1. The Strategic Position 3: Strategic Capability

2. Learning Outcomes (1)
Distinguish elements of strategic capability in organisations: resources, competences, core competences, and dynamic capabilities
Recognise the role of continual improvement in cost efficiency as a strategic capability
Analyse how strategic capabilities might provide sustainable competitive advantage on the basis of their value, rarity, inimitability, and nonsubstitutability
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3. Learning Outcomes (2)
Diagnose strategic capability by means of value chain analysis, activity mapping, benchmarking, and SWOT analysis
Consider how managers can develop strategic capabilities of organisations
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4. Core Concepts in Strategic Capability
Foundations
Cost efficiency
Sustainability
Organisational
knowledge
Analysis
Development
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5. What is Strategic Capability?
Strategic capability refers to the resources and competences of an organisation needed for it to survive and prosper.
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6. Exhibit 3.1 Strategic Capabilities and Competitive Advantage
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7. What are Resources?
Tangible resources are physical assets of an organisation such as plant, labour, and finance.
Intangible resources are non-physical assets such as information, reputation, and knowledge.
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8. Resource Categories Physical resources Financial resources Human
Intellectual
capital
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9. The Terminology of Strategic Capability
Threshold resources
Threshold competences
Unique resources
Core competences
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10. What are Core Competences?
Core competences are the skills and abilities by which resources are deployed through an organisation’s activities and processes such as to achieve competitive advantage in ways that others cannot imitate or obtain.
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11. Exhibit 3.3 Sources of Cost Efficiency
Economies
of scale
Experience
Cost
efficiency
Supply
costs
Product
design
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12. The Experience Curve
Competences in activities develop over time based on experience, resulting in cost efficiencies
Growth may not be optional
Unit costs should decline year on year
First mover advantage is important
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13. Exhibit 3.4 The Experience Curve
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14. Capabilities for achieving and sustaining competitive advantage
Value
Rarity
Inimitable
Substitution
Dynamic
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15. Rarity of Strategic Capabilities
Ease of transferability
Sustainability
Core rigidities
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16. Core Competences Lead to Competitive Advantage When…
They relate to an activity that underpins the value in the product features
They lead to levels of performance that are significantly better than competitors
They are difficult for competitors to imitate
Use eBay video, begin at 4:54 through 5:31 (section on eBay's effect on small antique shops)
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17. Strategic Capability for the Royal Opera House
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18. Exhibit 3.5 Criteria for Inimitability
Complexity
Culture and
history
Robustness
of strategic
capability
Causal
ambiguity
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19. What are Dynamic Capabilities?
Dynamic capabilities are an organisation’s abilities to renew and recreate its strategic capabilities to meet the needs of a changing environment.
Use clip from eBay video, begin at 5:32 and go to 6:13 (section on eBay and car market)
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20. Dynamic Capabilities at HMD Clinical
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21. What is Organisational Knowledge?
Organisational knowledge is the collective experience accumulated through systems, routines, and activities of sharing across the organisation.
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22. Diagnosing Strategic Capability
Value chain/
Value network
Activity maps
Benchmarking
SWOT analysis
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23. What is a Value Chain?
A value chain describes the categories of activities within and around an organisation, which together create a product or service.
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24. Exhibit 3.6 The Value Chain
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25. What is a Value Network?
A value network is the set of interorganisational links and relationships that are necessary to create a product or service.
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26. Exhibit 3.7 The Value Network
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27. Understanding the Capabilities in Relation to the Value Network
Which activities are central important to organisation’s strategic capability?
Where are the profit pools?
What should be outsourced?
Who might be the best partners in the parts of the value network?
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28. Exhibit 3.8 An Activity System Map
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29. Lessons Learned from Activity Maps
Consistency and reinforcement
Difficulties of imitation
Trade-offs
Insert section from eBay clip: 6:30-7:44 on percentage of fraud
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30. Approaches to Benchmarking
Historical benchmarking
Industry/sector benchmarking
Best-in-class benchmarking
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31. SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
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32. Limitations in Managing Strategic Capabilities
Competences valued but not understood
Competences are not valued
Competences are recognised, valued, and understood
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33. Developing Strategic Capabilities
Add and change
Extend
Stretch
Exploit
Cease
Develop externally
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34. Case Example: eBay Analyse eBay’s strategic capability.
Use clip from eBay video, start at 1:50 through 2:14 (on value of customers for eBay)
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