Strategic Capability

What is resource based strategy? The competitive advantage of an organization is explained by the distinctiveness of the capabilities. What is strategic capability? Strategic capability is the adequacy and suitability of the resources and competences of an organization to survive and prosper.

A resource strength is something a company is good at doing or attribute that enhances its competitiveness in the market place. Forms of resource strength: a.Skill, specialized expertise, or competitively important capability b.Valuable physical assets c.Human assets and intellectual capital d.Valuable organizational assets e.Valuable intangible assets f.An achievement or advantage that gives competitive advantage g.Valuable joint ventures or cooperative ventures

How do we assess a company resource strength? A.Competence: Activity a company learned to perform well B.Core competence: Competitively important activity a company perform better than other internal activities. C.Distinctive Competence: Competitively important activity a company performs better than rivals.

Strategic capability of an Organization Resources (Tangible and Intangible) Competences (Activities and process through which an organization deploys its resources.)

Resources Competences Threshold capabilities Capabilities for competitive advantage Threshold resources Tangible Intangible Threshold competences Unique Resources: Resources that provide competitive advantage Core competence: Competence that cannot be easily imitate or obtained Figure: STRATEGIC CAPABILITIES AND COMPETITIVE ADVANTAGE

Sources of cost efficiency: 1.Economies of scale 2.Supply costs 3.Experience 4.Product/process design Capabilities for sustaibnable competitive advantage: 1.Value of strategic capabilities 2.Rarity of strategic capabilities (Unique resources) 3.Robustness of strategic capabilities (non-imitable core competence) 4.Non-substitutability Dynamic Capabilities An organization’s abilities to develop and change competences to meet the needs of rapidly changing environments Diagnosing Strategic Capability: 1.The value chain value network 2.Activity Maps 3.Benchmarking 4.SWOT analysis

Core Competence according to Hamel and Prhlad core competence = Bundle of skills and technologies that enables a company to provide a particular benefit to customers. (not commitment to specific product-market opportunity) 1.Sony=Pocketability (cc=miniaturization) 2.Federal Express=on -ime delivery (cc=Logistics management) 3.Wal-Mart=Wide assortment (cc= Logistics management)  Competitive battles need not be limited to product terms. They include battles for developing competencies in fleet management, cabin service, reservation systems etc.  Competition for competence is not product versus product, or even business versus business. It is corporation versus corporation.

Why competition for competence be considered intercorporate competition? 1.Core competencies are not product specific. They are longer lasting than individual product. Eg. Sony 2.Battle for competence leadership has profound impact on profitability and growth of the organization. 3.The investment, risk taking, and time frame required to achieve core competence leadership often exceeds the resources and patience of a single business unit.

What is core competence? 1.Customer value 2.Competitor differentiation 3.Extendability

Competition for competence at 4 Levels 1.Competition to develop and acquire constituent skills and technologies 2.Competition to synthesize core competencies 3.Competition to maximize core product share 4.Competition to maximize end product share

Five key competence management tasks 1.Identifying core competencies( in terms of customers’ perceived value) 2.Establishing core competence agenda based on existing and new competencies, and between existing and new product markets. 3.Building new core competencies 4.Deploying core competencies 5.Protecting and defending core competencies