ch04-internal analysis.ppt

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Copyright 1998 by Houghton Mifflin Company. All rights reserved.

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Chapter 4 -- In ternal Analysis :

Resources, Capabi l i t ies, Competencies,

and Compet it ive Advantage

Text byCharles W. L. HillGareth R. Jones

Multimedia Slides byMilton M. Pressley

Univ. of New Orleans


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Preview

Competitive Advantage

Generic Building Blocks of Competitive

AdvantageBusiness Functions and the Value Chain

Distinctive Competencies, Resources, andCapabilities

Durability of Competitive AdvantageWhy Do Companies Fail?

Avoiding Failure and Sustaining CompetitiveAdvantage


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Competi t ive Advan tage: Value

Creation , Low Cos t, andDifferentiat ion

Competitive Advantage Sustained Competitive

Advantage


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Figu re 4.1: PC Firms: Return on Cap ital

Employed Relat ive to Indus try Means

-15

-10

-5

0

5

10

15

20

25

19

86

19

87

19

88

19

89

19

90

19

91

19

92

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93

19

94

Apple

AST

Compaq

Dell

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94


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Figure 4.2: Value Creation

V

P

C C

P-C

V-P

V=Value to Consumer

P=Price

C=Costs of Production

V-P=Consumer Surplus

P-C=Profit Margin


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Figu re 4.3: Generic Bui ld ing B locks

of Compet it ive Advantage

Competitive

Advantage:

Low Cost

Differentiation

Superior

Efficiency


7/40Copyright 1998 by Houghton Mifflin Company. All rights reserved.

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of Compet it ive Advantage

Superior

Quality

Competitive

Advantage:

Low Cost

Differentiation

Superior

Efficiency



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Figu re 4.4: The Impact o f

Quali ty on Prof i ts

Increased

Reliability

Increased

Quality

Increased

Productivity



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Increased

Reliability

Higher

Prices

Increased

Quality

Increased

Productivity

Lower

Costs



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Increased

Reliability

Higher

Prices

Increased

Quality

Higher

Profits

Increased

Productivity

Lower

Costs



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of Compet it ive Advantage(Continued)

Superior

Quality

Competitive

Advantage:

Low Cost

Differentiation

Superior

Innovation

Superior

Efficiency



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of Compet it ive Advantage(Continued)

Superior

Quality

Competitive

Advantage:

Low Cost

Differentiation

Superior

Innovation

Superior

Efficiency

Superior

Customer

Responsiveness



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Figu re 4.5: Summary of the Impact of Effic iency,

Qual i ty, Innovat ion , and Cus tomer

Responsiveness on Unit Cos ts and Prices

Lower Unit Costs

Efficiency



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Lower Unit Costs

Higher Unit Prices

Quality

Efficiency



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Lower Unit Costs

Higher Unit Prices

Customer

Responsiveness

Quality

Efficiency



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Innovation

Lower Unit Costs

Higher Unit Prices

Customer

Responsiveness

Quality

Efficiency



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Figu re 4.6: The Value Chain

Business Funct ions, The Value

Chain, and Value Creation

Inputs Outputs

Primary Activities

Research

and

Development



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Inputs OutputsProduc-

tion

Primary Activities

Research

and

Development



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tion

Marketing

and

Sales

Primary Activities

Research

and

Development



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tion

Marketing

and

Sales

Service

Primary Activities

Research

and

Development

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Materials Management


tion

Marketing

and

Sales

Service

Primary Activities

Research

and

Development

Support

Activities

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Human Resources



tion

Marketing

and

Sales

Service

Primary Activities

Research

and

Development

Support

Activities

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tion

Marketing

and

Sales

Service

Primary Activities

Research

and

Development

Support

Activities

Company Infra-Structure

Human Resources




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Bus iness Funct ions, The Value

Chain , and Value Creation

Cross Functional Goals*

*More Detail in Chapter 11

Corporate Headquarters Staff

CEO

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Figure 4.7: The Roots of Competi t ive Ad vantage

Distinctive

Competencies

Dist inc t ive Competenc ies,

Resources , and Capab i l i t ies

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Resources

Distinctive

Competencies



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Tangible Land

Buildings

Plant

Equipment

Intangible Brand Names

Reputation

Patents

Technical orMarketingKnow-How



Resources Are:

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Resources

Distinctive

Competencies

Capabilities



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Resources

Distinctive

Competencies

Capabilities

Superior

Efficiency

Quality

Innovation

Customer

Respon-

siveness



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Resources

Distinctive

Competencies

Capabilities

Differentia-tion

Low Cost

Superior

Efficiency

Quality

Innovation

Customer

Respon-

siveness

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Resources

Distinctive

Competencies

Capabilities

Differentia-tion

Low Cost

Value

Creation

Superior

Efficiency

Quality

Innovation

Customer

Respon-

siveness

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Resources

Higher

Profits

Distinctive

Competencies

Capabilities

Differentia-tion

Low Cost

Value

Creation

Superior

Efficiency

Quality

Innovation

Customer

Respon-

siveness

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(Cont inued)

Strategy and Competitive Advantage

Resources &

Capabilities

(Competencies)

Strategies

Shape

Build

Figure 4.8: The Relationship Between Strategies

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Resources , and Capab i l i t ies(Cont inued)

The Role of Luck

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The Durab i li ty o f

Competi tive Advantage Barriers to Imitation

Imitating Resources

Imitating Capabilities

Capability of Competitors

Strategic Commitment

Industry Dynamism

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Why Do Compan ies Fai l?

Inertia

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Inertia

Prior StrategicCommitments

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The IcarusParadox

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Avo iding Fai lure and Sus tain ing

Competi t ive Advantage

Focus on the Building Blocks ofCompetitive Advantage

Institute Continuous Improvementand Learning

Track Best IndustrialPractice and Use

Benchmarking Overcome Inertia

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