Strategic capabilities and competencies Flashcards
Differentiate between a strategic capability and a strategic competence.
Strategic capability = the potential that exists within an organisation to achieve an outcome; it has the appropriate mixture of resources available
Strategic competence = the understanding of how to use the organisational capabilities to drive a successful strategic outcome
An organisation needs to be able to build a sustainable competitive advantage, in the context of the macro and micro forces that it exists and operates within. What does the development of strategy need to recognise?
Strategic capabilities are both what?
Expand on this.
What is this often referred to?
What does it provide?
What does it fail to recognise?
needs to recognise the capabilities and competencies that exist currently within an organisation, and how these need to evolve as part of the realisation of the perceived vision
Both common and unique within organisation
(1) Common, because different capabilities are required by all organisations e.g., financial planning
(2) Unique, because every organisation has a unique mix of individuals with their own capabilities e.g., director is a world-renowned specialist
= resource-based strategy = provide organisation ability to recognise and apply its resources
Fails to recognise that the manner in which resources are applied/utilised by different individuals will drive the capabilities of the organisation
SOURCES OF STRATEGIC CAPABILITY - RESOURCES
It is useful to identify the resources that are available to a particular organisation before assessing its capabilities and its competencies.
How will resources always be assessed?
What are the tangible resources? (2)
What are the intangible resources? (3)
What are the human resources? (4)
How does Carter (1999) categorise motivation?
assessed at a snapshot moment in time, e.g., use of a SWOT analysis
Tangible = (1) financial resources and (2) physical resources e.g., land, buildings, machinery, vehicles etc.
Intangible = (1) technology, (2) reputation, and (3) culture = the way people within the organisation behave towards others (internal and external)
Human = (1) individual and combined SKILLS of its employees, (2) current and historic KNOWLEDGE, (3) COMMUNICATION channels and (4) MOTIVATION:
(+) attitude, (+) energy = spectators
(+) attitude, (-) energy = players
(-) attitude, (+) energy = walking-dead
(-) attitude, (-) energy = cynics
SOURCES OF STRATEGIC CAPABILITY - CORE COMPETERNCIES
The ability to demonstrate competence requires what?
Organisational competence could be seen to describe what?
Is competence variable or fixed?
What is a core competence?
the appropriate resources combined with the capability to utilise and apply those resources
how well (or not) an organisation is able to perform its required activities
Variable = will frequently change based upon the rationality or irrationality of human behaviour
Core competence = at any particular moment of time, the ability of an organisation to align its resources and its capabilities in the satisfaction of stakeholder (particularly customer) expectations
SOURCES OF STRATEGIC CAPABILITY - ACHIEVING COMPETITIVE ADVANTAGE
The achievement of a sustainable competitive advantage is assumed to be one of the core methods of adding value within an organisation.
What 2 basic types of competitive advantage does Porter (2004) suggest exist?
It is important to make a distinction between what? (2)
What do each of these describe?
- Cost advantage = where the organisation is able to deliver a greater level of profitability and financial benefit compared to its competitors
- Differentiation advantage = where the organisation is able to deliver a product or service that is distinct from that of its competitors
Make a distinction between (1) threshold capabilities (the normal day-to-day operating level of an organisation, which allows it to survive) and (2) core competencies (aspects of an organisation that are harder/impossible, for competitors to imitate or obtain, e.g., reputation of a key individual)
Threshold capabilities = describes the alignment of resource and capability to meet stakeholder expectations, fulfil strategic objectives/goals, and maintain economic position
Core competencies = describes the particular alignment of resource and capability which enables an organisation to have a unique product/service/reputation enabling it to maintain or gain a leading market position
UNDERSTANDING, ACHIEVING AND SUSTAINING COMPETITIVE ADVANTAGE
What does Arie de Geus (1999) suggest may be the only sustainable competitive advantage?
What does this recognise?
How does this link to Argyris ladder of inference?
‘the ability to learn faster than our competitors … may be the only sustainable competitive advantage.’
recognises the need for a continuous learning approach to allow the organisation to evolve
Humans continually learn and develop approach to decision-making and interaction with other humans = organisation needs to capture and enable the individual and team learning
UNDERSTANDING, ACHIEVING AND SUSTAINING COMPETITIVE ADVANTAGE
Lynch (2015) suggests that competitive advantage is derived from the interaction of what 6 core operational aspects?
- Differentiation = the recognition of an organisation’s unique features or attributes, often represented through branding
- Low costs = the ability to source resources at a lower level of cost than competitors (e.g. bulk purchasing power).
- High performance or technology = the alignment of particularly skilled people, patented products and leading-edge technology that is hard to replicate
- Quality = actual or perceived differentiation from the customer perspective
- Service = going above and beyond customer expectation
- Culture, leadership and style = the dynamic and charismatic bringing together of employees in a way that differentiates the organisation from its competitors
E.g., Google has relaxed office designs = differentiate and help stimulate a creative approach
UNDERSTANDING, ACHIEVING AND SUSTAINING COMPETITIVE ADVANTAGE
When appropriate, an organisation is able to achieve competitive advantage through what?
How can organisations create an agile and more focused approach?
What is horizontal integration? Name an example.
What is vertical integration? Name an example.
the building of strategic alliances within its supply chain = formal or informal can lead to significant cost advantage
by removing layers of unnecessary management = recognition of where a task is best controlled in the supply chain can add value to all participants
Horizontal integration = allows competing organisations to work together to procure a greater critical mass from their suppliers
E.g., sourcing alliance between Tesco plc and Carrefour
Vertical integration = allows an organisation to work with its suppliers or customers to create a more efficient and competitive end-to-end supply chain
E.g., vendor-management techniques used by large packaging companies and their customers
UNDERSTANDING, ACHIEVING AND SUSTAINING COMPETITIVE ADVANTAGE - THE VRIN OR VRIO FRAMEWORK OF COMPETITIVE ATTRIBUTES
Barney (1991) developed a framework to enable an organisation to do what?
What was this initially known as?
What is it known as now?
Summarise briefly the 4 different aspects of a VRIO framework.
to identify and consider the significance of its competitive attributes
Initially = VRIN framework = value, rarity, inimitability, and non-substitutability
Now = VRIO framework = value, rarity, inimitability, and organisational support
- 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
UNDERSTANDING, ACHIEVING AND SUSTAINING COMPETITIVE ADVANTAGE - THE VRIN OR VRIO FRAMEWORK OF COMPETITIVE ATTRIBUTES - INIMITABILITY
The inimitability of the resources and capabilities of an organisation will define what?
What are the 3 different criteria around the inimitability of resources and capabilities that Johnson (2017) identifies?
define its position in the market at any particular moment in time.
- Complexity = the development of internal or external linked activities/ processes can provide a unique position of competitive advantage
- Causal ambiguity = the inability of competitors to understand the causes that underpin the competitive advantage of a particular organisation
- Culture and history = the evolution of the resource, knowledge and capability across the history of the organisation can lead to a process that it is impossible for a competitor to imitate
UNDERSTANDING, ACHIEVING AND SUSTAINING COMPETITIVE ADVANTAGE - THE VRIN OR VRIO FRAMEWORK OF COMPETITIVE ATTRIBUTES - NON-SUBSTITUTABILITY & ORGANISATIONAL SUPPORT
The non-substitutability of the resources and capabilities of an organisation will prevent what?
Why was non-substitutability replaced by organisational support?
What did this change also recognise?
prevent a competitor achieving the same strategic objective or goal
Barney later decided that the concept of non-substitutability was too closely aligned with inimitability
recognised the increasing expectation by customers of ongoing support for the product or service
= If an organisation is able to offer a particular package of support, this can lead to competitive advantage (e.g. tech companies)
ASSESSING STRATEGIC CAPABILITY - SUPPLY CHAIN ANALYSIS
What is the organisational supply chain? (3)
In the context of strategic capability and competence, it is clear that the inputs within the supply chain will form the what?
The transformation process represents what?
The competence of the organisation and competitive advantage is evidenced by what?
This model can be used to assess what? (3)
organisational supply chain: (1) inputs (people, capital, material, knowledge), (2) transformation (USP), and (3) outputs (goods/services)
the resources
represents the capability of the organisation, and its individuals, to apply and use these resources to create a distinctive unique selling point (USP)
the ability to complete the supply chain by delivering goods/services to the customer or consumer
assess (1) the resources required; (2) the capability of the organisation to apply those resources; and (3) the competence of the organisation to utilise the resources and the capability to deliver an effective business model with sustainable competitive advantage
ASSESSING STRATEGIC CAPABILITY - VALUE CHAIN ANALYSIS
Porter (2004) uses value chain analysis to understand and identify what? (2)
Porter separates the structure of the organisation into primary activities and support activities. What are the 5 primary activities?
(1) understand the sequential process of value creating activities that exist within an organisation, and (2) identify the resources and capabilities required to deliver competitive advantage
Primary activities:
(1) Inbound logistics = receiving, handling and storing inputs to the production system
(2) Operations = the transformation of the raw materials into the final product or service
(3) Outbound logistics = storage, stock control and transportation of finished products
(4) Marketing and sales = informing customers of the product, persuading them to buy it, and enabling them to do so (advertising, promotion, sales)
(5) Service = the enhancement addition of value to a product or service = installation, repair, training, spares or ongoing support and consultation
ASSESSING STRATEGIC CAPABILITY - BENCHMARKING AND GAP ANALYSIS
Gap analysis is an important method of enabling the people leading an organisation to determine what?
What do these represent?
What are the 3 benefits of benchmarking?
determine which aspects of the operational flow, the resources and the capabilities are operating as intended, and which areas may need attention
they represent the gaps between what was expected compared to what actually happened
The benefits of benchmarking can include:
1. the alignment of performance against strategic and operational goals and objectives
2. the acceleration of management of change, having recognised the need for such change
3. the improvement of operational processes
ASSESSING STRATEGIC CAPABILITY - BENCHMARKING AND GAP ANALYSIS
Lynch (2015) suggests that the real benefit is to use the benchmarking exercise as a means of enhancing overall what?
What is the natural sequence that should follow as a result of a benchmarking exercise? (4)
The application of this type of cumulative approach enables the use of benchmarking in what?
as a means of enhancing overall competitive advantage within the wider operational environment
- explore the results and analyse the reasons for the differences
- redefine performance targets after discussion with key employees
- redevelop the assets and systems using the learning from the benchmarking exercise
- develop new performance objectives for individuals and groups, changing expectations and attitudes to what is possible as a result of the learning from the benchmarking exercise
enables the use of benchmarking in the assessment of strategic capability
