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C o re P ro d u c tsC o re C o m p e te n c e3/23/2023 24 Darral G. Clarke for BM 499 A Hierarchy of Competencies S u p p le m e n t a l C a p a b ilit ie sE n a b lin g C a p a b ilit ie sC o r e C a p a b ilit ie s3/23/2023 25 Darral G. Clarke for BM 499 Building Strategy from Capabilities Strategy Capabilities Resources 1. Identify resources, appraise relative strengths and weaknesses. Leverage use of resources 2. Identify capabilities. What do we do more effectively than petitors? Identify resource inputs to capabilities. 3. Appraise rentgenerating potential resources and capabilities in terms of: sustainable advantage, inappropriability 4. Select strategy that best exploits the firm’s resources and capabilities rela tive to external opportunities. 5. Identify resource gaps that need to be filled. Invest in replenishing, augmenting, and up grading the firm’s resource base. Competitive Advantage Source: Robert M. Grant, “The Resource Based Theory of Competitive Advantage,” California Management Review, Spring, 1991, page 151. 3/23/2023 26 Darral G. Clarke for BM 499 How to map your industry’s profit pool Orit Gadiesh and James L. Gilbert Harvard Business Review MayJune 1998 3/23/2023 27 Darral G. Clarke for BM 499 A straight forward exercise with plications ? Concept is straight forward ? Define value chain activities ? Determine their size and profitability ? Application of concept is plicated ? Financial data doesn’t correspond to value chain activities ? Company data is aggregated across businesses ? Products, customer purchases, channel volumes rarely match up with boundaries of an activity ? Considerable creativity is required 3/23/2023 28 Darral G. Clarke for BM 499 Four step process ? Define the pool ? Determine the size of the pool ? Determine the distribution of profits ? Reconcile the estimates 3/23/2023 29 Darral G. Clarke for BM 499 Four step process Define the pool Determine the size of the pool Determine profit distribution Reconcile the estimates Task: determine which valuechain activity influence profits now and in the future Develop a baseline estimate of cumulative profits generated by all profit pool activities Develop estimate of the profits generated by each activity Compare the outputs of steps 2 3 Guidelines Take a broad view of the value chain(beyond traditional industry definition) Seek a rough but accurate estimate Shift between aggregation and disaggregation in your analysis If numbers don’t add up,Check assumption and calculations Examine industry from three perspective: own, other players, customers Take easiest route: go where the data are Do own economics first, then large pure players, large mixed, smaller Collect additional da