Chapter 3: The Internal Organization: Resources, Capabilities, Core Competencies, and Competitive Advantages 95
competitors’ capabilities and core competencies. To become a core competence and a
source of competitive advantage, a capability must allow the firm to either
- Perform an activity in a manner that provides value superior to that provided by
competitors. - Perform a value-creating activity that competitors cannot perform.
Only under these conditions does a firm create value for customers and have oppor-
tunities to capture that value.
Creating value for customers by completing activities that are part of the value chain
often requires building effective alliances with suppliers (and sometimes others to which
the firm outsources activities, as discussed in the next section) and developing strong
positive relationships with customers. When firms have strong positive relationships with
suppliers and customers, they are said to have social capital.^92 The relationships themselves
have value because they lead to transfers of knowledge as well as to access to resources that
a firm many not hold internally.^93 To build social capital whereby resources such as knowl-
edge are transferred across organizations requires trust between partners. Indeed, partners
must trust each other in order to allow their resources to be used in such a way that both
parties will benefit over time while neither party will take advantage of the other.^94
Evaluating a firm’s capability to execute its value chain activities and support func-
tions is challenging. Earlier in the chapter, we noted that identifying and assessing
the value of a firm’s resources and capabilities requires judgment. Judgment is equally
Figure 3.5 Creating Value through Support FunctionsActivities associated with managing
the firm’s human capital. Selecting,
training, retaining, and compensating
human resources in ways that create
a capability and hopefully a core
competence are specific examples
of these activities.Activities taken to obtain and manage
information and knowledge throughout
the firm. Identifying and utilizing
sophisticated technologies, determining
optimal ways to collect and distribute
knowledge, and linking relevant
information and knowledge to
organizational functions are activities
associated with this support function.Activities associated with effectively
acquring and managing financial
resources. Securing adequate
financial capital, investing in
organizational functions in ways
that will support the firm’s efforts
to produce and distribute its products
in the short and long term, and
managing relationships with those
providing financial capital to the firm
are specific examples of these activities.Customer ValueFinanceHuman ResourcesManagement
Information Systems