Strategic Capability
Strategic Capability
Strategic Capability - depends on its strategic
capability which can be defined as the
adequacy and suitability of its resources and
competences of an organization’s for it to
survive and prosper.
Competency + Resources = Capability
Competitive Advantage
• The ability of the organization to generate greater returns than those of competitors over
the long term, as opposed to short-term tactics which provide a temporary advantage.
Sustainable Competitive Advantage
• It is the unique position that an organization develops in relation to competitors that allows to
outperform them consistently.
• Unique resources and core competences are of great importance in creating a sustainable
competitive advantage.
• Johnson et al (2017) suggest that if competitive advantage is to be achieved resources and
competences must have four qualities (also called VRIO model):
• Value - value placed by customers on resources and competences. Does it allow a company
to explore an environmental opportunity and neutralize a threat?
• Rarity – is resource or competence is rare enough? Is it controlled by limited number of
competitors?
• Inimitability – difficult for competitors to imitate most frequently resides in competences
involved in linking activities and processes.
• Organizational Support – is an organization policies and procedures able to support its
capabilities including its processes and systems.
Sustainable Competitive Advantage
Dynamic Capabilities
Dynamic capabilities are an organization’s abilities to develop and change competences to meet the needs of rapidly changing
environment. (Johnson et al, 2017)
Organizational Knowledge
A good example of how both resources and
capabilities may combine to produce
competitive advantage for an organisation
is in terms of organisational knowledge.
Organisational knowledge is organisation-
specific, collective intelligence,
accumulated through formal systems and
people’s shared experience. (Johnson, et
al, 2017)
Knowledge management is connected
with the theory of learning organization
and founded on the idea that knowledge
can be major factor in creating a
sustainable competitive advantage.
Organizational Learning
Organizational Learning (OL), which is broadly defined as a learning process within organizations that involves the interaction of
individual and collective (group, organizational, and inter-organizational) levels of analysis and leads to achieving organizations'
goals.
Knowledge Management
Knowledge management is the systematic
management of an organization's knowledge
assets for the purpose of creating value and
meeting tactical & strategic requirements; it
consists of the initiatives, processes,
strategies, and systems that sustain and
enhance the storage, assessment, sharing,
refinement, and creation of knowledge.
Explicit or ‘objective’ knowledge is
transmitted in formal systematic ways. It can
take the form of a codified information
resource such as a systems manual or files of
market research and intelligence.
Tacit knowledge is more personal, context-
specific and therefore hard to formalise and
communicate so difficult to imitate as well.
Example: Experience gained by top
management by making successful
acquisitions.
Knowledge Management technology
• Office automation system – IT applications that
improve productivity in office like word processing
system
• Groupware – software specifically designed to
support group working and with cooperative
requirements in mind. Eg: IBM Notes
• An intranet –internet network of an organization
using internet technology and protocols.
• An Expert System – a computer program that
captures human expertise. Eg: loan processing
software in banks
• Data warehouses – a large storage of data
accumulated from a wide range of sources within a
company an used to guide management decisions
• Data mining – software that discovers previously
unknown relationships (patterns in large data) and
provides insights that cannot be obtained through
ordinary reporting mechanism.
Porter’s Value Chain
Michael Porter’s Value Chain model is a useful
framework for assessing strategic capabilities of an
organization as it offers the bird’s eye view of how the
business run.
It represents the value created by the value activities
themselves and by the management of the linkages
between them.
Primary Activities: related with production.
Support activities: provide the background for the
effectiveness of the organization
• The value chain was introduced by Porter and
represents an approach to looking at the
development of competitive advantage within an
organization.
• The value chain represents a series of activities
that both create and build value. Combined they
represent the total value delivered by an
organization.
• The ‘margin’ in the diagram is the added value (the
difference between the total value of the activities
and cost of performing them).
Porter’s Value Chain - Case
Value Network
Michael Porter’s Value Chain is not bounded by an
organization’s borders, it is connected to what
Johnson et al, (2017) call a value network.
Value network is the set of inter-organizational links
and relationships that are necessary to create a
product or service.
The diagram shows the similarities between the value
network and supply chain.
The supply chain shows the system of organizations,
people, technology, activities involved in transforming
a product or service from its raw materials to the
finished products whereas value network emphases
on the value-creating capabilities within the supply
chain processes.
Careful management of the relationship in the value
network can promote innovation and the creation of
knowledge between organizations.
SWOT Analysis
• SWOT provides a general summary of the Strengths and Weaknesses explored in an analysis of resources and capabilities and the
Opportunities and Threats explored in an analysis of the environment.
• The aim is to identify the extent to which strengths and weaknesses are relevant to, or capable of dealing with, the changes taking place in
the business environment.
• SWOT analysis should form the starting point from which future strategic options can be assessed.
• SWOT analysis is most useful when it is comparative – if it examines strengths, weaknesses, opportunities and threats in relation to
competitors.
SWOT Analysis Examples
TOWS Matrix
SWOT can also help focus discussion on future choices and the
extent to which an organisation is capable of supporting the
strategies by way of using a TOWS matrix.
Each box of the TOWS matrix can be used to identify options that
address a different combination of the internal factors (strengths
and weaknesses) and the external factors (opportunities and
threats).
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