Strt Mgmnt Chp 3
Download
Report
Transcript Strt Mgmnt Chp 3
Strategic Capabilities
Strategic capability is the adequacy and
suitability of the resources and competences of
an organization for it to survive and prosper
(Resource are tangible or intangible)
Elements of Strategic Capabilities
1.
Resources and competences: Perhaps the most basic concept is that of
resources.
Tangible resources: are the physical assets of an organization such as plant,
labor and finance.
intangible resources: are non-physical assets such as information,
reputation and knowledge
Physical resources – such as the number of machines, buildings or the production
capacity of the organization
Financial resources – such as capital, cash, debtors and creditors, and suppliers of
money
Human resources – including the number and mix (e.g. demographic profile) of
people in an organization.
Intellectual capital is an important aspect of the intangible resources of an
organization. This includes patents, brands, business systems and customer
databases.
2. Threshold capabilities: Threshold capabilities are those
essential for the organization to be able to compete in a given
market
If an organization does not have threshold resources then
it will be unable to meet customers’ minimum requirements
threshold competences required to deploy resources so as to
meet customers’ requirements and support particular
strategies
Arising from these are other important
issues:
Threshold levels of capability will change and will usually rise
over time as critical success factors change and through the
activities of competitors and new entrants.
One of the challenges that firms face is the trade-offs that they
may need to make in order to achieve a level of threshold
capability required for different sorts of customers
It is important to recognize that the threshold level required is
likely to involve complementary resources and competences
3. Unique resources and core competences
Unique resources are those resources that critically
underpin competitive advantage and that others cannot
imitate or obtain
Core competences are the activities and processes through
which resources are deployed in such a way as to achieve
competitive advantage in ways that others cannot imitate or
obtain
COST EFFICIENCY
This will involve having both appropriate resources and the
competences to manage costs
For many organizations in many markets this is becoming a
threshold strategic capability for two reasons:
a. because customers do not value product features at any price.
b. competitive rivalry will continually require the driving down of
costs
Cost efficiency is determined by a
number of cost drivers
The Experience curve
Implication of experience curve concepts
that can influence competitive position
First mover advantage can be important
Sustained advantage through experience curve benefits are
not high
Continual reduction in costs is a necessity for organizations
It may be possible to reduce cost by outsourcing
CAPABILITIES FOR SUSTAINABLE COMPETITIVE
ADVANTAGE
Value of strategic capabilities:
The importance of value to the customer may seem to be an
obvious point to make but in practice it is often overlooked
or ignored.
Having capabilities in terms of resources or competences that
are different from other organizations is, of itself, not a basis
of competitive advantage if that are ‘valueless’ in customer
terms
Rarity of strategic capabilities:
Competitive advantage cannot be achieved if the strategic capability of an
organization is the same as other organizations
Rarity may depend on who owns the competence and how easily transferable it is
– such as a doctor in ‘leading-edge’ medicine
Secured preferred access to customers or suppliers
Some competences are situation dependent
Sometimes incumbent organizations have advantage because they have sunk costs
(say in set-up) that are already written off and they are able to operate at significantly
lower overall cost.
Robustness of strategic capabilities:
Robustness is sometimes referred to as ‘non-imitability’
The competences must lead to levels of performance that are
significantly better than competitors
Criteria for the robustness of strategic
capability
Non-substitutability:
Achieving sustained competitive advantage also means avoiding the
risk of substitution
However, the organization may still be at risk from substitution.
Substitution could take different forms
a. In other words the product or service as a whole might be a
victim of substitution.
b. It could be at the competence level. E.g based on a charismatic
leader and the way that individual has developed the
management systems in the organization
Dynamic capabilities: are an organization's abilities to
develop and change competences to meet the needs of
rapidly changing environments
These capabilities may be relatively formal such as
New product development
Standardized procedures for agreement for capital
expenditure
Major strategic moves, such as acquisitions or alliances by
which new skills are learned by the organization
ORGANISATIONAL KNOWLEDGE
Organizational knowledge is the collective and shared experience
accumulated through systems, routines and activities of sharing across the
organization.
Organizational knowledge highlights the social and cultural aspects of
strategic capability.
Exchange of knowledge is more likely to occur in cultures of trust without
hierarchical or functional boundaries
Knowledge takes different forms:
1. Explicit knowledge
2. Tacit knowledge
Arguably, the more formal and systematic the system of knowledge, the
greater is the danger of imitation
DIAGNOSING STRATEGIC CAPABILITY
The value chain: The value chain describes the activities
within and around an organization which together create a
Primary activities:
For example, for a manufacturing business product or service
Inbound logistics
Operations
Outbound logistics
Marketing and sales
Service
The value network
The value network is the set of inter-organizational links and
relationships that are necessary to create a product or service
Some of the key questions they need to address are these:
Where cost and value are created
Which activities are centrally important
Where the profit pools are
The ‘make or buy’ decision
Who might be the best partners
Activity Map
Benchmarking
An organization's strategic capability has to be assessed in
relative terms since it concerns the ability to meet and beat
the performance of competitors
Historical benchmarking.
Industry/sector benchmarking.
Best-in-class benchmarking.
MANAGING STRATEGIC CAPABILITY
1.
The limitations of managing strategic capabilities
Competences are valued but not understood.
Competences are not valued.
Competences are recognized, valued and understood.
2. Stretching and adding capabilities
Extending best practices.
Adding and changing activities.
Stretching competences.
Building on apparent ‘weaknesses’.
Ceasing activities.
Trade-offs
External capability development.
3. Managing people for capability development
Targeted training and development may be possible
HR policies might be employed to develop particular competences
To develop people’s awareness
Building dynamic capabilities
the recognition of the significance of the intuition of people in
the organization
the acceptance that different, even conflicting ideas and views
are to be welcomed
experimentation is the norm and becomes part of the learning process