Analysing strategic capability Resource audit Competences In separate activities Through linking activities Rigidities Preventing change Core competences To outperform competition To create new opportunities Assessing balance Resources Competences Business units Identifying key issues SWOT analysis Critical success factors Understanding strategic capability From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition Comparisons Historical Industry norms Benchmarking Resources, competences and competitive advantage LINK TO COMPETITIVE ADVANTAGE Same as competitors or Easy to imitate RESOURCES COMPETENCES Necessary resources Threshold competences Better than competitors* and Difficult to imitate Unique resources Core competences * Provides the basis to outperform competitors or demonstrably provide better value for money. From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition Figure 4.3 Analysing competences and core competences Identifying competences Value chain analysis Organisational competences Bases of competences Cost efficiency Value added From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition Managing Robustness linkages The value chain Firm infrastructure Support activities Human resource management Margin Technology development Procurement Inbound Marketing Operations Outbound Service logistics logistics and sales Margin Primary activities Source: M.E Porter, Competitive Advantage, Free Press, 1985. Used with permission ofThe Free Press, a division of Macmillan, Inc. Copyright 1985 Michael E. Porter. From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition Figure 4.5 The value system Supplier value chains Channel value chains Organisation's value chain Source: Adapted from M. E. Porter, Competitive Advantage, Free Press, 1985. Used with permission of The Free Press, a division of Macmillan, Inc Copyright 1985 Michael E. Porter From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition Customer value chains How core competences change over time : Market access Global network Overseas plants Quality/Reliability Production processes Supplier management Product features (at low volume) Life-style niche marketing 'Agile' production ?? Source: Based on G. Hamel and A. Heene (eds.), Competence-based Competition, Wiley, 1994, pp 16-18. From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition Sources of cost efficiency Economies of scale Experience Cost efficiency Supply costs From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition Product/Process design Assessing effectiveness Customer requirements Product attributes Service expectations Price sensitivity Degree of matching Value-added features Product features Service performance Communication From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition Figure 4.9 Core competences through managing linkages Type of linkage Type of activity Example Internal linkage Primary - primary Interdepartmental coordination Computer-based operational systems Human resource development for new technologies Extend ownership of activities in supply/ distribution chain Primary - support Support - support External linkage Vertical integration Specification and checking … of supplier/distributor performance Total quality management Merchandising activities Working with suppliers/distributors to improve their performance …by deleting activities Reconfigure value chain Strategic alliances From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition (See chapter 7) Figure 4.10 Benchmarking - at three levels Level of benchmarking Resources Through Examples of measures Resource audit Quantity of resources, e.g. revenue/employee capital intensity Quality of resources, e.g. qualifications of employees age of machinery uniqueness (e.g. patents) Competences in separate activities Analysing activities Sales calls/sales person Output/ employee Materials wastage Competences through managing linkages Analysing overall performance Market share Profitability Productivity From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition Product portfolio matrices Lowlo MARKET SHARE COMPETITIVE POSITION Strong Average Weak High LoLLwLLow High Stars Question marks MARKET GROWTH Low Cash cows High INDUSTRY ATTRACTIVENESS Med Dogs (a) The original Boston Consulting Group Matrix (BCG) Low (b) Attractiveness matrix* Sources: Diagram (a) from research by the BCG. Diagram (b) adapted from C.Hofer and D.Schendel,Strategy Formulation:Analytical concepts, reprinted by permission from page 32; copyright c 1979 by West Publishing Company. All rights reserved. Diagram (c) from C.Hofer, Conceptual Constructs for Formulating Corporate and Business Strategies, Intercollegiate Case Clearing House,Boston, no 9-378-754. 1977, p.3, and adapted by C.Hofer and D.Schendel, Strategy Formulation:Analytical concepts, p.34. Diagram (d) from J.R. Montanari and J.S Bracker, Strategic Management Journal, vol. 7, no. 3 (1986), reprinted by permission of John Wiley & Sons Ltd. From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition Product portfolio matrices COMPETITIVE POSITION Strong Average Weak High Development STAGE OF Growth PRODUCT/ MARKET EVOLUTION Shake-out PUBLIC NEED AND SUPPORT + FUNDING ATTRACTIVENESS Publicsector star Political hot box Golden fleece Back drawer issue Low Maturity Decline (c) Product/market evolution matrix *Also known as the 'directional policy matrix' From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition High Low ABILITY TO SERVE EFFECTIVELY (d) Public sector portfolio matrix Portfolio Analyses Over-coming some pitfalls Defining `high’ and `low’ (growth or share) can be difficult `Plot’ SBU’s not products Apply to market segments not whole markets Assess the `role’ of each SBU Consider wider resource implications - not just cash Dogs may have a positive role From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition Identifying Core Competences (1) Competences may exist for: Reducing Cost Continual Cost Reduction Economies of Scale or Scope Control and Co-ordination Factor Costs Identifying Marketing Skills and Experience Marketing Culture From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition Identifying Core Competences (2) Adding Value Customer Culture Value Assurance Value Enhancement Innovation They may be core competences if they support/enhance competitive advantage and are difficult to imitate. (after Faulkner and Bowman: The Essence of Competitive Strategy: Prentice Hall, 1995) From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition Sustainability of Competitive Advantage Depends on: Robustness of the competences Extent to which they can be imitated Extent to which they are embedded in routines, tacit knowledge and culture From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition Competences and Core Competences Resources are deployed to create competences Core competences underpin competitive advantage only some competences are core core varies with strategy core varies with time core can be exploited in several ways Mismatches resolved by changing core competences changing strategy Competences exist in activities From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition