64

Strategic
Management (MMMS. Se
Chapter
Intemal Competences & Resources Core, Distinctive.
7 Strategic
Threshold Competence, Competence vs Capability, Resoutes &
Analysis, Value Chain Analysis, Strategic Outsourcing Core
competence and synergy, Distinctive competencies, VRIO

|7.1FACETS OF INTERNAL ANALYSIS

annalysis
An in-depth
investigation of a company's internal elements, including its
and processes known as an internal analysis. To
develop a workable resources,
is
business plan, firm decision-makers use business stratemassets,
internal analysis to
development or corection. In order to have a complete view of howprecisely pinpoint areas fo
independent unit and as a component of the larger the firm operates both as ax
the company's business plan competitive
frequently combine an internal analysisindustry, individuals developing
with an external study.
Tools for Internal Analysis
Various frameworks are available for
analysis. To find out important details companies to use when performing an internal
about the internal business
structures, each employs slightly different techniques, processes, resources, and
a few of the most strategies,
typical illustrations of internal analysis and objectives. The following are
1
Strategy evaluation: It is a continuous frameworks:
regular basis to determine whether a internal assessmernt technique used on a
business strategy or plan. company is accomplishing the goals set
forth in a
2 SWOT analysis: A SWOT analysis
Threats) aids in providing businesses with (Strengths, Weaknesses, Opportunities, and
a
operations. SWOT assessments are excellent forcomprehensivea picture of all internal
across the board. assessing company's capabilities
3. VRIO
analysis: Avaluable, rare, unique, and organised
organisation of business resources. It is perfect for (VRIO) analysis aids the
business's resources evaluating and classifying a
4. Balanced
scorecard: A balanced scorecard is a strategy performance
tool, or a well-structured report, that management
managers may use to
employees under their supervision are carrying out their duties keep track of how the
and the
decisions. results of those
5.
McKinsey 7S. Framework: A well-known technique for businesses planning
synchronise their departments and procedures to
is
the Mckinsey 7S framework. It enables
you to research seven internal
company factors that you may use to help the business
reach its objectives.
 65
Competencesand Res
Resources core, Distinctive, Strategic &Threshokt Competence,
Ihtenmal
C

Resources
phenomena.
Resources refers to a broad range of human, societal, and organizational a
In actuality,
Resourcesby themselves typically do not result in a competitive advantage.resources into core
competitiveadvantage is produced by the special combination of a number of
competencies.
are
forms. Resources that
company's resources come in both tangible and intangible include manufacturing
A
tangible can
be observed and measured. Examples of tangible resources historical
Assets with a strong
production machinery, and formal reporting processes. considered
facilities, those that have gathered over time are frequently
connectionto the company and an
organization's history.
foundation of
deep rooted in the since they are
intangible resources. These are to study and copy
challenging for rivals like nowledge,
Intangible resources are comparatively include things
routines. Intangible resources managerial skills,
ingrainedin distinctive patterns of the ability to innovate, the
trust between
managers and employees, ideas, scientific skills, and
organisational routines (the particular
ways people work together), people (ike employees,
services and how it interacts with
company's reputation for its
products or
phusical, and technological resources are the
suppliers). Financial, organisational, innovative. and reputational resources are
customers, and resources. Human,
different categories of tangible
four intangible resources. comprehending the strategc
the three categories of or business owner in resources can
have a problem as a manager resources. The extent to which
Youwill strategic
organization's tangible and intangible advantage, is a sign of their
worth of your competitive balance
of key skills and, ultimately, monetary value on the company's
support the growth distribution facility is given a based on a number
of elements,
a however, is
value. For instance, The facility's true value, well
like how
as intangibles including
resource. materials, as
sheet as a tangible and raw
to consumers intermally and with external
stakeholders,
accessibility
including its both
integrate their actions
employees
suppliersand customers.
Jay B Barneyconceived
VRIO ANALYSIS abbreviated as VRIO. organization's
and
organisation are used to assess
an
imitability, format their
Value, rarity, is the
four-question
by enterprises to classify
This is used framework.
analysis in 1991, analysis tool that the
the VRI0 capabilities. It is an internal characteristics listed in
certain competitive advantage
resources and they exhibit them a is:
according to
whether
internal resources that give that ask if a resource
resources identify the questions A
Organizations can then analysis stands for four value of the resources?
the
this
categorisation. VRIO
firm organized to capture competitive advantage
thanks to a
imitate?And is requirements can bring sustained
rare? costy to
valuable? meets all four
capability that
Tesource or
for the company.
66
Strategic Managernent (MMS.
The VRIOFramework is explained as under:
1. Valuable The framework's first question asks whether a resource offers value
a business to take advantage of
opportunities or protect itself from hazards, A
deemed useful if the response is in the affirmative. Resources are also
assist organisations in raising the perceived value of their clients.
This is
rese
onuo
Tb
worthwhile they
it
li
Ceng
boosting differentiation or, alternatively, by lowering the
short of this need are at a
competitive disadvantage.
product's price.
Because internal
accomplcesished
Resour that
conditions are always changing, it is and
crucial to
Otherwise, they may lose their worth or become regularly assess the value of the external
2. Rarity - Rare resources are those that can
completely useless.
only be obtained by one or a
resources.
businesses. Resources that are uncommon and small number at
precious
advantage. On the other side, competitive parity results provide temporary competitiuo
a
share a resource or utilise a when a large number of businesses
capacity
perform better than another by using the
in a similar manner.
This is so that no
resources to implement theorganisation
same can
Even though competitive parity is not same strategy
the intended state, a
valuable but accessible resources. An company should not
and capabilities because they are organisation would suffer if it lost valuable ignore the
resources
3. necessary for survival in the market.
Imitability - Aresource is costly to imitate if other
imitate, buy or substitute it at a
reasonable price.
organizations that doesn't have it can't
ways: by directly copying the Imitation can take place in two different
resource or by offering a
Acompany with
important, hard-to-find, and expensivesimilar good or service (substituting).
to replicate
alwaysachieve lasting
three reasons, according competitive advantage. Resources can be
resources may but not
to Barney: i) difficult to replicate for
Previous
in response to circumstances. Resources that were created
over a lengthy period of time or
duplicate. ii) Causal uncertainty. Companies arehistorical events are typically expensive to
that give them a nable to pinpoint the specific
competitive advantage. i) Social
capabilities that are built on the corporate culture or complexity. Those resources and
resources
4.
Organisation - A corporation cannot benefit from interpersonal
its
interactions.
value from them. A
company needs to organise itsresources it is not set up to extract
if
policies, organisational structure, and
culture management systems, procedures,
in order to fully
valuable, rare, and costly to imitate resources and exploit the potential of its
they want to maintain their talents. The businesses can only do so if
competitive advantage.
 67
Competencesand Resources core, Distinctive, Strategic &Threshokl Competence
Ihtemal

the.
Resource or Capability
s
Is the Resource or

Valuable? Competitive
No Disadvantage
Yes

Rare? Competitive Parity

No

Yes

Costly To Imitate?
Temporary
No Competitive
Advantage
Yes

and is the Fire

Organized to Temporary
Capture Value Competitive
No Advantage

Sustained
Competitive
Advantage

Capabilities
have been consciously integrated to
use resources that
The firm's capabilities are its ability to organisation together, develop over
Capabilities, the glue that binds an
attain a specific end state. intangible resources. Although some of
relationships between tangible and
time through intricate process, the majority are usually hidden
and
an automated business
them can be seen, like exchanging
Capabilities are generally dependent on developing, carrying, and
intangible. to forming
and knowledge through the firm's human capital, which is essential
information
advantages. Repetition and practise boost the worth of a company's capabilities
competitive may fully
knowledge base is based on organisational actions that not all employees
because a
comprehend.
Types of capability in functions of business business.
most important functional aspects of a
Marketing capability - This is one of the
I. attributes ike Product, its positioning,
Capability in this department could be from various
mix, type of appropriate pricing method, preparing creative marketing collaterals,
product
plant, cordial relationship with vendors,
locational advantage in terms of warehouses,
efficiently implementing cutting edge
effective execution of marketing intelligence system,
technology for promotions.
 68
Strategic
2.
Financial capability - Strategic ways of sourcing funds and allocation (M.MS
Management
where the capability of a firm lies. The task here to manage ways of of those .Setrunnd.isH
3.
utilizing them for a desirable output. raising
funds i
Operations capability - Capability in operations is related to production
based activity in an organization. It includes efficiency in and
the output, finding alternative ways to maximize the production,
production.
managing research
output and minimize quality of
the cost of
4 Human resource capability- The
intellectual capital is by and large the
function of an organization. Here the capability incudes most essential
talent recruited and nurtured for career
is ensuring that the right quality of
relationships with industries is also advancements. Having strong interpersonel
5.
considered as a capability.
Information capability - The attributes in this function include ways of
and
hardware. Collecting information, processing it, managing softw/ao
stakeholders and most importantly storage of disseminating the information to all
Management Systems (DBMS). information particularly in Database
Relationship between Resources & Capabilities
Resources
Relatively easy to imitate Capabilities Competencies
Hard to imitable 1) Rare Possessed by few, if any
1) Buy on open market
if tangible 1) Invisible to outsiders firm's competitors
2) Deep in 2) Costly to imitate : Other fims
2) Develop if intangible company
3) Not dependent on cannot obtain, or must obtain at
individuals much higher cost
4) Team Chemistry 3) Valuable : Allow fims to
exploitin
opportunities or neutralise threats
environmnent.
4) Non substitutable :
provides sane value. Nothing else
Figure : Interaction of Resources and
Capabilities
Source: Management Strategy by Marcus
1.
Measurement : Resources are the possessions that allow a company or
carry out its operations. Resources come in both material and intangible forms. organisation to
comes to tangible resources, the balance sheet of When it
the company is used to value them.
Capabilities, on the other hand, are organisational skill or the capacity to
one or more resources such that effectively combine
the final output is greater than the sum of
its parts.
2. Market Exchange : It is challenging for the
organisation to evaluate its values given its
intangible resources. Resources are therefore challenging to buyand sell. Other intangible
resources, such as reputation for quality, reputation based on
to sell, with the probable skilled labour, etc., are difficult
exception of patents, which are based on intellectual
rights and have a legal foundation. These property
resources are reliant on the organization's policies.
Similar to organisational competencies, which are hard to
trade and transfer because they
are developed over time through practice.
 Competencesand Resources core, Distinctive, Strategic &Threshokd Competence,. 69
Intermal
to
Difficult to Imitate :The success of an organisation is highly dependent on their ability
difficult to
3 combine its resources seamlessly through various capibility factors. Others find it
certain
replicatethese. The following are a few reasons why ie's challenging to replicate
organisationalaspects:
To develop new or distinctive product features, pricina, advertising stories, packaging.
a.
is difficult
etc., marketers use avariety of marketing capacity variables. For instance, it
to replicate Fevicol's distinctive commercials.
b Methods and tactics that a business uses for its goods and services.
C.
Approaches and strategies for hiring new personnel.
suppliers.
A Keeping up the connections the company has with its clients and
such as land and equipment, plant
Barriers to Entry : Physical and materjal resources.
4.
machinery, do not present an entry barrier because thev may be obtained from the
and
and standardised. The capacity to
market. These resources' costs are well-known
mix these resources is difficult to obtain. The entv barriers are caused by
meaningfully
difficult to acquire and whose value cannot be determined. These
resources that are
Acauiring unique, difficult-to-imitate, precious,
resources and competencies are connected. and advantage over rivals.
the organization's existence
and organised resources is crucial for
Position : Maintaining the firm's competitive position in the market is the key
5. Competitive capabilities for this, which are unavailable on
the
The businesses need
to long-term success. and gradual learning. Any rival who
a lot of organisational effort
marketplace. These require extremely expensive and
leader will discover it to be an
tries to mimic or copy the market When carried out over a longer
with little chance of success.
time-consuming endeavour or jump
and with planning, the follower will have to pay more on advertising
length of time
start the R&D process.

THRESHOLD COMPETENCES
7.2 CARE, DISTINCTIVE,
abilities,
organization's core competencies are the
INTERNAL COMPETENCIES - Any
that make up its "defining strength." Acompany's core strength is
expertise, resources, and skills recent
for other organizations whether they are longtime rivals or
unique, making it difficult
market entrantsto imitate it.
or distinctive
competencies of an organization-also referred to as core capabilities
The core These
what it is capable of doing better than any other business and why.
Competences explain stakeholders and
base from which the company can give value to
capabilities offer a solid its rivals and
opportunities, and expand. They distinguish the business from
CUstomers,grasp new industry.
development of a persistent competitive advantage in the market or
Support the
70
Strategic Management
DISTINCTIVE COMPETENCES Acompany's distinctive competerncies (MMS. Sem
skills that are specific to that company and enable it to outperform rivals in the are a
gOup i
put, distinguishingcompetencies are the characteristics that set a company apart
is a standout trait or attribute that allows a company to stand out from rival
markrietv.alsSi. rnphy
from
companies
Any number of things could represent a company's unique selling point. It can
be a
it comes up with, a talent it possesses, or a
distinctive design. As an alternative, neW
distinguishing skill could be its brand awareness, marketing strategies, being the first in a
field, or client
acceptability.
Corts: cormpanys
Examples:
1 Compare Amazon to any other e-commerce
best-in-class distribution, and a hugely brilliant companies similarly. Brand recognition
workforce come together for Amazon
all
to form distinctive capabilities.
2
Compare Google to any competing search engine on the
been around for a considerably longer time, no market. Since Google has
other corporation can imitate its brand
name. The brand name then serves as a
defining characteristic of Google.
Distinctive competencies v/s Core competencies
Abusiness's core
competency is a skill that is
Anything a business does well and is essential to itsessential to the enterprise's overall success.
category. Due to the possibility of competitors also value-creating operations falls under this
feature. offering it, it is not always a
distinguishing
A distinctive competency, on the
other hand, sets the business apart from its
or might not be a key rivals. It might
competency for the business. Customers can
relate to this superior quality
because it is specific to the company.
Consider the contrast between two businesses A and B
as the sale of water bottles, in that operate in the same sector, such
order to better qrasp this distinction. If A
or a superior brand name in this hasa near-zero failure rate
instance, it becomes a differentiating capability for A in
comparison to B, unless it depends on this low defect rate.
competency if it does use the low defect rate as a selling point Company A exploits this as its core
and is recognised in the market as a
dependatble provider of fault-free water bottles.
THRESHOLD COMPETENCY- The set of competence level that is at bare
is required to do business is referred as threshold minimum and
player or those fighting for survival may adopt the competencies. The market's No. 3 or No. 4
concept of
businesses with threshold competence may advance to a threshold competence. Over time,
threshold competence might also result in a company's closure.higher level. However, maintaining
 71
Competences and Resources core, Distinctive, Strategie &Threshokl Competence.
ntermal
COMPETENCE VERSUS CAPABILITY

Competence Capability
Competence is the condition or calibre of a The word "'capability" refers to the quality of
that enables
person's job. If a person and his work are having capacity. It is the state and
strength
judged to be "acceptable," but not someone to develop the within their
"exceptional," then they are considered capacity to learn and do tasks
competent. zone of competence.
by
a regular way of thinking while Develops profesional judgerment
Adopts and evaluative thinking.
following standard rules and regulations. adopting analytical measurable cognitive-based
Droduces easily assessed measurable skills or Produces
knowledge -based outputs. outputs or tactic understanding.
and roles. Focuses on critical practice.
Focuses on specitic procedures and
line with fixed thinking, which is Is more inclined to adopt a proactive and
His more in flexible
objective point of view; is
incapable of changing or adapting. adaptable.

7.3 STRATEGIC OUTSOURCING

provider for
a business assigns to a third-party service
A group of operations
that the resources
outsourced services. Small businesses that lack
strategic large
management are known as frequently connected with this approach. Both
themselves are most variety of
to handle all activities frequently use outsourcing. Companies from a
businesses of practise and research
corporations and mid-sized gathered through years
partner's experience several aspects of its
industries can benefit from a might so enhance
outsourcing. A company
with the aid of strategic
commercial situation as a result. of external resources by
utilising
the best use
main go¡l is to make in order to increase the
Strategic outsourcing's high degree of experience
trends, and a
cutting-edge technologies, market
of the business.
ettectiveness and competitiveness
Benefits of strategic outsourcing the primary
motivations for
costs is one of
1 Decreased costs -
The need to reduce recruiting specialist staff,
you may
Instead of
strategic outsourcing. Outsourcing frequently
incudes
businesses to employ experience.
rely on a partner's knowledge and to reduce operating
expenses.
entirely which enables companies
automation and optimization, variety of
operations By eliminating a
concentrate on core more time to
2. Sufficient time to enables businesses to free up engagement
duties, outsourcing challenges that call for human
repetitive and routine
core competencies and business
manage their
and judgement. of making costly errors
if you attempt to
run the risk
management of risk -
You
skills. Even making an
effort to leam
3. Better necessary
without the
address problems on your own
fruitul.
this skill might not be
 72
Strategic Managernert (MMS. Sorn
4.
Access to a worldwide database of knowledge- You aren't capable of mastering ever.
subject. But by collaborating with numerous service providers, you may quickly have acces
to a pool of resources and expertise. Companies that focus on outsourcing devote time and
resources to supply you with the greatest specialists available so you may take advantae ri
their experience.

Drawbacks of strategic outsourcing

Outsourcing entails giving a third party full authority over a business process or function. it
carries some hazards as a result. For instance, you might run across issues while outsourcing:
1. Service delivery that can be delayed or fall short of expectations2.
2 Security and confidentiality could be put at risk.
3 Lack of adaptability - the contract may be too rigid to allow for change.
4. Management issues -the outsourcing company's adjustments may cause conflict
5. Instability: There is a chance that the outsourced firm may collapse or turm out to be
less competent than your organization thought.

|REVIEWQUESTIONS

Q.1. What is intemal analysis? Discuss various tools used by organizations to perform internal
analysis
Q.2. What is VRIO Analysis? Explain.
Q.3. What do you understand by the terms 'resources' and 'capabilities'
Q.4. Short Note on Distinctive Competencies
Q.5. Distinguish between Competence v/s Capability.
Q6. Explain the concept of strategic outsourcing along with its benefits and drawbacks.