Hitt M.A., Ireland R.D., Hoskisson R.E. Strategic Management: Competitiveness and Globalization: Concepts

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Part 1: Strategic Management Inputs

environments, Journal of Business

Research, 57: 1378–1390.

117. T. Yu, M. Subramaniam, &

A. A. Cannella, Jr., 2009, Rivalry

deterrence in international markets:

Contingencies governing the mutual

forbearance hypothesis, Academy of

Management Journal, 52: 127–147.

118. Porter, Competitive Strategy, 49.

119. L. Capron & O. Chatain, 2008, Competitors’

resource-oriented strategies: Acting

on competitors’ resources through

interventions in factor markets

and political markets, Academy of

Management Review, 33: 97–121;

M. B. Lieberman & S. Asaba, 2006, Why

do firms imitate each other? Academy of

Management Journal, 31: 366–385.

120. D. B. Montgomery, M. C. Moore, &

J. E. Urbany, 2005, Reasoning about

competitive reactions: Evidence from

executives, Marketing Science, 24: 138–149.

121. S. Jain, 2008, Digital piracy: A competitive

analysis, Marketing Science, 27: 610–626.

122. J. G. York, 2009, Pragmatic sustainability:

Translating environmental ethics into

competitive advantage, Journal of

Business Ethics, 85: 97–109.

123. K. A. Sawka, 2008, The ethics of

competitive intelligence, Kiplinger

Business Resource Center Online, http://

www.kiplinger.com, March.

124. T. Mazzarol & S. Reboud, 2008, The

role of complementary actors in

the development of innovation in

small firms, International Journal of

Innovation Management, 12: 223–253;

A. Brandenburger & B. Nalebuff, 1996,

Co-opetition, New York: Currency

Doubleday.

125. 2009, Continental to join Star alliance,

Continental Airlines Homepage, http://

www.continental.com, June 12.

126. 2009, ING Profile and fast facts, http://

www.ing.com, June 12.

127. C. S. Fleisher & S. Wright, 2009,

Examining differences in competitive

intelligence practice: China, Japan, and

the West, Thunderbird International

Business Review, 51: 249–261; A. Crane,

2005, In the company of spies: When

competitive intelligence gathering

becomes industrial espionage, Business

Horizons, 48(3): 233–240.

Studying this chapter should provide you with the strategic

management knowledge needed to:

1. Explain why ﬁ rms need to study and understand their internal

organization.

2. Deﬁ ne value and discuss its importance.

3. Describe the differences between tangible and intangible resources.

4. Deﬁ ne capabilities and discuss their development.

5. Describe four criteria used to determine whether resources and

capabilities are core competencies.

6. Explain how value chain analysis is used to identify and evaluate

resources and capabilities.

7. Deﬁ ne outsourcing and discuss reasons for its use.

8. Discuss the importance of identifying internal strengths and

weaknesses.

ying t

is c

apter s

provi

e you wit

e strategic

ana

ement knowled

e needed to:

Explain wh

ﬁ rms need to stud

and understand their internal

rgan

zat

Deﬁ ne value and discuss its im

ortance

Describe the differences between tan

ible and intan

ible resources.

ﬁ

ne capabilities and discuss their development

CHAPTER 3

The Internal Organization:

Resources, Capabilities,

Core Competencies, and

Competitive Advantages

During a bad recession in 2008, Apple

recorded record sales. The ﬁ rm’s strong

performance in poor economic times is

largely credited to its innovation capabilities. Apple has continued to upgrade its current

products, such as its laptops, with enhancements (e.g., MacBook and MacBook Pro).

Analysts believe that these innovative additions will keep Apple’s “hot streak” alive and

well. Furthermore, projections suggest that smartphone sales will surge over the next few

years. These projections include a 200 percent increase in the sales of high-end mobile

phones by 2013, to 300 million in annual

sales. The growing popularity of Web

2.0 applications such as Facebook and

Twitter are increasing the desire for these

phones. Such demand is very positive

for the future of BlackBerry and Apple’s

iPhone. By 2013, analysts believe that

approximately 23 percent of all new

mobile phone sales will be smartphones.

Apple has also continued to upgrade

its innovative iPod with its second

generation of iPod touch. One analyst

gave it a perfect score for the signiﬁ cant

enhancements made. And the iPod touch

serves some similar functions as the

iPhone such as providing an Internet

connection, using the same touchscreen,

and playing music and videos in the same

way. An example of the continuous

innovation is the 4-gigabyte iPod Shufﬂ e

introduced in 2009. It is less than two

inches long (smaller than a double-A

battery) and can store approximately

1,000 songs. This is the third-generation

Shufﬂ e—the ﬁ rst-generation Shufﬂ e

launched in 2005 could store approximately 240 songs. In addition to increased storage, the

new Shufﬂ e can handle songs in 14 different languages. Apple has “set the standard” for

design of personal computer since the mid-1990s. Since 1996, Apple product innovations

include developing a tool that created a quantum increase in the sale of digital music,

creating a mobile phone—a ﬂ exible computer—that is fun to use, and, in customer service,

developing a chain of unique and popular retail stores. Thus, most external observers argue

that Apple’s innovative products have led to their becoming one of the fastest-growing

companies in the United States.

Coupled with its innovation, Apple is an aggressive marketer. While most ﬁ rms are

paring back their costs and advertising during the recession, Apple has increased its

marketing and advertising programs. It is the second most proliﬁ c technology advertiser,

behind Microsoft.

While Apple is in a positive market position, it did experience potential problems in

2009. Its charismatic leader, Steve Jobs, had to take a medical leave of absence, causing

uncertainty about the company’s future. It also lost a few other top managers to key

positions in other ﬁ rms. Thus, investors became nervous and analysts questioned whether

the ﬁ rm could continue to be a market innovator, especially without Jobs.

Sources: C. Wildstrom, 2008, Apple laptops: The hits keep coming, BusinessWeek, http://businessweek.com,

November 4; C. Edwards, 2008, Apple’s superlative sequel: The latest iPod touch, BusinessWeek, http://

businessweek.com, November 20; R. Waters & C. Nutialin, 2009, Apple moves to clear up uncertainty ahead

of Jobs’ absence, Financial Times, http://www.ft.com, January 16; B. Stone, 2009, Can Apple ﬁ ll the void? The

New York Times, http://www.nytimes.com, January 16; Apple bobbing, Financial Times,. http://www.ft.com,

January 22; N. Lomas, 2009, Smartphones set to surge, Business Week, http://businessweek.com, February 3;

B. Stone, 2009, In campaign wars, Apple still has Microsoft’s number, The New York Times, http://www.nytimes.com,

February 4; P. Elmer-Dewitt, 2009, Apple is 14th fastest-growing tech company, Fortune, http://www.fortune

.com, February 6; Apple launches smaller, 4-gigabyte iPod shufﬂ e, Houston Chronicle, http://www.chron.com,

March 11.

APPLE DEFIES GRAVITY

WITH INNOVATIVE GENIUS

ROBERT GALBRAITH/Reuters/Landov

Apple now offers more than 50,000 applications

for the iPhone, enabling their customers to

continually discover new uses for their

smartphone.

Part 1: Strategic Management Inputs

As discussed in the first two chapters, several factors in the global economy, including

the rapid development of the Internet’s capabilities

and of globalization in general have

made it increasingly difficult for firms to find ways to develop a competitive advantage

that can be sustained for any period of time.

As is suggested by Apple’s experiences,

innovation may be a vital path to efforts to develop sustainable competitive advantages.

Sometimes, product innovation serves simultaneously as the foundation on which a firm

is started as well as the source of its competitive advantages. This occurred with Apple.

Steve Jobs was one of the cofounders of the company and helped to develop the personal

computer that the company introduced to the market. Later, Jobs and the board of direc-

tors of Apple felt the need for more marketing expertise. So, a new CEO with a strong

marketing background was brought in to the firm. Later Jobs was forced out and Apple

lost its innovative approach. However, Jobs was brought back into the firm in 1997; he

is commonly believed to be the savior of the company because he was able to revital-

ize the firm’s innovation capabilities. Thus, his departure on medical leave, announced

in December 2008 (see opening case), created uncertainty and concern on the part

of investors.

Competitive advantages and the differences they create in firm performance are often

strongly related to the resources firms hold and how they are managed.

“Resources

are the foundation for strategy, and unique bundles of resources generate competitive

advantages that lead to wealth creation.”

As Apple’s experience shows, resources must

be managed to simultaneously allow production efficiency and an ability to form com-

petitive advantages such as the consistent development of innovative products.

To identify and successfully use resources over time, those leading firms need to

think constantly about how to manage them to increase the value for customers who “are

arbiters of value”

as they compare firms’ goods and services against each other before

making a purchase decision. As this chapter shows, firms achieve strategic competitive-

ness and earn above-average returns when their unique core competencies are effectively

acquired, bundled, and leveraged to take advantage of opportunities in the external envi-

ronment in ways that create value for customers.

People are an especially critical resource for helping organizations learn how to con-

tinuously innovate as a means of achieving successful growth.

In other words, “smart

growth” happens when the firm manages its need to grow with its ability to successfully

manage growth.

People are a critical resource to efforts to grow successfully at 3M,

where the director of global compensation says that harnessing the innovative powers of

the firm’s employees is the means for rekindling growth.

And, people at 3M as well as

virtually all other firms who know how to effectively manage resources to help organiza-

tions learn how to continuously innovate are themselves a source of competitive advan-

tage.

In fact, a global labor market now exists as firms seek talented individuals to add

to their fold. As Richard Florida argues, “[W]herever talent goes, innovation, creativity,

and economic growth are sure to follow.”

The fact that over time the benefits of any firm’s value-creating strategy can be dupli-

cated by its competitors is a key reason for having employees who know how to man-

age resources. These employees are critical to firms’ efforts to perform well. Because all

competitive advantages have a limited life,

the question of duplication is not if it will

happen, but when. In general, the sustainability of a competitive advantage is a function

of three factors: (1) the rate of core competence obsolescence because of environmental

changes, (2) the availability of substitutes for the core competence, and (3) the imitabil-

ity of the core competence.

The challenge for all firms, then, is to effectively manage

current core competencies while simultaneously developing new ones.

Only when firms

develop a continuous stream of capabilities that contribute to competitive advantages do

they achieve strategic competitiveness, earn above-average returns, and remain ahead of

competitors (see Chapter 5).

In Chapter 2, we examined general, industry, and competitor environments. Armed

with this knowledge about the realities and conditions of their external environment,

Chapter 3: The Internal Organization: Resources, Capabilities, Core Competencies, and Competitive Advantages

firms have a better understanding of marketplace opportunities and the characteristics of

the competitive environment in which those opportunities exist. In this chapter, we focus

on the firm itself. By analyzing its internal organization, a firm determines what it can

do. Matching what a firm can do (a function of its resources, capabilities, core competen-

cies, and competitive advantages) with what it might do (a function of opportunities and

threats in the external environment) allows the firm to develop vision, pursue its mission,

and select and implement its strategies.

We begin this chapter by briefly discussing conditions associated with analyzing the

firm’s internal organization. We then discuss the roles of resources and capabilities in

developing core competencies, which are the sources of the firm’s competitive advan-

tages. Included in this discussion are the techniques firms use to identify and evaluate

resources and capabilities and the criteria for selecting core competencies from among

them. Resources and capabilities are not inherently valuable, but they create value when

the firm can use them to perform certain activities that result in a competitive advantage.

Accordingly, we also discuss the value chain concept and examine four criteria to evaluate

core competencies that establish competitive advantage.

The chapter closes with caution-

ary comments about the need for firms to prevent their core competencies from becoming

core rigidities. The existence of core rigidities indicates that the firm is too anchored to its

past, which prevents it from continuously developing new competitive advantages.

Analyzing the Internal Organization

The Context of Internal Analysis

In the global economy, traditional factors such as labor costs,

access to financial resources and raw materials, and protected or

regulated markets remain sources of competitive advantage, but

to a lesser degree.

One important reason is that competitors can

apply their resources to successfully use an international strategy

(discussed in Chapter 8) as a means of overcoming the advantages

created by these more traditional sources. For example, Volkswagen

began establishing production facilities in Slovakia “shortly after

the Russians moved out” as part of its international strategy.

Volkswagen is thought to have a competitive advantage over rivals

such as France’s Peugeot Citroen and South Korea’s Kia Motors,

firms that are now investing in Slovakia in an effort to duplicate the

competitive advantage that has accrued to Volkswagen. In 2008, a

total of 770,000 automobiles were manufactured in Slovakia

Increasingly, those who analyze their firm’s internal organiza-

tion should use a global mind-set to do so. A global mind-set is

the ability to analyze, understand, and manage (if in a managerial

position) an internal organization in ways that are not depen-

dent on the assumptions of a single country, culture, or context.

Because they are able to span artificial boundaries,

those with a

global mind-set recognize that their firms must possess resources

and capabilities that allow understanding of and appropriate

responses to competitive situations that are influenced by country-specific factors and

unique societal cultures. Firms populated with people having a global mind-set have a

“key source of long-term competitive advantage in the global marketplace.”

Finally, analysis of the firm’s internal organization requires that evaluators exam-

ine the firm’s portfolio of resources and the bundles of heterogeneous resources and

capabilities managers have created.

This perspective suggests that individual firms

possess at least some resources and capabilities that other companies do not—at least

not in the same combination. Resources are the source of capabilities, some of which

Using a global mind-set,

Volkswagen’s leaders

decided that the ﬁ rm

should open facilities in

Slovakia. Opening these

facilities long before

their competitors has led

to a distinct competitive

advantage for VW in

Slovakia and surrounding

countries.

A global mind-set is

the ability to analyze,

understand and manage

an internal organization

in ways that are not

dependent on the

assumptions of a single

country, culture, or

context.

Part 1: Strategic Management Inputs

lead to the development of a firm’s core competencies or its competitive advantages.

Understanding how to leverage the firm’s unique bundle of resources and capabilities is a

key outcome decision makers seek when analyzing the internal organization.

Figure 3.1

illustrates the relationships among resources, capabilities, and core competencies and

shows how firms use them to create strategic competitiveness. Before examining these

topics in depth, we describe value and its creation.

Creating Value

By exploiting their core competencies to meet if not exceed the demanding standards of

global competition, firms create value for customers.

Value is measured by a product’s

performance characteristics and by its attributes for which customers are willing to pay.

Customers of Luby Cafeterias, for example, pay for meals that are value-priced, generally

healthy, and served quickly in a casual setting.

Firms with a competitive advantage offer value to customers that is superior to the

value competitors provide.

Firms create value by innovatively bundling and leverag-

ing their resources and capabilities.

Firms unable to creatively bundle and leverage

their resources and capabilities in ways that create value for customers suffer perfor-

mance declines. Sometimes, it seems that these declines may happen because firms fail to

understand what customers value. For example, after learning that General Motors (GM)

intended to focus on visual design to create value for buyers, one former GM customer

said that in his view, people buying cars and trucks valued durability, reliability, good fuel

economy, and a low cost of operation more than visual design.

Ultimately, creating value for customers is the source of above-average returns for

a firm. What the firm intends regarding value creation affects its choice of business-

level strategy (see Chapter 4) and its organizational structure (see Chapter 11).

Chapter 4’s discussion of business-level strategies, we note that value is created by a

product’s low cost, by its highly differentiated features, or by a combination of low cost

and high differentiation, compared with competitors’ offerings. A business-level strategy

Core

Competencies

Discovering

Core

Competencies

• Outsource

Capabilities

Resources

• Tangible

• Intangible

Competitive

Advantage

Strategic

Competi-

tiveness

Four Criteria

of Sustainable

Advantages

Value

Chain

Analysis

• Valuable

• Rare

• Costly to Imitate

• Nonsubstitutable

Figure 3.1 Components of Internal Analysis Leading to Competitive Advantage and Strategic Competitiveness

Value is measured by a

product’s performance

characteristics and by

its attributes for which

customers are willing

to pay.

Chapter 3: The Internal Organization: Resources, Capabilities, Core Competencies, and Competitive Advantages

is effective only when it is grounded in exploiting the firm’s core competencies and

competitive advantages. Thus, successful firms continuously examine the effectiveness

of current and future core competencies and advantages.

At one time, the strategic management process was concerned largely with under-

standing the characteristics of the industry in which the firm competed and, in light of

those characteristics, determining how the firm should be positioned relative to competi-

tors. This emphasis on industry characteristics and competitive strategy underestimated

the role of the firm’s resources and capabilities in developing a competitive advantage.

In fact, core competencies, in combination with product-market positions, are the firm’s

most important sources of competitive advantage.

The core competencies of a firm,

in addition to results of analyses of its general, industry, and competitor environments,

should drive its selection of strategies. The resources held by the firm and their context

are important when formulating strategy.

As Clayton Christensen noted, “Successful

strategists need to cultivate a deep understanding of the processes of competition and

progress and of the factors that undergird each advantage. Only thus will they be able to

see when old advantages are poised to disappear and how new advantages can be built in

their stead.”

By emphasizing core competencies when formulating strategies, compa-

nies learn to compete primarily on the basis of firm-specific differences, but they must be

aware of how things are changing in the external environment as well.

The Challenge of Analyzing the

Internal Organization

The strategic decisions managers make about the components of their firm’s internal

organization are nonroutine,

have ethical implications,

and significantly influence the

firm’s ability to earn above-average returns.

These decisions involve choices about the

assets the firm needs to collect and how to best use those assets. “Managers make choices

precisely because they believe these contribute substantially to the performance and sur-

vival of their organizations.”

Making decisions involving the firm’s assets—identifying, developing, deploying, and

protecting resources, capabilities, and core competencies—may appear to be relatively easy.

However, this task is as challenging and difficult as any other with which managers are

involved; moreover, it is increasingly internationalized.

Some believe that the pressure on

managers to pursue only decisions that help the firm meet the quarterly earnings expected by

market analysts makes it difficult to accurately examine the firm’s internal organization.

The challenge and difficulty of making effective decisions are implied by preliminary

evidence suggesting that one-half of organizational decisions fail.

Sometimes, mistakes

are made as the firm analyzes conditions in its internal organization.

Managers might,

for example, identify capabilities as core competencies that do not create a competitive

advantage. This misidentification may have been the case at Polaroid Corporation as deci-

sion makers continued to believe that the skills it used to build its instant film cameras were

highly relevant at the time its competitors were developing and using the skills required to

introduce digital cameras.

When a mistake occurs, such as occurred at Polaroid, decision

makers must have the confidence to admit it and take corrective actions.

A firm can still

grow through well-intended errors; the learning generated by making and correcting mis-

takes can be important to the creation of new competitive advantages.

Moreover, firms

and those managing them can learn from the failure resulting from a mistake—that is,

what not to do when seeking competitive advantage.

Thus, difficult managerial decisions

concerning resources, capabilities, and core competencies are characterized by three condi-

tions: uncertainty, complexity, and intraorganizational conflicts (see Figure 3.2).

Managers face uncertainty in terms of new proprietary technologies, rapidly changing

economic and political trends, transformations in societal values, and shifts in customer

demands.

Environmental uncertainty increases the complexity and range of issues to

examine when studying the internal environment.

Consider the complexity associated

with the decisions Gregory H. Boyce is encountering as CEO of Peabody Energy Corp.

Part 1: Strategic Management Inputs

Peabody is the world’s largest coal company. But coal is thought of as a “dirty fuel,”

meaning that some think its future prospects are dim in light of global warming issues.

Boyce is building a new “clean” coal-fired plant to produce energy and is a proponent

of strong emissions standards. The firm argues for more use of “clean coal.” Obviously,

the complexity of these decisions is quite significant.

Biases about how to cope with

uncertainty affect decisions about the resources and capabilities that will become the

foundation of the firm’s competitive advantage.

For example, Boyce strongly believes in

coal’s future, suggesting that automobiles capable of burning coal should be built. Finally,

intraorganizational conflict surfaces when decisions are made about the core competen-

cies to nurture as well as how to nurture them.

In making decisions affected by these three conditions, judgment is required. Judgment

is the capability of making successful decisions when no obviously correct model or rule

is available or when relevant data are unreliable or incomplete. In this type of situation,

decision makers must be aware of possible cognitive biases. Overconfidence, for example,

can often lower value when a correct decision is not obvious, such as making a judgment

as to whether an internal resource is a strength or a weakness.

When exercising judgment, decision makers often take intelligent risks. In the cur-

rent competitive landscape, executive judgment can be a particularly important source of

competitive advantage. One reason is that, over time, effective judgment allows a firm to

build a strong reputation and retain the loyalty of stakeholders whose support is linked

to above-average returns.

As explained in the Strategic Focus, GE’s managers build their capabilities in its

executive leadership program. This program, which is recognized as one of the best in the

world, helps GE’s managers develop the capabilities to deal with uncertainty, complexity,

and intraorganizational conflict. As such, they learn to use their judgment to make deci-

sions that help GE navigate effectively in an uncertain and complex competitive land-

scape. The effectiveness of GE’s managers and their ability to exercise good judgment in

making strategic decisions is shown in the value GE has created for its shareholders and

the number of former GE managers who are now CEOs of other major companies.

In the next section, we discuss how resources (such as young professionals and

low-level managers) are developed and bundled to create capabilities.

Uncertainty

regarding characteristics of the general and the

industry environments, competitors’ actions, and

customers’ preferences

Complexity

regarding the interrelated causes shaping a ﬁrm’s

environments and perceptions of the environments

Intraorganizational Conﬂicts

among people making managerial decisions and

those affected by them

Condition

Source: Adapted from R. Amit & P. J. H. Schoemaker, 1993, Strategic assets and organizational rent, Strategic

Management Journal, 14: 33.

Figure 3.2 Conditions Affecting Managerial Decisions about Resources, Capabilities, and

Core Competencies

For many years, GE was considered one of the

best organizations for management talent in

the world. For the period, 1993–2002, GE was

ranked first or second in market value added

among the Stern Stewart 1,000 firms. In fact, GE was one of the top producers of

shareholder value through the more than 20 years of Jack Welch’s tenure as CEO. Most

analysts attribute this phenomenal record to GE’s exceptional leadership development program.

Approximately 9,000 managers participated in programs annually at GE’s Leadership

Center in Crotonville, New York. Managers received extensive leadership and team-based

training in these programs. They even provided internal consulting by working on major GE

projects, such as evaluating joint venture partners and analyzing opportunities for the use of

artificial intelligence. Its world-class management development programs provided GE with

an inventory of successors for almost any management position in the company. In fact, many

analysts believe that the management development programs helped GE achieve a

competitive advantage. Some argue that the management development process has the

characteristics of a core competence; it is valuable, rare,

difficult to imitate, and nonsubstitutable.

Jack Welch was often quoted as saying that people

came first and strategy second. He actively participated

in the management development program, sharing his

expertise with other GE managers. Welch’s successor, Jeff

Immelt, does the same. Immelt believes that effective

leaders learn constantly and also help others in the firm

to learn as well. GE’s leadership development program is

so good that many companies look for talent among GE’s

management team because the program produces more

leaders than it can usefully absorb. Thus, there are many

company CEOs who are former GE managers. A study of

these CEOs found they outperformed non-GE CEOs by a

significant margin.

GE is experiencing problems in the economic malaise

of 2008–2009. This is partly because of problems in its

major financial services business (similar to the whole

financial services industry). However, it is also partly due

to the current CEO’s emphasis on innovation for the

future of the company. To innovate effectively requires

that the firm invest now for returns several years later,

which involves taking risks. As such, shorter-term returns

are likely to suffer with high costs and lower returns awaiting the major longer-term payoffs

of important innovations. Only time will tell if these investments to create innovations with

long-term payoffs (as opposed to short-term returns) will work.

Sources: G. Spotts, 2006, GE’s Immelt may have “ecomagination,” but he needs project managers for jumbo-sized

ideas, FastCompany, http://www.fastcompany.com, June 11; Things leaders do, FastCompany,

http://www.fastcompany.com, December 19; S. Hamm, 2008, Tech innovations for tough times, ADNetAsia,

http://www.zdnetasia.com, December 26; E. Smith, 2009, At GE, management development is a continuous process.

Aprendia Corp, http://www.aprendiacorp.com, February 15; G. Rowe, R. E. White, D. Lehmbert, and J. R. Phillips, 2009,

General Electric: An outlier in CEO talent development, IVEY Business Journal, http://www.iveybusinessjournal.com/

article, January/February; P. Eavis & L. Denning, 2009, GE needs a circuit breaker, Wall Street Journal, http://www.wsj.com,

March 5; P. Eaves, 2009, GE paper cut is greeted with relief, Wall Street Journal, http://www.wsj.com, March 13;

D. Lehmberg, W. G. Rowe, R. E. White, and R. R. Phillips, 2009, The GE paradox: Competitive advantage through

tangible non-firm-specific investment, Journal of Management, in press.

GE BUILDS MANAGEMENT

CAPABILITIES AND SHARES

THEM WITH OTHERS

GE CEO Jeff Immlet, like his

predecessor Jack Welch,

believes the development of

leaders within the organization

is an essential investment.

AP Photo/Mark Lennihan