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