Chapter 5 – Strategic capability and competencies

Question 1

According to Lynch, how is organisational capabilities defined?

Answer 1

Lynch (2015) defines ‘organisational capability’ as ‘the skills, structures and leadership of the organisation behind all its assets together and allow them to interact efficiently’.

Question 2

Kay (1993) suggests that it is the distinctive capabilities of an organisation’s resources that will enable it to develop and fulfil its strategy, while retaining a position of competitive advantage. He identifies three core AIR capabilities that are required:

Answer 2

1. The architecture capability network of internal and external relationships
2. The innovative capability – develop new products and services and maintain a competitive advantage
3. The reputation capability reason why customers come back, investors invest, potential employees apply

Question 3

According to Porter, what are the three ways to achieve competitive advantage?

Answer 3

1. Cost advantage: where the organisation is able to deliver a greater level of profitability and financial benefit when compared to its competitors
2. Differentiation advantage: where the organisation is able to deliver a product or service that is distinct from that of its competitors
3. Choose to dominate a particular segment of a market

Question 4

How can an organisation achieve competitive advantage through building strategic alliances within its supply chain?

Answer 4

Horizontal integration allows competing organisations work together to procure a greater critical mass from their suppliers e.g. Tesco and Carrefour

Vertical integration allows an organisation to create a more efficient and competitive end to end supply chain e.g. Netflix shift from licensing tvs and films to producing its own content

Question 5

What is the VRIN and VRIO framework of competitive attributes?

Answer 5

Barney (1991) developed a framework to enable an organisation to identify and consider the significance of its competitive attributes. Initially, this was known as the VRIN framework (value, rarity, inimitability and non-substitutability) and was then amended to VRIO (value, rarity, inimitability and organisational support).

Question 6

Name some methods to assess strategic capabilities?

Answer 6

• Supply-chain analysis - assess inputs (people, capital, material), transformation process (USP) and outputs (goods and services)
• Value-chain analysis - Porter - primary and support activites - encourage a deeper understanding of the strategic potential of an organisation
• Gap analysis - gap between what was expected to happen and what actually happened
• Benchmarking
• SWOT analysis
• McKinsey 7S framework

Question 7

Outline the McKinsey 7S framework

Answer 7

Hard elements are easier to define and identify, and are largely determined by the strategic activities of the people within the organisation.

1. Strategy: the plan to maintain and build sustainable competitive advantage
2. Structure: the organisational hierarchy and lines of accountability
3. Systems: the activities, policies and procedures that enable day-to-day tasks to be completed

Soft elements are less tangible, are part of the culture of the organisation and are largely determined by the manner in which the people within the organisation interact and communicate.

4. Style: the nature of leadership and the levels of empowerment as well as the channels of communication used by that leader
5. Staff: the mixture of employees and the combination of the capabilities
6. Skills: the specific competences of each individual employee within the organisation
7. Shared values: the realisation of the culture and the general ethos of the organisation resulting from the perpetual and changing interaction of the other elements, sometimes referred to as goal congruence

Question 8

Outline some methods to develop strategic capabilities

Answer 8

• Addition of new resources into the organisation
• Investment in technology or machinery
• The learning organisation