STRATEGIC CAPABILITY By: Vedika Saraf Swagata Giri Yukti Agarwal Vikram Pesswani Vivek Sood Srishti Seth Sumalya Chakraborty Tanushree VIJAYWARGI Tarun Vohra

Sustainable Competitive Advantage Chapter 2 External Environment What the Firm Might Do Sustainable Competitive Advantage Chapter 3 Internal Environment What the Firm Can Do 5

STRATEGY DEVELOPMENT Changing strategic capability better to fit a changing environment. Creation of new opportunities by stretching and exploiting the strategic capability.

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 resources Tangible Intangible Threshold competences Threshold capabilities Capabilities for competitive advantage Unique Resources: Resources that provide competitive advantage Core competence: Competence that cannot be easily imitate or obtained STRATEGIC CAPABILITIES AND 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.

Identifying Resources and Capabilities That Can Add Value Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Support Activities Inbound Logistics Primary Activities

Identifying Resources and Capabilities That Can Add Value Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Support Activities Inbound Logistics Operations Primary Activities

Identifying Resources and Capabilities That Can Add Value Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Support Activities Inbound Logistics Outbound Logistics Operations Primary Activities

Identifying Resources and Capabilities That Can Add Value Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Support Activities Inbound Logistics Outbound Logistics Marketing & Sales Operations Primary Activities

Identifying Resources and Capabilities That Can Add Value Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Support Activities Service Inbound Logistics Outbound Logistics Marketing & Sales Operations Primary Activities

Value Chain Analysis Firm Infrastructure Human Resource Management Identifying Resources and Capabilities That Can Add Value Firm Infrastructure Human Resource Management Support Activities MARGIN Technological Development Procurement Service Inbound Logistics Outbound Logistics Marketing & Sales MARGIN Operations Primary Activities

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 BENCHMARKING Historical Benchmarking - Comparing with self - Complacent 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 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.

Competitor SWOT analyses SWOT ANALYSIS It 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

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