A Presentation by:
Thomas Hutcheson, Kristina Giamportone , Stevie Kreidler, Brittney McQuesten,
and Kevin Jones
6 OBJECTIVES
• Role of a firms resources and capabilities as a
basis of strategy
• Identity and appraise the resources and
capabilities of a firm
• Evaluate the potential for a firms resources
and capabilities to competitive advantage
6 OBJECTIVES
• Use resources and capabilities to formulate
strategies that exploit internal strengths
• Identify the means through which a firm can
develop its resources and capabilities
• Recognize the difficulties that managers face
in developing resources and capabilities of an
organization
Rise of hyundia
Hyundai's Case
• New Ceo Chung Mong Koo faced two key
problems in 1999.
– Building the companies production and research
capabilities abroad.
– Enhancing company’s market knowledge and
marketing skills.
Solution
• Began opening production plants all over the
world and customized their products based on
locations culture.
– Plush rear seats in China because most families
have chauffeurs.
– Adjusted structure and height of cars in India due
to road conditions.
Chapter Focus
• Defining the difference between strategy and
the internal environment.
– A firms resources
– A firms capabilties
Internal Environment
• As the environment becomes unstable, the
internal resources are a more secure base for
formulating strategy.
• Competitive advantage is the primary source
of profitability rather than industry
attractiveness.
How can resources be used?
• When a company is facing a downfall with its
major product, it can focus its resources
towards another market.
– Ex. Honda Motors
– Ex. Canon Inc.
Resources vs. Capabilties
• Resources are the productive assets of the
firm. Come in 3 kinds, tangible, intangible, and
human resources.
• Capabilities are things that the company can
do with its resources.
• Fig 3.4
Tangible Resources
• Economizing asset usage and the control of
resources being used within a firm. As well as
cash and all receivable accounts.
• Employing existing assets more profitably.
Redeploying assets elsewhere.
– Ex. British Airways.
Intangible Resources
• Reputation : Name or brand of the company,
or how the company is viewed by consumers.
• Technology : Intellectual property, patents,
copyrights, and trade secrets.
Human Resources
• The ability to recruit and retain talented
employees is critical to the company’s success
and strategy.
• At the same time, labor costs must be kept
low to remain competitive.
Organizational Capability
• Capabilities that can provide a basis for
competitive advantage.
– Distinctive Competences
– Core Competences
• Ex. The success of Sony
Functional Analysis
• Identifies capabilities in relation to functional
areas of the firm.
– Ex. Corporate, Management info, R&D,
Operations, Product design, Marketing, Sales.
Value Chain Analysis
• Separates activities into a sequential chain,
then you can analyze the capabilities within
each activity.
3 Factors that profits from the
internal environment depend on
• Fig 3.6
Establishing Competitive Advantage
• In order to establish advantage, two
conditions must be present.
– Scarcity: If the resources are not widely available,
then the firm has a competitive advantage.
– Relevance: The resources the firm chooses to use
must be relevant to the current market in order to
be competitive.
Sustaining Competitive Advantage
• Durability over time in order to survive
technological changes within the industry.
• Transferability or the mobility of the resources
used so that it can be traded amongst
companies.
• Replicability so that if the resource cannot be
bought, then it can be made within the firm.
Appropriating the returns
• Defining who the “owner” is so that returns
may be accrued.
• However, capabilities rely heavily on the skills
and efforts of employees, who may be seen as
partial owners.
• Dependent on the expertise required in each
employee.
3 Steps in Appraising resources and
capabilities, then guiding a strategy
formulation
• 1. Identify key resources and capabilties.
• 2. Appraising resources and cabailities.
• 3. Develop strategy implications.
Identify key resources and capabilities
• Look in each activity of the firm.
• Within each activity, find what makes the
certain activity successful.
• Finally, look for factors within the firm as a
whole that separate the firm from other
competitors.
Appraising Resources and Capabilities
• Relies on two criteria:
– Importance: which components are most
important in ensuring the firm has a competitive
advantage.
– Strengths: What are the firms strongest assets and
what are the weaknesses that could improve.
(Relies on the use of benchmarking, or comparing
performance to competitors)
Develop Strategy Formulation
• Step by step process:
– Exploit firms strengths
– Upgrade or remove firms weaknesses
– Employ inconsequential strengths anywhere
possible
Developing Resources and Capabilties
• In order to be a successful firm, you have to
continue to try to develop new resources and
capabilities.
– Capabilities are not simply an outcome of the
resources on which they are based.
• Ex. GM vs. Honda, Pixar vs. Disney, Cisco vs. Alcatel
Organizational Capabilities
• Capabilities are usually a direct result of the
history of the firm.
• Early struggles or decisions shape the future
capabilities.
• Ex. Wal-Mart
Rigid? Or not?
• Most argue that Organizational Capabilities
are rigid because they inhibit the firm from
major changes or developing new capabilities.
• However, the successful firms argue in two
ways.
– Flexibility in routines
– Dynamic Capability
Intel
• Fab 42
• Will be completed in 2013
• Most advance semiconductor manufacturing
facility in the world
• 10 xers good to great
Harley-Davidson Case
History of Harley-Davidson: Fall and Rise
• 1903 Founded
• 1969 Acquired by AMF
• 1981 Buyout of AMF’s Harley Davidson subsidiary
• 1996 opened new plants, launched new models and began to explore international
markets
The Brand
• Image and the loyalty are Harley’s greatest assets
• The value that Harley represents-individuality, freedom and adventure-can be traced
back to the cowboy and frontiersman of yesterday and before that to the quest that
brought people to America in the first place
The Product
• Falls behind its competitors in the application of automotive technologies
• Active in new product development
• Every Harley rider has their own unique, personalized motorcycle
• Harley offers a wide price range
Distribution
• Dealers have to carry a full line of Harley replacement parts/accessories and msust
perform services on Harley bikes
• Harley offers new services to customers
Other Products
• General merchandise represents 20% of total revenue in 2008
Harley-Davidson Case
Closing Case
• On May 1, 2009 Keith Wandell took over as CEO of HarleyDavidson, Inc.
• Demand for luxury leisure products costing between $8,000
and $26,000 will continue to be subdued
• Harley’s core market is the baby-boomer generation which is
moving towards retirement homes than outdoor sports
The question the company now faces is whether they should
stay focused on what they do best or make smaller more
affordable bikes that are more appealing to younger riders
and overseas markets?