Chapter 5

Question 1

5.1: Differentiate between a strategic capability and a strategic competence, giving an example in each case.

Answer 1

Strategic capability is the potential that exists within an organisation to achieve an outcome; it has the appropriate
mixture of resources available. Example: Company G has a good mixture of people skills, sufficient cash and other
resources and a strategic plan to create a new product, and the capability to create competitive edge in a market place.

Strategic competence is the understanding of how to use the organisational capabilities to drive a successful strategic
outcome. Example: To turn its capabilities into competence, Company G needs to have the appropriate leadership, drive
and determination to align the resources in the fulfilment of the strategic objectives.

Question 2

5.2: Identify two different types of competitive advantage.

Answer 2

Michael Porter described two basic types of competitive advantage:

• cost advantage is where an organisation is able to deliver a greater level of profitability and financial benefit than its
  competitors
• differentiation advantage is where an organisation is able to deliver a product or service that is distinct from that of
  its competitors.

Question 3

5.3: Summarise briefly the four different aspects of a VRIO framework

Answer 3

• The value of the resources and capabilities of an organisation will be determined by the ability of the organisation to
  deal with the opportunities and threats that exist and provide a perceived value to stakeholders.
• The rarity of the resources and capabilities of an organisation will deter or prevent competition.
• The inimitability of the resources and capabilities of an organisation will prevent the competition from copying the
  success.
• The organisational support offered by the organisation can be a differentiator and can enhance competitive
  advantage.

Question 4

5.4: Clarify briefly the five primary activities of Porter’s value-chain analysis.

Answer 4

• Inbound logistics: The receipt, storage, stock control and transportation of the material resources required for the
  business operation.
• Operations: The transformation of the raw materials into the final product or service, including manufacturing,
  packaging, testing and quality control.
• Outbound logistics: The storage and stock control of finished products, together with the transportation of these
  products to the customer; in the case of a service rather than a product this process would include the means and
  location of the delivery of the service.
• Marketing and sales: The means through which consumers and customers are made aware of the product
  or service and are able to purchase it, including the selling process itself, the administration of the sales, and
  associated advertising.
• Service: The enhancement addition of value to a product or service, such as installation, repair, training, spares or
  ongoing support and consultation.