MGC2120 Lecture Notes - Lecture 5: Business Process Outsourcing, Strategic Planning, Value Chain
23 Sep 2018
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Week 5: Leveraging Resources & Capabilities
• SWOT
- Firm has strengths & weaknesses on the basis of their
resources. Using their strength, they can identify the
opportunities in the environment & risks in the market.
- Due to their resources, knowledge, strategic planning,
they can neutralise risk in the external environment &
at the same time, they can identify & explore
opportunities to generate competitive advantages from
the market.
- Due to lack of resources, a firm also has weaknesses
to neutralise threats or to explore opportunities in the
market.
Resources play an important role to improve
leverage strengths, advantages in the market. If a firm
doesn’t have a unique resource, then it can’t neutralise
threats from new competitors in the market → reduce
risk of extinction in the market.
Resources & Capabilities
- Intangible: human, innovation, reputaional
- Tangible (can be seen, measured): fincancial,
physical, technological
(Traditional firms are based on tangible resources
since they thought tangible resources is the soul of
competitive advantages. Hence, traditional firms
expand their business in different countries &
invest/generate assets their >< New firms/start-ups
focus more on intangible resources eg. innovation,
knowledge creation, networking with other firms,
forming alliances → generating competitive
advantages → assets can’t be seen, hard to quantify
their resources.)
• Value chain
- A chain connects different stages of production
process.
- Every specific step has primary activities & support
activities.
- Depends on firm leverage resources & expertise,
firms often identify specific area to concentrate their
business.
- Firms often try to benchmark each stage of the
production process in the value chain. After
benchmarking, firms will try to compare their
competitive advantages with other firms in the market.
If the firm is better than other competitors, they’ll try
to focus on these activities. If other competitors are
better, then the firm outsources these activities to the
market.
1. Two-stage Decision model in Value Chain analysis
2. Outsourcing
- A process to organize activities in the market. We get
firms to do the activities on the behave of our firms.
- Firms outsources when:
+ They don’t have any specific attribute, can’t
generate value in the value chain.
+ Lack of resources in-house.
- Mode of activity
+ Offshoring: outsource activities in foreign
location & have a foreign firm doing the activities for
our firm.
+ Onshoring: outsource activities in domestic
market. + Captive sourcing (FDI): setting up
subsidiaries abroad so that work is done in-house
(location is foreign)
+ Domestic in-house activity.
+ Business process outsourcing (BPO):
outsourcing of business processes eg. accounting, loan
origination, etc.
+ Reshoring: moving formerly offshored
activities back to the home country of the local firm.
3. The resource-based view: firm’s resources &
capabilities are the primary drivers of competitive
advantage & performance.
• VRIO Framework
Firm resources
- Heterogeneous: when we assume all the firms in the
market have similar type of resources, same amount of
resources (homogeneous) → no firm can make
assumption about future possibilities, no firm can be
the first mover in the industry. (First mover is the
strategy when the firm makes the decision before other
competitors to start a new business → generated huge
revenue in the first few years & still maintain their
competitiveness). Therefore, firm must have
heterogeneous resources to predict these movements.
- Immobile: when a firm gets competitive advantages
from some resources, then other firms always try to
Internal
External
Strengths
Weaknesses
Opportunities
Threats
Do we really
need to perform
this activity
in-house?
Outsource,
sell the unit, or
lease its services
to other firms
Do we have the
resources &
capabilities that
add value in a way
better than rivals
do?
Acquire necessary
resources &
capabilities
in-house
Access resources
& capabilities
through strategic
alliances
No
No
Yes
Yes
(keep doing it)
Document Summary
Week 5: leveraging resources & capabilities: swot. Firm has strengths & weaknesses on the basis of their resources. Using their strength, they can identify the opportunities in the environment & risks in the market. Due to their resources, knowledge, strategic planning, they can neutralise risk in the external environment & at the same time, they can identify & explore opportunities to generate competitive advantages from the market. Due to lack of resources, a firm also has weaknesses to neutralise threats or to explore opportunities in the market. Resources play an important role to improve leverage strengths, advantages in the market. If a firm doesn"t have a unique resource, then it can"t neutralise threats from new competitors in the market reduce risk of extinction in the market. Tangible (can be seen, measured): fincancial, physical, technological (traditional firms are based on tangible resources since they thought tangible resources is the soul of competitive advantages. A chain connects different stages of production process.
