This document summarizes key concepts from Gary Hamel and C.K. Prahalad related to the resource-based model of analyzing internal capabilities and resources to develop competitive advantage. It discusses resources, competencies, core competencies, distinctive capabilities, and using value chain analysis to identify areas of competitive advantage. Case studies of Toyota and Apple are presented to illustrate core competencies.

1. Internal Analysis TEAM B

2. Agenda Gary Hamel & C.K. Prahalad The Resource-Based Model Resources, Capabilities and Core Competencies Value Chain Analysis 2

3. Gary HamelC.K. Prahalad NicolòRavina Satu Kukkonen-Omar

4. American management expert Born 1954 in USA Graduate of Andrews University (1975) and the Ross School of Business at the University of Michigan (1990) Started his working life as a hospital administrator Has worked for companies as General Electric, Time Warner, Nokia, Nestle, Shell, Best Buy, Procter & Gamble, 3M, IBM, and Microsoft Gary Hamel-Background 4

5. Originator of Corecompetenciestogether with C.K Prahalad Fortune Magazine called him “the world’s leading expert on business strategy” ‘ Pioneering concepts such as “strategic intent,” “core competence,” “industry revolution,” and “management innovation” have changed the practice of management in companies around the world. Gary Hamel - Landmarks 5

6. Father of the concept of Core competency Born 1941 in India Studied Physics at university before working for Union Carbide chemicals company Wrote Doctoral thesis at Harvard Business school Professor at University of Michigan where he met Gary Hamel In 1993 the Wall Street Journal named him as one of the top ten teachers in the world In 1994 received an award from Indo-American Society for promoting goodwill between India and the United States C.K. Prahalad - Background 6

7. Prahalad was co-founder and became CEO of PrajaInc Many of his ideas on competitive analysis argue against the supremacy of traditional strategic thinking Focus on the concepts of “Core competence”, “strategic intent” and “the bottom of the pyramid” The book Fortune at the bottom of the pyramid was voted top business book of the year 2004 by www.amazon.com C.K. Prahalad - Landmarks 7

8. The Resource-Based Model Philipp Vejchoda Eva Wottge Julie Couderc

9. The Resource-Based Model Inside-Out approach – starting point is the internal environment Alternative perspective to Outside-In approaches such as Porter’s 5 forces Resource-Based View emphasizes the internal capabilities of the organization in formulating strategy to achieve a sustainable competitive advantage Internal capabilities determine the strategic choices a company makes in competing in the external environment 9

10. Resources Definition Resources are inputs that enable an organization to carry out its activities Confer no value to companies – only when they are put to some productive use the value follows Tangible ResourcesPhysical assets that a company possesses like plants and machinery, finance and human capital Intangible ResourcesRoutines and practices that have developed over time within an organization including reputation, culture, knowledge, brands 10

11. Competencies Definition: Competenciesareattributesthat firms require in order to be able to compete in the marketplace Prerequisite to compete within an industry Competencies themselves do not confer any competitive advantage for the organization 11

12. Core Competencies Definition: A cluster of attributes that an organization possesses which in turn allows to achieve competitive advantage Derive from collective learning of individual members within an organization Associated with Organizational Learning They should Provide access to a wide variety of markets (Honda’s engine desing and production) Make a significant contribution on the customer benefits (BMW engineering capabilites) Be difficult to imitate for competitors 12

13. Case Study Toyota Toyota Priusrepresentscorecompetenceof Toyota masterfuel-savingtechnologies in a fasterwaythanrivals hopeforcuttingcostsfortheenginetothe half Effect on competitors: jump on thishypeand play catch meifyoucan (iftheywanttoor not) 13

14. DistinctiveCapabilities Definition: Are important in providing an organizationwithcompetitiveadvantage Derivefrom 3 areas An organization‘sarchitecture (internal, external, networks) Innovation and Reputation 14

15. Case Study Apple Organizationalarchitecture Innovation Reputation !!Your turn!! 15

17. He propose a strategy formulation in 5 stages:

18. >Identify and classify resources

19. >Identify capabilities

20. >Appraise rent-generating of resources and capabilities by their potential for sustainable competitive advantage and appropriability of their returns

21. >Exploits resources and capabilities relative to the external environment

22. >Identify whether any resource gaps exist which need to be filled16

23. 17

24. Identify Sustainable Competitive Advantage To obtain a sustainable competitive advantage a company has to improve a valuable strategy that its competitors will unable to duplicate. Barney (1991) To be sustainable, a competitive advantage need to achieve those 4 features: > Valuable > Rare > Difficult to imitate i.e unique location, path dependency, usual ambiguity and social complexity > No strategic substitute for this product 18

25. Resources, Capabilities and Core Competencies Mikaela Rimaila Riitta Varhelo

26. Strategic role 20

28. Contributes to superiorcustomervalue

29. Is difficult for compettitors to imitate21 Distinctive capabilities

30. Main questions Whatstrengths and weaknessesare in my responsibilityarea? Whichstrengthsprovide my customerswithaddedvalue? Which of the companystrengthswillboostourcompetitiveedge? Howcan I strategiallymanagethesesareas to highlevels of performance? 22

31. Main questions Which things are done poorly, or not at all, in our organization? Are we focusing on our core competences? Are we doing too many things around the core things we should be doing? 23

32. Value Chain Analysis Markku Tomperi Miika Kostamo

33. Value Chain Analysis Primary Activities Margins Support Activities Micheal Porter 1985. Competitive Advantages. 25

34. Value Analysis for an activity No Yes No No Yes Yes ADDED VALUE = MARGIN 26

35. http://garyhamel.com/ http://www.garyhamel.com/doc/hamel_cv.pdf The Economist, http://www.economist.com/node/12311358 www.wikipedia.com www.amazon.com http://books.google.com/books?id=ifCmWeOgvQsC&pg http://www.openlearningworld.com/books/Introduction%20to%20Strategic%20Management/Alternative%20Models%20of%20Developing%20Strategic%20Competitiveness/The%20Resource-Based%20Model.html http://en.wikipedia.org/wiki/Robert_McQueen_Grant Henry, Anthony: Understanding Strategic Management, Second Edition, Oxford 2011 Sources 27