Capabilities of the Firm

1. Capabilities of the Firm Dr. David Lawson

2. Introduction To Capabilities Of The Firm • Land, Labor & Capital • Land – Buildings, operation, machinery, logistics, etc. • Labor – Human capital • Capital – Funds on hand, investments, investors, etc.

3. Two Key Resources For The Firm • Two major resources of the firm • Human Capital • Second is open for debate • The second resource is organization and strategy dependent • Depending on what the strategy is identifies the second resource

4. Reputational, Human And Innovation • Organizational reputation is key to strategy execution • “Reverence and Awe” • Provides a status symbol for customers to identify • Human Capital • Must have great people at all levels to execute and sustain • Innovation • R&D • Market and organization driven

5. Strategic Management • Strategy management is an entire organization effort • Management of strategy is the control portion of Fayol’s model • Includes measuring using the 13 financial ratios and other indicators such as operational information, market share, product sold, etc. • Adjustments to strategy can be made but only if absolutely necessary • Must allow time for initial strategy to “play out” before making any changes

6. Strategy Selection • Key point for understanding – there is no right or wrong for strategy selection, only what works best for the organization and the situation • Selected strategy must be organizationally capable and worthwhile • Not a “pie in the sky” effort • Must not over tax or deplete organizational resources at any level • Must be supported by leadership at all levels and by the rank and file

7. Benchmarking And SWOT • Benchmarking • Relating your success to your competitors • Can identify best practices of others • Can provide a “direction” • Must be careful to not over benchmark • SWOT • Important but venerable and is time-dependent • Usefulness is dependent on “importance” of material measured • If using SWOT, must recalculate on regular intervals to be relevant • Can be useful if done over an extended period of time

8. Why And How To Fine-Tune A Strategic Plan • Strategies may be modified if necessary • Misidentification of market • Operational issues • Funding issues • Proper understanding of the pro-forma estimates and organizational performance • Understanding financial/economic indicators • The “non-quantitative” measures • Adjustments should be made in incremental steps • Massive adjustments are a desperate and last measure

9. Process Performance And Benchmarking • Process Performance • The identification and measurement of organization process for effectiveness and efficiency • Can be redefined if need be for cost reduction, operational improvement or other compelling reasons • Benchmarking • Internal measurements such as quarter-to-previous year quarter, etc. • Measures against expected to actual, estimates from outside analysts, etc.

10. Internal Analysis Wrapup • There is no right/wrong strategy, only what is appropriate for the organization and situation • Sufficient time must be allowed for strategy to “play out” • Strategy may be adjusted if needed • Strategies are measured financially using the accounting/economic measures • Must be fluent in finance • Must include support of organizational leadership and rank & file • Strategy must be organizationally capable