.
Person Purpose is purely to look after the
individuals (found where self-employed
people are the norm).
Miles and Snow Strategic cultures
Defenders (orthodox ) like strategic options
that have worked in the past / low risks / secure
markets.

Prospectors(Adaptors) like options that could

deliver results even if they entail high risk.

Analysers (followers) will move into new areas

but only after someone else has proved they work.

Reactors(Free wheelers) do not plan ahead.

Cultural Web
(By Gerry Johnson and Scholes)
Cultural web provides
Effect of culture is on: -
Strategy and strategic planning
Perception of competitors/customers
and employees
Management Styles/Structure
Attitude towards Stakeholders
Ethics
Organisatio
nal
Structure
 Centralisation v decentralisation
Centralisation v decentralisation
One factor in determining the flexibility of a structure is the
One factor in determining the flexibility of a structure is the
level at which decisions are made.
level at which decisions are made.
Centralised
Centralised
Organisations the upper levels of an organisations
Organisations the upper levels of an organisations
hierarchy retain the authority to take most decisions. The
hierarchy retain the authority to take most decisions. The
choice of organisation will depend to a certain extent on the
choice of organisation will depend to a certain extent on the
size of the organisation and the scale of its activities, such
size of the organisation and the scale of its activities, such
that the functional structure is likely to be centralised, and
that the functional structure is likely to be centralised, and
the divisional structure is likely to be decentralised.
the divisional structure is likely to be decentralised.
Decentralisation:
Decentralisation:
Is more likely in large scale organisations
Is more likely in large scale organisations
Gives authority to make specific decisions to units and
Gives authority to make specific decisions to units and
people at lower levels in the organisations hierarchy
people at lower levels in the organisations hierarchy
Allows frontline staff to respond flexibly to customer
Allows frontline staff to respond flexibly to customer
demands without reference upwards to senior management
demands without reference upwards to senior management
Allows local management (of dispersed units) to respond
Allows local management (of dispersed units) to respond
flexibly to local market conditions without reference
flexibly to local market conditions without reference
upwards to head office.
upwards to head office.
 Different Structural Types are
Different Structural Types are

Entrepreneurial
Entrepreneurial

Functional
Functional

Divisional
Divisional

Matrix
Matrix
 Entrepreneurial
Entrepreneurial

Earlystageinaafirm'sdevelopmentwhere
Earlystagein firm'sdevelopmentwhereone one
ororaafewfoundersmake
fewfoundersmakemostmostororall
allday-to-day
day-to-day
andstrategicdecisions.
andstrategic decisions.
 Functional
Functional
 Advantages
Advantages
Pooling of expertise, through the grouping of
Pooling of expertise, through the grouping of
specialisedtasks
specialised tasksand
andstaff.
staff.
No duplication of functions and economies of
No duplication of functions and economies of
scale.
scale.
Senior managers are close to the operation of
Senior managers are close to the operation of
allfunctions.
all functions.
The facilitation of management and control of
The facilitation of management and control of
functionalspecialists
functional specialists(suited
(suitedtotocentralised
centralised
organisations).
organisations).
 Disadvantages
Disadvantages
Vertical barriers between functions, that may
Vertical barriers between functions, that may
affect work flow (creating coordination
affect work flow (creating coordination
problems)and
problems) andinformation
informationflow
flow(creating
(creating
communicationproblems).
communication problems).
Focuses on internal processes/inputs rather
Focuses on internal processes/inputs rather
thanoutputs
than outputssuch
suchasasquality
qualityand
andcustomer
customer
satisfactionthrough
satisfaction throughaahorizontal
horizontalvalue
valuechain.
chain.
Do not cope well with change, growth and
Do not cope well with change, growth and
diversification.
diversification.
Senior management may not have time to
Senior management may not have time to
addressstrategic
address strategicplanning
planningissues.
issues.
 Divisional structures
Divisional structures

Typesofofdivisional
Types divisionalStructure
Structureare
are

a)
a)
ProductDivision
Product Division
b)
b)
GeographicDivision
Geographic Division
c)
c)
HoldingCompany
Holding Company
 Advantages
Advantages
Flexibility divisions can be closed or created
Flexibility divisions can be closed or created
totorespond
respondtotochanges
changesininorganisational
organisational
strategy.
strategy.
Specialist expertise is built up relating to a
Specialist expertise is built up relating to a
particularproduct
particular productorormarket
marketsegment.
segment.
Managersofofdivisions
Managers divisionshave
haveaagreater
greaterpersonal
personal
interestininthe
interest thestrategy
strategyforfortheir
theirown
owndivision.
division.
The enabling of performance management
The enabling of performance management
(andhence
(and hencecontrol)
control)ofofbusinesses
businessesby byhead
head
officefrom
office fromaadistance.
distance.
 Disadvantages
Disadvantages
Highcentral
High centralmanagement
managementcosts.
costs.
Duplication of effort with all functions
Duplication of effort with all functions
representedwithin
represented withindivisions.
divisions.
Vertical barriers between divisions that may
Vertical barriers between divisions that may
preventinformation
prevent informationsharing
sharingand
andcooperation
cooperation
betweendivisions.
between divisions.
Strategic management can be a complex
Strategic management can be a complex
hierarchicalprocess.
hierarchical process.
Matrix organisations
 Advantages
Advantages

Customer has single point on contact

Customer has single point on contact
Interfunctional communication enhanced
Interfunctional communication enhanced
Flexible, could react to both internal and
Flexible, could react to both internal and
externalenvironments
external environments
 Disadvantages
Disadvantages

Functional Managers expertise is diluted-

Functional Managers expertise is diluted-
spreadover
spread overmany
manyprojects
projects
Staff serving two Masters could result in
Staff serving two Masters could result in
conflicts
conflicts
Time consuming (meetings and higher admin
Time consuming (meetings and higher admin
costs)
costs)
 Mintzbergsstructural
Mintzbergs structural
configurations
configurations
Critical success factors
(CSFs)

Critical success factors (CSFs) are

performance requirements that are
fundamental to an organisations success. In
this context CSFs should thus be viewed as
those product features that are particularly
valued by customers. This is where the
organisation must outperform competition.
Supermarket industry
the right product mix available in each store,
having it actually available on the shelves,
pricing it correctly.
Food processing industry
new product development, good distribution
channels, health aspects (e.g. low fat)
Life insurance industry
reputation, innovative new policies
In developing CSFs from customer
needs,
Customers buying decisions are often complex and
may involve a wide range of motivating factors. CSFs
need to focus on the most important factors that
ultimately determine the buying decision.
Many factors are taken for granted by customers (e.g.
fitness for purpose). These give rise to threshold
features i.e. all products must have these simply to
enter the market.
CSFs will vary from segment to segment. The
organisation will need to assess its strategic
capabilities to identify which segments it should target.
Customers understanding of value can vary over time,
so the organisation needs to be open to changing the
monitored CSFs.
What factors would buyer of car
will value????????
Motivating factors include brand, image, price,
running costs, safety, warranty, performance,
reliability, dealer network, availability and cost of
extras (e.g. air-conditioning, leather seats), fuel
economy, economic footprint, depreciation, etc.
Reliability is likely to be a threshold product feature.
Corporate purchasers may focus more on price
(including discounts), running costs and
depreciation.
Families may be more concerned about safety
Single young males, image and performance.
KPIs Key Performance Indicators
A common way of thinking about KPIs is to group
them into various categories.

Economy the amount spent on inputs

(materials, labour, marketing etc).

Efficiency how good the organisation is at

turning inputs into outputs (wastage, idle time
etc).

Effectiveness whether customers are satisfied

with the products / services provided (customer
satisfaction, repeat customers etc).
Example of CSFs developed for a shipping
terminal
?
What might a parcel delivery service such as DHL
identify as its two main critical success factors?

The two main critical success factors would probably

be:
Speedy collection from customers after their
request for a parcel to be delivered
Rapid delivery.
Reliable delivery
?
Also explain how the company might measure their
performance.

Their performance can be measured by establishing key

performance indicators for each CSF and measuring
actual achievements against them, e.g.:
Collection from customers within 3 hours of receiving
the order, in any part of the country, for orders on a
working day.
Nextday delivery for 100% of parcels to destinations
within the UK.
Delivery within 2 days for 100% out of UK.