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7/27/2019 ASM Competencies
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Leben Johnson
ASM-Competencies 1
Competencies
MPIBA-012015th February 2013
Adapted from: Thomas L Wheelen & J. David HungerCompetitiveness & Globalization By: Michael A Hitt, R. Duane Ireland , Robert E.
Hoskisson
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Competencies
Resources: An organization's assets
Tangible Assets: Plant, Equipment, Finances and location
Human Assets: Number of employees, skills and motivation
Intangible Assets: Patents, Copyrights, knowledge, culture and reputation.
Capabilities: Are the abilities to exploit its resources and are functionally based.
Example: Marketing capabilities, Manufacturing capabilities, HR capabilities.Dynamic Capabilities: Constant change in processes to adapt to the uncertain environment.
Competencies: Cross functional integration and coordination of capabilities.
Example: Competency of new product development is the results of integrating MIS, Marketing,
R&D capabilities.
Core Competency: A competency that a corporation can do well across divisions.
Distinctive Competency: When Core Competency is superior to competition and differentiates
product.
VRIO Framework:
Value, Rareness, Imitability, Organization.
ASM-Competencies 2
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Criteria for Resources and Capabilities That Become
Core Competencies
Core
Competencies
Valuable Rare
Costly to ImitateNonsubstitutable
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How Resources and Capabilities
Provide Competitive Advantage
The firm is organized appropriately to obtainthe full benefits of the resources in order torealize a competitive advantage
Valuable Allow the firm to exploit opportunities orneutralize threats in its external environment
Rare Possessed by few, if any, current andpotential competitors
Costly to imitate When other firms cannot obtain them ormust obtain them at a much higher cost
Nonsubstitutable
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Core Competencies
When the four key criteria of resources and
capabilities are met, they become core
competencies.
Managerial competencies are especially
important.
Core competencies serve as a source of
competitive advantage, create value, and provide
the opportunity for above-average returns.
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Why Two Models? Industrial Organization
(I/O) Model Focuses on the
environment outside thefirm.
Resource-Based Model
Focuses on the inside of
the firm
Successful strategy formulation and implementation actions
result only when the firm properly uses both models.
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Competitive Advantage Roots
Resources
Distinctive
Competencies
Capabilities
Functional Strategies
Superior:
-Efficiency
- Quality
- Innovation
- Customer Service
Differentiation
Low Cost
Value
Creation
Superior
Profitability
Build
Build
Shape
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Competitive Advantage
Competitive advantage Factors:
Value: The amount of value the customers place on the product
Price: The price that a company charges for the product
Cost: The cost of creating that value
ASM-Competencies 8
V-P
P-C
C
V
P
C
V = Value to Consumer
P = Price of Product
C = Cost to production
V-P=Consumer Surplus
P-C=Profit Margin
V-C=Value Created
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Value Creation and Pricing Options
ASM-Competencies 9
V-P
P-C
C
V-P
P-C
C
V-P
P-C
C
Option1: Lowers Price
To generate demand
Option2: Raises Price
To reflect valueInitial State
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Value Chain
The chain of activities that a company performs to add value and transform an
input into an output.
ASM-Competencies 10
Value
Reliability
High
Low
Inferior
Value
Superior
Attributes
Yugo
Ford Explorer
Toyota Corolla Lexus
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Durability of Competitive Advantage
Barriers to Imitation:
- Imitating Resources.- Imitating Capabilities.
Capability of Competitors:
- Strategic Commitment.
- Absorptive Capacity.
Industry Dynamism:
Loosing Competitive AdvantageInertia:
Prior Strategic Commitments:
The Icarus Paradox: Craftmesn, Builders, Pioneers and Salesmen
Uncertainty
Poor commercialization
Poor positioning Strategy
Technological Myopia
Slow to Market
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Sustaining Competitive Advantage
- Focus on building blocks.- Institute continuous improvement & Learning
- Track best industrial practices
- Benchmark
- Overcome inertia.
ASM-Competencies 12
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Building Competitive Advantage
Achieving Superior Efficiency:
- Economies of Scale
ASM-Competencies 13
UnitCost
$
0
Output
Economies of Scale Diseconomies of Scale
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Building Competitive Advantage
Achieving Superior Efficiency:
- Learning Effects
ASM-Competencies 14
UnitCost
$
0
Output
Learning Effect
Time 1
Time 2
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Building Competitive Advantage
Achieving Superior Efficiency:
- Flexible Manufacturing and Mass Customization
ASM-Competencies 15
UnitCost
Production Vol & Product Variety
Total Unit Cost
Variety
Related
VolumeRelated
UnitCost
Production Vol & Product Variety
Total Unit Cost
Variety Related
Volume Related
Flexible ManufacturingTraditional Manufacturing
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Building Competitive Advantage
Achieving Superior Efficiency:
- Marketing and Efficiency
ASM-Competencies 16
ProfitperCustome
r
Length of time customer stays with company
(+)
(-)
0
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Building Competitive Advantage
Achieving Superior Efficiency:
- Material Management
- R & D Efficiency
- Human Resource Efficiency
Hiring Efficiency
Employee Training
Self-Managing Teams
Pay for Performance
- Information System and Internet Efficiency
- Infrastructure Efficiency
- Total Quality Management (TQM)
Six-Sigma Methodology
Build Org. Commitment to Quality
Focus on the Customer
Measure Quality
Set goals and create incentives
Solicit inputs from employees
Identify defects and trace them to source
ASM-Competencies 17
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Building Competitive Advantage
Achieving Superior Efficiency:
- Innovation
Quantum Innovation
Incremental Innovation
Build Skills in Basic and Applied Research
Project Selection and Management
Cross-functional integrationProduct development teams
Partly parallel development process
ASM-Competencies 18
Phase 1
Idea
Generation
Phase 2
Project
Refinement
Phase 3
Project Execution
Gate1
Gate2
Market
The Development Funnel