CHAPTER 9 Core Competencies and Resource Allocation Analyzing Core Competencies

CHAPTER 9

Core Competencies and Resource AllocationAnalyzing Core Competencies

By Anil Bilgihan for Dr. DeMicco

Student Learning Objectives

On completion of this chapter, you will be able to;

Identify the role of core competencies in executing the delivery of competitive methods. Describe the importance of the linkages between core competencies and competitive

methods in creating sustainable competitive advantage. Achieve a more practical understanding of frameworks for assessing the strengths and

weaknesses of the firm’s competencies.

Key Concepts of the Chapter

• Core Competencies

• The service exchange

• Linking core competencies

• Service production competencies

• Product production competencies

• Functional competencies

• Visioning competencies

• Organizational structure competencies

• Branding competencies

• Physical asset competencies

• Integrating competitive methods and core competencies

Objectives

1. Identify the role of core competencies in executing the delivery of competitive methods.

Please read pages 255 through 261 in the text book for further information.

Chapter Purpose

• Until this chapter, we covered the co-alignment process proceeds from the scanning the environment to the selection of competitive methods.

• The next step in the strategic thinking process is to ensure that resources are consistently allocated to those competitive methods that are determined to add the greatest value to the guest and, by extension, to the firm.

Strategic Management Model

Long-term Objectives

• Performance Measure• Action Plan• Resources Needed• Evaluation Timetable• Responsibility• Accountability• Rational

Short-term Objectives

Strengths and Weakness Analysis of Core Competencies

Functional analysis Financial position Visioning competencies Physical assets Structure Production Service Branding

Evaluation

Conducting an Internal Analysis

• Analysis helps managers understand what is strategically possible and choose the best strategy.

• A firm cannot successfully implement any strategy without the appropriate set of resources and capabilities.

• Weaknesses—the firm’s resource and capability deficiencies that make it difficult for the firm to complete important tasks

• Strengths—resources and capabilities that allow the firm to complete important tasks.

Conceptual Map of the Structure Construct

AnalysisAction

Firm Structure

A framework for analysis of core

competencies

Strengths and weaknesses

analysis

Implementation

Aligning CM and CC

A Framework for Assessing the Firm Structure

• There is an important connection between strategy choice and resource allocation. (Please refer to Exhibit 9.3, page 257)

• Exchange process

• Core Competencies

• Peripheral Competencies

◦ Please read pages 257 through 261 in the text book for further information.

Exchange Process

• It is the heart of Competency Model

• The process where all the products and services that have been created by the firm, and blended together into a specific competitive method.

• Referred to as the moment of truth.

• Please read page 257 in the text book for further information.

• Please see Exhibit 9.3 on page 257

Core Competencies

• Capabilities that the firm emphasizes and performs especially well while pursuing its vision.—————————————————————

• Core competencies help the firm achieve a competitive advantage when the firm’s core competencies are different from those held by competitors.

• Core competencies enable a firm to complete activities effectively.

• Distinctive competencies provide products to customers that are superior to those provided by competitors.

Managing Resources to Develop Capabilities and Core Competencies

Examples: Core Competencies

• Expertise in integrating multiple technologiesto create families of new products

• Know-how in creating operating systemsfor cost efficient supply chain management

• Speeding new/next-generation products to market

• Better after-sale service capability

• Skills in manufacturing a high quality product

• System to fill customer orders accurately and swiftly

Peripheral Competencies

• They serve to support the continuing development and maintenance of the CCs.

• The ability to acquire essential resources such as labor and capital is especially important in the contemporary environment of the hospitality industry.

• Please read pages 259 through 261 in the text book for further information.

Competency Model of the Hospitality Enterprise

Peripheral CompetenciesHuman Resource Systems

Financial Management Systems

Environment Scanning Systems

Business Development

Systems

Core Competencies

Business Operating Systems

Production Systems

Sales & Marketing Systems

Cultural and

Behavioral Systems

The Product/Service Transaction

P

S

P

SS

S

S

PP

P

Exchange Processes

Resources and Capabilities Model of the Hospitality Enterprise

Competitive Method A

Sample list of core competencies for competitive advantage

Superior execution Quality controlBehavioral performance skills Service training programsInformation exchange skills Transaction cost efficienciesSpeed of transaction Employee competencyWorkflow uncertainty management Management competency

S

P

S

S

S

S

P

P

P

Exchange Processes

Frameworks for the Analysis of Core Competencies

• Managers will always be on a quest to improve CCs so they can assure investors of a consistent delivery of a CM.

• The first framework used to identify possible CCs is Service Production Competencies.


Service Production CompetenciesCategories of Service Transaction

Type of Service Description Examples

Self Service Minimal customer contract, simple service process, oriented towards speed and convenience, little behavioral needs from customer

Quick service restaurant

Maintenance Interactive

Customers seek employee contact only when needed to solve problems, expect only limited assistance if needed, no need for customized service, customer seeks little recognition.

Casual theme restaurants, limited service hotels

Task Interactive Focus is on customized professional level of service, the need for trust exists, customer seeks recognition above basic elements of the service exchange, expect service personnel to make decisions on the spot

Full service hotels, and restaurants

Personal Interactive

High customer attachment to service experience, high attachment to service employee by customer; high levels of information input, high level of trust, highly customized.

Travel agent specializing in custom trips, concierge, consultant, masseuse, personal tour guide

• Please read pages 261 and 261 in the text book for further information.

Product Production Competencies

• Unlike the service intangibles, products represent the tangible portion of most portfolios.

• Please refer to “The System Model of Product” in the text slide.

• Please read pages 263 through 265 in the text book for further information.

The System Model of Product

Quality productsConvenienceTimingPrice/value

Production systemsQuality control systemsProduction management systemsProcess improvement systemsMaintenance systemsEngineering systemsStorage and inventory control systems Product distribution and handling

Raw materialsCapitalLaborDemandFunctional capabilitiesEquipmentInformation

Input Output

Feedback loop

Transformationprocesses

Functional Framework

• Management is often viewed as a series of functions to be performed.◦ Eg. Business school curricula have focused on

enhancing student skills in what is referred to as the functional areas of management.


Functional Areas for Core Competencies Development

Functional Area Key Components

Finance Asset management, capital budgeting, capital structure, financial analysis and planning, financial control and budgeting, asset valuation

Marketing Product development, promotional activities, distribution, pricing, internal marketing, external marketing, communications, public relations, market research

Human resources Organizational behavior, labor relations, hiring, developing, compensating, leadership, educating, high performance work practice systems.

Administration Accounting management information systems, strategic planning, legal, risk/insurance, communications, process improvement

Operations Cost control systems, production systems, production management, quality control, process improvement

Research and Development New business opportunities, competitive intelligence, product testing, feasibility studies, business valuation

Other Competency Frameworks

• Visionary/Creativity Competencies◦ Capabilities that do not fit conveniently into the

product-service or functional frameworks but, according to leading thinkers in the area of CCs, are important to achieving competitive advantage include such skills as creativity, vision, leadership, and innovation.

◦ A sample of the skills and capabilities within this framework and often stated as needed in tomorrow’s hospitality industry is provided in next slide.


Skills and Capabilities Essential to Tomorrow’s Hospitality Manager

• A visionary employing value adding strategies

• Using and managing knowledge and technology for competitive advantage

• Spanning boundaries of skills and knowledge in a fast changing environment

• A leader in a dynamic and complex setting

• A synthesizer and blender of skills and knowledge in a fast changing environment

• A manager and motivator of the knowledge worker

Other Competency Frameworks(cont’d)

• Organizational Structural Competencies

◦ Organizational factors • Span of Market Share

• Market Coverage

• Geographic Dispersion

• Economies of Scale

• Examples: Econolodge and McDonald’s



• Branding

◦ The power of the brand has long been considered an enormously valuable competitive advantage.

◦ The value of the brand in the hospitality industry has become an important resource for many companies and is now considered an important value-generating competency.



• Physical Assets

◦ The hospitality industry is well known for producing magnificent hotels, restaurants, and resorts.

◦ Given the capital and labor intensity of the industry, this is really an important core competency.

◦ Eg. Hyatt chain – atrium lobby



• Dimension of Firm Structure

◦ The construct of the firm structure refers to how an organization allocates resources throughout the firm and is made up several dimensions.

◦ It includes • Decision making authority

• The number of rules and regulations

• The number of specializations or specific job functions

• How they all fit together to make the firm work along with being able to react quickly to changing environmental forces.

Organizational StructureFormalization

• Standardization• Policies chart• Procedures• Rules• Performance reviews channels• Controls systems• Resource allocation systems• Employee handbooks• Policy manuals• Operating instructions• Communication• Management info• Budgets


Organizational StructureCentralization

• Locus of control• Power• Authority• Accountability

Organizational StructureComplexity

• Number of occupational specialties• Number of different functional areas• Number of positions• Number of distribution channels• Number of segments competing in• Number of levels of customer service• Geographic dispersion• Divisional integration• Matrix structure

Organizational StructureConfiguration

• Locus of decision making• Corporate• Divisional• Unit• Stratification• Delegation• Power• Control• Responsibility• Accountability

Organizational StructureFlexibility

Core Processes ofTransformation inService Delivery

Financial Competencies

• A manager must be constantly taking a measurement of how the firm is doing regarding the key financial indicators to be sure that capital can be raised when necessary and the reputation of the firm with respect to risk and return is strong.


Summary

• In the presentation we have looked at the concepts to help you understand the illusive construct of structure.

Multiple Choice Questions

1) Which function is not included in business operating systems?

• Accounting

• Financing

• Budgeting

• Planning

2) Which of the following may not be included in the skills and capabilities essential for tomorrow's hospitality manager?

• A visionary employing value-adding strategies

• Using and managing knowledge and technology for competitive advantage

• A leader in a dynamic and complex setting

• Culinary skills

3) The brand is supposed to reflect the following in product/service choice decision, except:

• standards.

• quality.

• value adding.

• preferences.

• consistency.


4) The dimensions of firm structure refer to how an organization allocates resources throughout the firm and is made up of several dimensions. It includes the following, except:

• centralization.

• formalization.

• sophistication.

• complexity.

• configuration.

5) Which is the one key indicator of financial competencies that shows the success of the firm?

• ROE

• ROI

• P/E

• WACC

6) The following are principles guiding the improvement of quality service, except:

• quality is defined by the management.

• quality is a journey.

• quality is everyone's job.

• quality and integrity are inseparable.


7 ) Service quality depends upon the following, except:

• proper training.

• execution.

• quality control.

• sufficient resource allocation to attain and maintain leadership.

• the competencies of the management.

8) In order to meet the challenge of millions of daily service encounters, managers must do the following, except:

• understand how guests derive utility from the service.

• understand how the organization must be managed to add value and produce the rate of return required.

• understand how the organization can produce and deliver that utility.

• understand how the organization can meet its objectives to both guests and employees.


9) Services are different from products, in the hospitality industry, because of the following characteristics, except:

• service is a performance not a physical object.

• the guest is involved in production.

• service delivery management — the guests desire to be served when and where they choose.

• quality control is difficult.

• service is tangible product.

10 Our definition of quality includes the following, except:

• doing the right thing.

• doing the right thing right.

• doing the right thing right and consistently.

• doing the right thing right, consistently and continuously.


11) The systems that core competencies focus on are the following, except:

• business operating.

• cultural and behavioral.

• production.

• sales and marketing.

• intelligence.

12) The sample list of core competencies for competitive advantage include the following, except:

• quality control.

• service training program.

• employee competency.

• customer's product knowledge.

13) The characteristics of self service include the following, except:

• minimal customer contact.

• speed and convenience.

• highly customization.

• simplicity.


14) The characteristics of maintenance interaction include the following, except:

• customer seeks employee contact only when needed to solve problems.

• customer expect only limited assistance if needed.

• customer has no need for customized service.

• customer seeks little recognition.

• customer seeks recognition.

15) The characteristics of task interaction include the following, except:

• focus is on customized professional level of service.

• the need for the recognition exists.

• customer seeks recognition above basic elements of the service exchange.

• expect service personnel to make decisions on the spot.

• expect only limited assistance if needed.

16) The characteristics of personal interaction include the following, except:

• high customer attachment to service experience.

• high attachment to service employee by customer.

• expect service personnel to make decisions on the spot.

• high level of trust, highly customized.

• high involvement of customer.


17) Examples of core competencies related to the service transaction include the following, except:

• transaction cost efficiency.

• political stability.

• speed of transaction.

• access to effective service personnel.

• employee attitudes.

18) The input of resources represents the following, except:

• raw materials.

• labor.

• capital.

• the finished product.


19) The output of resources represents the following, except:

• quality products.

• convenience.

• price/value.

• semi-finished products.

20) The transformation process of the systems model of product includes the following systems, except:

• production systems.

• human resources development systems.

• quality control systems.

• production management systems.

Case Study

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CHAPTER 9 Core Competencies and Resource Allocation Analyzing Core Competencies