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FBS(week 3) Firm capabilities (Sustainability (4-1. Imitation (Create…
FBS(week 3) Firm capabilities
Sustainability
4-2. Durability
can company maintain the capabilities over time
challenges
core rigidity
success---breeds complacency
risk adverse---myopic
obsoleted valuable capabilities
change of the market
physical assets
depreciation(old)
any type of physical machinery(manufacturing equipment)
some assets may be more valuable to others
want to sell it out
human capital
skills ___degrade
retirement
loss of a good leader
4-1. Imitation
Can others do what we do?
Create barriers to imitation
Legal barriers
license to operate an industry
patent on your technology
Control scarce supply
Real estate: location, location, location
be a source of competitive advantage
Developed over unique historical path
Capabilities are socially complex
Value derives from tight combinations
Example: telephone
credibly commit a firm to a course of action
Others are hard to scale up
these capabilitiesare limited to a specific purpose
The degree to which a competitive advantage is both captured and sustained.
1.Analyzing Firm Capabilities
Role of firm capabilities
some firms are more profitable
economic rent due to barriers to imitation
eg:Ricardian rents
premise that firm capabilities matter most
Cost advantage
quick turnaround times/high utilization
Demand advantage
high quality eg:lack of loss of baggage/on time
Assessing the alignment of capabilities: internally&externally
Sustainable?
Identifying the value chain & specific resources & capabilities
Building Capabilities
Developed internally over time
Knowledge management, training
Superior leadership
New product developlment and internal R&D
Acquired from others
Mergers & acquisitions
Alliances, associations, & corporate venture capital
Resources market
(in imperfect market)
Limitations
Pre-existing complementary capabilities
Luck
Superior information
2.Value Chain
To identify specific resources and capabilities that create value
Automobile
Manufacturer
Distributor
Supplier
Buyer
Primary Activities
Inbound Logistics
Operations
Outbound logistics
Marketing and Sales
Service
Secondary Activities
Firm Infrastructure
Human Resource Management
Technological Development
Procurement
Resources to Capabilities
People and Assets
Tangible
Cash, Physical Plant, Patents, Talent
Intangible
Brands, Reputation, Technical Expertise,Loyalty
Systems and Processes
Tangible
Contracts, Allowances, IT Systems
Intangible
Positive Culture, Talent Acquisition
3.Alignment
Internal alignment
processes and systems aligned with each other
reinforce and build off of each other to deliver capability
External alignment
VRIN analysis
Rare
Inimitable
Valuable
Non-substituable
Create the value proposition
Meet the market demand , the customers want
Example
Failure
Coal mine company
Success
Nucor steel
Few labor
Human resource management
Low cost
Incentives