Slide 1Slide 2Slide 3Slide 4Slide 5Slide 6Slide 7Slide 8Slide 9Slide 10Slide 11Slide 12Slide 13Porter’s Generic Internal Value ChainSlide 15Slide 16Slide 17Slide 18Slide 19Slide 20Slide 21Slide 22Slide 23Slide 24Slide 25Slide 26Slide 27Slide 28Slide 29Slide 30Slide 31Slide 32Slide 33No ResponseSlide 35Slide 36Slide 37Slide 38Slide 39Slide 40Managerial ImplicationsEvaluating a Evaluating a Firm’sFirm’sInternal Internal CapabilitiesCapabilitiesChapter 3Chapter 3Evaluating a Firm’s Internal CapabilitiesEvaluating a Firm’s Internal CapabilitiesCopyright © 2006 Pearson Prentice Hall. All rights reserved. Copyright © 2006 Pearson Prentice Hall. All rights reserved. Strategic Management & Competitive Advantage - Barney & HesterlyStrategic Management & Competitive Advantage - Barney & Hesterly22What Does Internal Analysis Tell Us?Internal analysis provides a comparative look at a firm’s capabilities • what are the firm’s strengths?• what are the firm’s weaknesses?• how do these strengths & weaknesses compareto competitors?Evaluating a Firm’s Internal CapabilitiesEvaluating a Firm’s Internal CapabilitiesCopyright © 2006 Pearson Prentice Hall. All rights reserved. Copyright © 2006 Pearson Prentice Hall. All rights reserved. Strategic Management & Competitive Advantage - Barney & HesterlyStrategic Management & Competitive Advantage - Barney & Hesterly33Why Does Internal Analysis Matter?• establish strategies that will exploit any sourcesof competitive advantage• determine if its resources and capabilities arelikely sources of competitive advantageInternal analysis helps a firm:Evaluating a Firm’s Internal CapabilitiesEvaluating a Firm’s Internal CapabilitiesCopyright © 2006 Pearson Prentice Hall. All rights reserved. Copyright © 2006 Pearson Prentice Hall. All rights reserved. Strategic Management & Competitive Advantage - Barney & HesterlyStrategic Management & Competitive Advantage - Barney & Hesterly44The Theory Behind Internal AnalysisThe Resource-Based View• developed to answer the question: Why do some firms achieve better economic performancethan others?• assumes that a firm’s resources and capabilitiesare the primary drivers of competitive advantageand economic performance• used to help firms achieve competitive advantageand superior economic performanceEvaluating a Firm’s Internal CapabilitiesEvaluating a Firm’s Internal CapabilitiesCopyright © 2006 Pearson Prentice Hall. All rights reserved. Copyright © 2006 Pearson Prentice Hall. All rights reserved. Strategic Management & Competitive Advantage - Barney & HesterlyStrategic Management & Competitive Advantage - Barney & Hesterly55The Resource-Based ViewResources and CapabilitiesResources:• tangible and intangible assets of a firm» tangible: factories, products intangible: reputation• used to conceive of and implement strategiesCapabilities:• a subset of resources that enable a firm totake full advantage of other resources» marketing skill, cooperative relationshipsEvaluating a Firm’s Internal CapabilitiesEvaluating a Firm’s Internal CapabilitiesCopyright © 2006 Pearson Prentice Hall. All rights reserved. Copyright © 2006 Pearson Prentice Hall. All rights reserved. Strategic Management & Competitive Advantage - Barney & HesterlyStrategic Management & Competitive Advantage - Barney & Hesterly66The Resource-Based ViewResources and CapabilitiesFirm Assets:MachineryCollective Product Design SkillRecruiting SkillEngineering Skill of IndividualsMineral DepositsAre these resourcesor capabilities??????Evaluating a Firm’s Internal CapabilitiesEvaluating a Firm’s Internal CapabilitiesCopyright © 2006 Pearson Prentice Hall. All rights reserved. Copyright © 2006 Pearson Prentice Hall. All rights reserved. Strategic Management & Competitive Advantage - Barney & HesterlyStrategic Management & Competitive Advantage - Barney & Hesterly77The Resource-Based ViewFour Categories of Resources• Financial (cash, retained earnings)• Physical (plant & equipment, geographic location)• Human (skills & abilities of individuals)• Organizational (reporting structures, relationships)Evaluating a Firm’s Internal CapabilitiesEvaluating a Firm’s Internal CapabilitiesCopyright © 2006 Pearson Prentice Hall. All rights reserved. Copyright © 2006 Pearson Prentice Hall. All rights reserved. Strategic Management & Competitive Advantage - Barney & HesterlyStrategic Management & Competitive Advantage - Barney & Hesterly88The Resource-Based ViewTwo Critical Assumptions of the RBV• Resource Heterogeneity» different firms may have different resources• Resource Immobility» it may be costly for firms without certainresources to acquire or develop them» some resources may not spread from firm tofirm easilyEvaluating a Firm’s Internal CapabilitiesEvaluating a Firm’s Internal CapabilitiesCopyright © 2006 Pearson Prentice Hall. All rights reserved. Copyright © 2006 Pearson Prentice Hall. All rights reserved. Strategic Management & Competitive Advantage - Barney & HesterlyStrategic Management & Competitive Advantage - Barney & Hesterly99The Resource-Based ViewWhat do these assumptions really mean?• if one firm has resources that are valuableand other firms don’t, and…• if other firms can’t imitate these resourceswithout incurring high costs, then…• the firm possessing the valuable resourceswill likely gain a sustained competitive advantageEvaluating a Firm’s Internal CapabilitiesEvaluating a Firm’s Internal CapabilitiesCopyright © 2006 Pearson Prentice Hall. All rights reserved. Copyright © 2006 Pearson Prentice Hall. All rights reserved. Strategic Management & Competitive Advantage - Barney & HesterlyStrategic Management & Competitive Advantage - Barney & Hesterly1010The Resource-Based View• heterogeneity of resources typically occurs as the result of ‘bundling’ the resources and capabilitiesof a firm (bundles of HR practices, p. 90)Resource Heterogeneity• managers of a firm could take resources that seemhomogeneous and ‘bundle’ them to createheterogeneous combinations• competitive advantage typically stems from severalresources and capabilities ‘bundled’ togetherEvaluating a Firm’s Internal CapabilitiesEvaluating a Firm’s Internal CapabilitiesCopyright © 2006 Pearson Prentice Hall. All rights reserved. Copyright © 2006 Pearson Prentice Hall. All rights reserved. Strategic Management & Competitive Advantage - Barney &