COMPETENCIES AND CAPABILITIES OF A FIRM

FIRM’S COMPETENCIES AND CAPABILITIES Competence is something a firm can do well. Competence is acquired through experience which is accumulation of learning and build up of proficiency in performing an activity Prof.Bijay KC, Ph.D., SAIM

CORE COMPETENCIES AND CAPABILITIES Something a firm does well relatively to other internal activities and such activity is central to the firm’s strategy and competitiveness. Very Valuable for the firm lying at the core Core competency lies in the firm’s people, not in the assets of its balance sheet Prof.Bijay KC, Ph.D., SAIM

DISTINCTIVE COMPETENCE Competence that helps firm to perform better than its rivals It is a basis for gaining competitive advantage over its rivals Core competence may be in the form of high quality product/service, timely delivery, easy access etc. Prof.Bijay KC, Ph.D., SAIM

THE ROOTS OF COMPETITIVE ADVANTAGES End Products 1 2 3 4 5 6 7 8 9 10 11 12 Business 1 Business 2 Business 3 Business 4 Core Product 2 Core Product 1 Competence 2 Competence 3 Competence 4 Competence 1 Prof.Bijay KC, Ph.D., SAIM

THE ROOTS OF COMPETITIVE ADVANTAGES HONDA End Products 1 2 3 4 5 6 7 8 9 10 11 12 Lawn Mowers Power Generators Four Wheelers Two Wheelers Vehicles Generators Engine Designing Power trains Designing Prof.Bijay KC, Ph.D., SAIM

Core Competencies of some companies Companies Products Core Competencies 3 Ms Post it note Adhesives, sticky tapes Magnetic tape competence to use Coated abrasives Honda Motor cycles, cars Engines and power Lawn mowers trains Generators Canon Copier, laser Optics imaging and printers microprocessors Cameras image scanners Prof.Bijay KC, Ph.D., SAIM

IDENTIFYING CORE COMPETENCIES Three tests to identify core competencies: Core competence provides potential access to a wide variety of markets. Core competence should make a significant contribution to the perceived customer benefits of the end product. Core competence should be difficult for competitors to imitate. A list of 20/30 capabilities indicate a firm has no competencies Prof.Bijay KC, Ph.D., SAIM

LOSING CORE COMPETENCIES Companies lose core competencies when They undercut internal investment Forego opportunities to establish competencies that are evolving in the existing business Prof.Bijay KC, Ph.D., SAIM

SUSTAINBILITY OF CORE COMPETENCE 1.Durability: the rate at which a firm’s resources and competencies depreciate or become obsolete and irrelevant 2. Imitability: the rate at which a firm’s resources and competencies can be imitated by others Prof.Bijay KC, Ph.D., SAIM

A core competence can be easily imitated if it is: Transparent: How quickly other firms can understand the relationship of resources and capabilities supporting the success of a firm’s strategy? Transferability: How quickly can competitors gather resources and capabilities to support a competitive challenge? Replicability: How quickly can the competitors use duplicated resources and capabilities Prof.Bijay KC, Ph.D., SAIM

DEVELOPING STRATEGIC ARCHITECTURE A strategic architecture is a road map of the future that identifies which core competencies to build Fundamental questions are: How long can a corporation preserve competitiveness in the existing business if it neglects the particular core competence? How central is this core competence to perceived consumer benefits? What future opportunities be foreclosed if the corporation were to lose this particular competence? Prof.Bijay KC, Ph.D., SAIM

DEVELOPING STRATEGIC ARCHITECTURE Strategic architecture should make resource allocation priorities transparent to the entire organization. Consistency in resource allocation and Development of a relevant administrative infrastructure Prof.Bijay KC, Ph.D., SAIM