3.Identify internal capabilities and skills

The ability of a firm to implement its strategy is dependent upon both the functions and business processes that support its strategy.

Depending on the nature of the organization, its functions and business process capabilities and skills are

central to strategy implementation. These capabilities can be classified into product or service creation functions and processes, and product or service delivery and satisfaction functions and processes.

Product related functions and processes are dependent upon a firm’s R&D and manufacturing/purchasing capabilities.

·

The R&D function generates proprietary technologies that can be applied to the development and production of new products. In the electronics industry, access to basic components, like hard

disk drives and floppy disk drives and high precision production equipment are fundamental to making smaller, lighter, higher quality products. Each generation of smaller products, like palm

recorders stimulate market growth for the company that is first to the market. Each generation of smaller products also reduce packaging and shipping costs, reduce power consumption, extend

battery life and are more convenient to carry.

·

The time to market process is required to integrate new technology into a firm’s products and services. Today, competitive advantage is often related to the speed with which a firm can introduce the next generation of technologies into the market through new product and process developments. Once the product is developed, production capacity often becomes the

Limiting factor of market growth.

·

The manufacturing function transforms a set of purchased components and software into a firm’s products. Having acceptable products available in a timely manner for customers is central to making sales. The ability to provide the highest quality products in the most efficient allows companies to gain market share by offering competitive prices and ready availability.

Experience curve effects from high volumes can lead to lower costs.

·

The integrated supply chain process coordinates

purchasing of components for assembly, product outsourcing, otherwise making sure products are available to meet customer order requirements. Outsourcing and alliances increase a firm’s ability to offer a wider range

of products or to introduce new products more rapidly. Increased flexibility provides competitive advantage in responding to rapid market changes.

Market related functions and processes are directed at serving the customer in the most effective manner possible. Distribution and marketing activities, including sales and service, are central to fulfilling customer demands and ensuring customer satisfaction.

·

The distribution function is essential for a firm in gaining market access. The company that dominates the sales channels for a given market often controls the market. Market share is related to product availability, i.e. the number and type of locations that make the products and services available to your customer target. The Internet is providing the next generation of distribution and marketing system.

·