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Chapter 3 The Internal Organization: Resources, Capabilities, Core Competencies, and Competitive Advantages 故曰:知彼知己,百戰不殆;不知彼而知己,一勝一 負;不知彼,不知己,每戰必殆。 So it is said that if you know your enemies and know yourself, you can win a thousand battles without a single loss. If you only know yourself, but not your opponent, you may win or may lose. If you know neither yourself nor your enemy, you will always endanger yourself. - Sun Tzu © RoyaltyFree/ Stockdisc/ Getty Images Southwest Airlines • What is Southwest’s business model? • What is the airlines industry like? • How does Southwest’s business model help the airlines achieve strategic competitiveness in this industry? • What strengths and weaknesses does Southwest airlines have? Analyzing the External Environment Opportunities and threats By studying the external environment, firms identify what they might choose to do. Analyzing the Internal Organization Unique resources, capabilities, and competencies (required for sustainable competitive advantage) By studying the internal environment, firms identify what they can do. Resources, Capabilities, and Core Competencies • Resources: Competitive Advantage Core Competencies Capabilities Resources • Tangible • Intangible – are the source of a firm’s capabilities. – are broad in scope. – cover a spectrum of individual, social and organizational phenomena. – alone, do not yield a competitive advantage. Resources • Resources – A firm’s assets, including people and the value of its brand name, that represent inputs into a firm’s production process: • • • • • capital equipment skills of employees brand names financial resources talented managers • Types of Resources – Tangible resources: • • • • financial physical technological organizational – Intangible resources: • human • innovation • reputation Resources, Capabilities and Core Competencies Capabilities: Competitive Advantage Core Competencies Capabilities Resources • Tangible • Intangible • represent the capacity to deploy resources that have been purposely integrated to achieve a desired end state. • emerge over time through complex interactions among tangible and intangible resources. Resources, Capabilities and Core Competencies Core Competencies Competitive Advantage Core Competencies Capabilities Resources • Tangible • Intangible • Resources and capabilities that are the sources of a firm’s competitive advantage that: – distinguish a firm competitively and reflect its personality. – emerge over time through an organizational process of accumulating and learning how to deploy different resources and capabilities. Resources, Capabilities and Core Competencies Competitive Advantage Core Competencies Capabilities Resources • Tangible • Intangible Core Competencies (cont’d): • activities that a firm performs especially well compared to competitors. • activities through which the firm adds unique value to its goods or services over a long period of time. Building Core Competencies Sustainable Competitive Advantage Four Criteria of Sustainable Advantages • • • • Valuable Rare Costly to imitate Nonsubstitutable The four criteria of sustainable competitive advantages: • valuable capabilities • rare capabilities • costly to imitate • non-substitutable Superhero Analysis • Wolverine • Spider-Man • Iron Man • Silver Surfer Service Marketing and Sales Procurement Technological Development Human Resource Management Firm Infrastructure The Basic Value Chain Outbound Logistics Operations Inbound Logistics Building Core Competencies: Criteria and Value Chain Analysis • Value Chain Analysis – Primary activities • Involved with product’s physical creation, sales and distribution to buyers, and service after the sale – Service, marketing/sales,

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