BY:VEDIKA SARAFSWAGATA GIRIYUKTI AGARWALVIKRAM PESSWANIVIVEK SOOD SRISHTI SETHSUMALYA CHAKRABORTYTANUSHREE VIJAYWARGITARUN VOHRA

STRATEGIC CAPABILITY

Chapter 2Chapter 2External EnvironmentExternal EnvironmentWhat the Firm Might DoWhat the Firm Might Do

Chapter 3Chapter 3Internal EnvironmentInternal EnvironmentWhat the Firm Can DoWhat the Firm Can Do

SustainableCompetitiveAdvantage

Changing strategic capability better to fit a changing environment.

Creation of new opportunities by stretching and exploiting the strategic capability.

STRATEGY DEVELOPMENT

RESOURCES

There are two types of resources: Tangible resources:

Eg: Buildings, plant, labor and finance

Intangible resources:

Eg: Information, reputation and knowledge

NIZATI RESOURCESSOURCES

Physical resources

Financial resources

Human resources

Intellectual resources

Resources Competences

Threshold capabilities

Threshold resources•Tangible•Intangible

Threshold competences

Unique Resources:Resources that provide competitive advantage

Core competence:Competence that cannot be easily imitate or obtained

STRATEGIC CAPABILITIES AND COMPETITIVE ADVANTAGE

Capabilities for competitive advantage

Cost Efficiency

This can be achieved through: Appropriate Resources Managing those resources Attaining cost efficiency has become

important for companies Value for money Competitive rivalry

Cost Efficiency

Cost Drivers Economies of Scale Supply Cost Product/ Process Design Experience

So, with the help of all these drivers companies can get relative cost advantage over competitors.

Capabilities For Sustainable Competitive Advantage

Value for customers:

Strategic capabilities of the organization should provide value to the customers.

Rarity of strategic capabilities:• Achieve resources which are rare in nature like

Specific individual• Organization having secured preferred access to

customers or supplier• Organizations having advantage by achieving the

sunk cost.

Robustness of strategic capabilities

It involves identifying capabilities that are likely to be durable and which competitors find difficult to imitate or obtain.

Complexity

Internal linkages

External linkages Culture and history Causal ambiguity

Characteristic ambiguity

Linkage ambiguity

NON-SUBSTITUTABILITY

Possessing competencies that are complex, culturally embedded & causally ambiguous.

Related to 5 forces model of competition. E.g. E-mails substituting postal service.

Substitution at competence level. i.e. Skills

DYNAMIC CAPABILITIES

Change competencies to meet the needs of rapid changing environment.

Acquisitions or Alliances.

Build capacity to change, innovate and learn.

ORGANISATIONAL KNOWLEDGE

Accumulated through systems, routines and activities.

Required due to organizational complexity and sophisticated information systems.

Essential social process relying on communities of interest.

Higher degree of formality leads to danger of imitation.

Value Chain

It describes the activities within and around an organization which together create a product or service.

Determines whether or not the best value products or services have been developed.

SupportActivities

Primary Activities

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Value Chain AnalysisValue Chain AnalysisIdentifying Resources and Capabilities That Can Add Value

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SupportActivities

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Technological Development

Human Resource Management

Firm Infrastructure

Procurement

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MARGIN

MARGIN

Value Chain AnalysisValue Chain AnalysisIdentifying Resources and Capabilities That Can Add Value

Value Network

The set of inter organizational links and relationships that are necessary to create a product or service.

It is important for any organization to understand the basis of their strategic capabilities in relation to the wider value network.

Value Network

Identify activities are centrally important to their own strategic capability.

Identify the profit pools. Decide to make or to buy. Know the best partners in various parts

of the value network and the relationships to be developed with them.

ACTIVITY MAPS

Tries to show how different activities of an organisation are linked together.

How is it mapped? Critical Success factors(CSF) Consistency Reinforcement Difficulties in imitation(built over a long period of time

culturally embedded, complex & causally ambiguous) Trade Offs

BENCHMARKING Benchmarking is the process of determining who is the very

best, who sets the standard, and what that standard is.

Application of benchmarking involves four key steps:

(1) Understand in detail existing business processes.

(2) Analyze the business processes of others.

(3) Compare own business performance with that of others

analyzed.

(4) Implement the steps necessary to close the performance gap.

TYPES OF BENCHMARKING1. Historical Benchmarking

- Comparing with self

- Complacent

2. Industry/sector Benchmarking

- Comparing with firms within the same industry or similar firms

- Firms in other industries that can satisfy the same needs

- Industry convergence

3. Best-in-class benchmarking

- Best practices

- Ex. British airways – aircraft processes from Formula one

VALUE OF BENCHMARKING

It is a process for gaining momentum for improvement and change rather than mechanics of comparisons.

It may lead to a situation where you get what you measure but it is not what you intended to measure strategically. As a result, if the basis of benchmarking is flawed it can set off a reorientation of strategies that are flawed.

Only identifies good and bad performance but not the reasons for such performance.

SWOT ANALYSISIt explores the relationship between the environmental influences and the strategic

capabilities of an organization compared to its competitors.

Competitor SWOT analyses

• A positive (+) score denotes that the strength of the company would help it take advantage of, or counteract a problem arising from an environmental change or that a weakness would be offset by that change. • A negative (–) score denotes the strength would be reduced by such change or that a weakness would prevent the organization from overcoming problems associated with that change.

Managing Strategic Capability

Limitations of managing strategic capabilities

*Competences are values but not understood

*Competences are not valued

*Competences are recognized, valued and understood

Stretching and adding capabilities

*Extending best practices

*Ceasing activities

*Adding and changing activities

*External capability dev.

*Stretching competences

*Building on apparent weaknesses

Managing Strategic Capability

Managing People for capability development

*Targeted training and development

*HR policies

*Develop people’s awareness

Building dynamic capabilities

*Learning Organization

*Knowledge creation-

1) Socialization

2)Externalization

3)Combination

4)Internalization

THANK YOU