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and trade secrets ?Technical employees ?Research facilities ?Reputation with customers ?Reputation with suppliers ?Knowledge required to apply it successfully ?Brand name ?Perceptions of product quality, durability, and reliability ?For efficient, effective, supportive, and mutually beneficial interactions and relationships Capabilities ?Capability is the capacity for a set of resources to integratively perform a task or activity. Example of Firm’ s Capabilities Function Areas Capabilities Firm Examples Distribution Effective use of logistics management techniques WalMart AEROJET Human R. Motivating,empowering, and retaining employees MIS Effective and efficient control of inventories through pointofpurchase data collection methods Marketing Effective promotion of brandname products WalMart Gillette Management Effective customer service McKinsey . Innovative merchandising HewlettPackard Crate Barrel Effective execution of managerial tasks Ability to envision the future of clothing PepsiCo The Gap Effective anizational structure Manufacturing Design and production skills yielding reliable products Komatsu RD Product and technologically sophisticated automobile engines Product and design quality The Gap Mazda Miniaturization of ponents and products Sony Exceptional technological capability Corning Development of sophisticated engineering elevator control solutions Rapid transformation of technology into new products and processes Engineering Inc. Motion Control Deep knowledge of silverhalide materials Kodak Digital technology Thomson Consumer Electronic Firm infrastructure Human resource management Technology development Procurement Inbound logistics Operations Outbound logistics Marketing sales Service Primary activities Support activities The Basic Value Chain Support activities provide the support necessary for the primary activities to take place. Primary activities are involves with a product’ s physical creation, its sale, and distribution to buyers, and its service after the sale. Concept of Primary and Support Activities Examining the ValueCreating Potential of Primary Activities Inbound Logistics Activities, such as materials handling, warehousing, and inventory control, used to receive, store, and disseminate inputs to a use of logistics management techniques Operations Activities necessary to convert the inputs provided by inbound logistics into final product form. Machining, packaging, assembly, and equipment maintenance are examples of operations activities. Marketing and Sales Activities pleted to provide means through which customers can purchase products and to induce them to do so. To effectively market and sell products, firms develop advertising and promotional campaigns, select appropriate distribution channels, and select, develop, and support their sales force. Outbound Logistics Service Activities involved with collecting, storing, and physically distributing the final products to customers. Examples of these activities include finished goods warehousing, materials handling, and other processing. Activities designed to enhance or maintain a product’ s value. Firms engage in a range of servicerelated activities, including installation, repair, training, and adjustment. Each activity should be examined related to petitors’ abilities. Accordingly, firms rate each activity as superior, equivalent, or inferior. Examining the ValueCreating Potential of Support Activities Procurement Activities pleted to purchase the inputs needed to produce a firm’ s products. Purchased inputs include items fully consumed during the manufacture of products(., raw materials and supplies as well as fixed assets – machinery, laboratory equipment, office equipment, and buildings) Technological development Activities pleted to improve a firm’ s product and processes used to manufacture it. Technology development takes many forms, such as process equipment, design, both basic research and product design, and servicing procedures. Firm Infrastructure Firm infrastructure includes activities such as general management, planning, finance, accounting, legal support, and governmental relation that required to support the work of the entire value chain. Through its infrastructure, the firm strives to effectively and consistently identify external opportunities and threats, identify resources and capabilities, and support core petencies. Human Resources Management Activities involved with recruiting, hiring, training, developing, and pensating all personnel. Each activity should be examined related to petitors’ abilities. Accordingly, firms rate each activity as superior, equivalent, or inferior. Core Competence Core petence are resources and capabilities that serve as a resource of petitive advantage for a firm over its rivals. Core Competence Core Competence Core Competence Core Competence as a Strategic Capability Resources ?Inputs to a firm’ s production process Capability ?An integration of a team of resources Core Competence ?A strategic capability Capability ?A nonstrategic team of resources Does the capability satisfy the criteria of SCA? Yes No The source of Criteria of Sustainable Competitive Advantage ? Valuable Valuable capabilities are those that help a firm exploit opportunities and/or neutralize threats in its external environment. ? Rare Rare capabilities are those possessed by few, if any, current or potential petitors. ? Costly to Imitate Costly to imitate capabilities