CHAPTER 9

Core Competencies and Resource Allocation

Analyzing 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
Strengths and Weakness
Analysis of Core Competencies

 Functional analysis
 Financial position
 Visioning competencies
 Physical assets Short-term Objectives
 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

Action Analysis

A framework for
Implementation analysis of core
competencies

Firm Structure

Strengths and
Aligning weaknesses
CM and CC analysis
 A Framework for Assessing the
Firm Structure
• There is an important connection between strategy c
hoice and resource allocation. (Please refer to Exhib
it 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 technologies
to create families of new products
• Know-how in creating operating systems
for 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 Competencies
Human Resource Systems

Core Competencies
Business Operating Systems
The Product/Service Transaction

P
P P Cultural
Business Sales & P P Environment
Development and Scanning
Marketing
Systems Exchange Processes Behavioral Systems
Systems
S SS Systems
S
S

Production Systems

Financial Management Systems

 Resources and Capabilities Model
of the Hospitality Enterprise

P
P P
P

Exchange Processes
S
S S
S
S

Competitive Method A

Sample list of core competencies for competitive advantage

Superior execution Quality control

Behavioral performance skills Service training programs
Information exchange skills Transaction cost efficiencies
Speed of transaction Employee competency
Workflow uncertainty management Management competency
 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.

• Please read page 261 in the text book for further information.
 Service Production Competencies
Categories of Service Transaction
Type of Service Description Examples

Self Service Minimal customer contract, simple service process, Quick service restaurant
oriented towards speed and convenience, little behavioral
needs from customer
Maintenance Customers seek employee contact only when needed to Casual theme restaurants,
Interactive solve problems, expect only limited assistance if needed, limited service hotels
no need for customized service, customer seeks little
recognition.
Task Interactive Focus is on customized professional level of service, the Full service hotels, and
need for trust exists, customer seeks recognition above restaurants
basic elements of the service exchange, expect service
personnel to make decisions on the spot

Personal High customer attachment to service experience, high Travel agent specializing in
Interactive attachment to service employee by customer; high levels custom trips, concierge,
of information input, high level of trust, highly customized. 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

Feedback loop

Input Output

Transformation
processes
Raw materials Quality products
Capital Convenience
Labor Timing
Demand Price/value
Functional capabilities Production systems
Equipment Quality control systems
Information Production management systems
Process improvement systems
Maintenance systems
Engineering systems
Storage and inventory control systems
Product distribution and handling
 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.

• Please read pages 265 and 266 in the text book for further information.
 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.

• Please read pages 266 and 267 in the text book for further information.
 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 f
ast changing environment
• A leader in a dynamic and complex setting
• A synthesizer and blender of skills and knowledge i
n 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

• Please read pages 267 and 268 in the text book for further information.
 Other Competency Frameworks(cont’d)

• 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.

• Please read page 268 in the text book for further information.
 Other Competency Frameworks(cont’d)

• Physical Assets

◦ The hospitality industry is well known for producing magn

ificent hotels, restaurants, and resorts.
◦ Given the capital and labor intensity of the industry, this i
s really an important core competency.

◦ Eg. Hyatt chain – atrium lobby

• Please read page 269 in the text book for further information.
 Other Competency Frameworks(cont’d)

• 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 Structure
Formalization

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

• Please read page 270 in the text book for further information.
 Organizational Structure
Centralization

• Locus of control
• Power
• Authority
• Accountability
 Organizational Structure
Complexity

• 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 Structure
Configuration

• Locus of decision making

• Corporate
• Divisional
• Unit
• Stratification
• Delegation
• Power
• Control
• Responsibility
• Accountability
 Organizational Structure
Flexibility

Core Processes of
Transformation in
Service Delivery
 Financial Competencies

• A manager must be constantly taking a measureme

nt of how the firm is doing regarding the key financi
al indicators to be sure that capital can be raised w
hen necessary and the reputation of the firm with re
spect to risk and return is strong.

• Please read page 273 in the text book for further information.
 Summary

• In the presentation we have looked at the concepts

to help you understand the illusive construct of stru
cture.
 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.
 Multiple Choice Questions
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.
 Multiple Choice Questions
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.
 Multiple Choice Questions
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.
 Multiple Choice Questions
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.
 Multiple Choice Questions
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.
 Multiple Choice Questions
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.
 Multiple Choice Questions
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