3. Chapter - Strategic Capabilities

When is a strategic capability organizationally supported?

When the organization is suitably organized to support those capabilities, including appropriate organizational processes and systems.

What are the four ways in which the analysis of the value chain can help managers?

1) A generic description of activities - understanding the discrete activities and how they both contribute to consumer benefit and how they add to cost. 2) Identifying activities where the organization has particular strengths or weaknesses 3) Analyzing the competitive position of the organization using the VRIO criteria - thus identifying sources of sustainable advantage. 4) Looking for ways to enhance value or decrease cost in value activities (e.g. outsourcing)

What are the different ways in which a manager can develop strategic capabilities?

1) Internal capability development 1.1) Building and recombining capabilities (R&D) 1.2) Leveraging capabilities (e.g. apply to different BU's) 1.3) Stretching capabilities (new products based on them) 2) External capability development (M&A, alliances) 3) Ceasing activities 4) Monitor outputs and benefits when it is not possible to fully understand capabilities 5) Awareness development

What are two possible limitations of benchmarking?

1) Surface comparison (limited to output not underlying reasons) 2) Simply achieve competitive parity

What questions can be answered by looking at the value system?

1) What are the activities and cost/price structures of the value system? 2) Where are the profit pools? (Refers to the different levels of profit available at different parts of the value system) 3) Identify potential make-or-buy decisions 4) Where are opportunities for partnerships?

What are distinctive capabilities?

Distinctive capabilities are required to achieve competitive advantage.

What elements can contribute to the inimitability of a strategic capability?

1. Complexity (internal and external linkages) 2. Causal ambiguity (characteristic, linkage) 3. Culture and history (path dependency, taken for granted activities)

What three different types of dynamic capabilities can be distinguished?

1. Sensing (Constant scan, search and exploration of opportunities, e.g. R&D) 2. Seizing (Sensed opportunities must be seized through new products or services, activities, processes etc.) 3. Reconfiguring (Seizing an opportunity requires renewal and reorganization of capabilities, investments, manufacturing, markets etc.)

What is Benchmarking and what two approaches can be used?

Benchmarking is used as a means of understanding how an organization compares with others- typically competitors. 1) Industry/sector benchmarking 2) Best-in-class benchmarking

When is strategic capability inimitable?

Inimitable capabilities are those that competitors find difficult and costly to imitate or obtain or substitute.

What is organizational knowledge?

Organizational knowledge is organization-specific, collective intelligence, accumulated through formal systems and people's shared experience.

When is a strategic capability rare?

Rare capabilities , are those possessed uniquely by one organization or by a few others.

What is the SWOT analysis?

SWOT provides a general summary of the Strengths and Weaknesses explored in an analysis of strategic capabilities and the Opportunities and Threats explored in an analysis of the environment. This analysis can also be useful as a basis for generating strategic options and assess future courses of action. Should be comparative not absolute!

What are strategic capabilities?

Strategic capabilities are the capabilities of an organization that contribute to its long-term survival or competitive advantage.

When is a strategic capability valuable?

Strategic capabilities are valuable when they create a product or a service that is of value to customers and if, and only if, they generate higher revenues or lower costs or both.

What is meant by the concept of dynamic capabilities?

The concept of dynamic capabilities means an organization's ability to renew and recreate its strategic capabilities to meet the needs of changing environments .

What is the difference between the value chain and the value system?

The value chain describes the categories of activities within an organization which, together, create a product or service. Most organizations are also part of a wider value system , the set of inter-organizational links and relationships that are necessary to create a product or service.

With which concept can distinctive capabilities be detected?

There are four key criteria by which capabilities can be assessed in terms of their providing a basis for achieving a competitive advantage: Value, Rarity, Inimitability and Organisational support - or VRIO

What are threshold capabilities?

Threshold capabilities are those needed for an organization to meet the necessary requirements to compete in a given market and achieve parity with competitors in that market.