1. GROUP 5 ARNAB DEY (08FT-011) PUSHKAR (08FT-031) RAHUL MAHESHWARI (08FT-033) RAJEEV VISHWANATH (08FT-034) ROMIT SANYAL (08FT-040) Competing Capabilities: the New Rules of Corporate Strategy

2. Flow of Presentation Time: Source of Competitive Advantage Capabilities: Source of Competitive Advantage  Basic Principles of Capabilities-led Competition  Replication of Capabilities across  Geographies  Different Businesses Capabilities based Competition  CA of Walmart over Kmart  Defending Market Share: Medequip  Capabilities led growth of Honda  Banc One’s Community Focus versus Wachovia’s Individual Focus  The Capabilties propelled success of Dell  The CA of Toyota in the Automotive industry

3. Time: Source of Competitive Advantage 1980s: Time discovered as source of CA 1990s: One piece of far reaching transformation Application of Time based CA  Speeding new products to market  Manufacturing just in time  Responding promptly to customer complaints Benefits  Consistency of product quality  Acuity of insight into evolving customer needs  Ability of exploit emeerging markets

4. Capabilities A set of business processes which  Continuosly deliver value to the customer &  Are treated by companies as the primary object of strategy Capability-based Competitor  Identify their key business processes,  Manage them centrally &  Invest in them havily looking for a long term payback

5. Capabilities: Source of Competitive Advantage Basic Principles of Capabilities-led Competition  The building blocks of corporate strategy are not products and markets but business processes  Competitive success depends on transforming a company’s key processes into strategic capabilities that consistently provide superior value to the customer  Companies create these capabilities by making strategic investments in a support infrastructure that links together and transcends traditional SBUs and functions  Because capabilities necessarily cross functions, the champion of a capabilities-based strategy is the CEO

6. Replication of Capabilities Across Geographies  Cloning of Business Processes across boundaries/regions  Capabilities easier to transfer than more traditional CA  Honda’s success outside Japan  Walmart’s movement from Southern to Northern USA Across Business Functions  Bigger payoff  Two ways  Cloning key Business Processes across Businesses Dealer Management of Honda  Creating flexible & robust Processes to serve multiple Businesses Same inventory-replenishment system across new & traditionally distinct retail stores in Walmart

7. Transforming into Capabilities-based Competitior Shift the strategic framework to achieve aggressive goals  Medequip: Linking customer need to customer satisfaction Organize around the chosen capability and make sure employees have the necessary skills and resources to achieve it  Medequip: Abandoned functional structure, created customer sales & service; overall responsibility for specific customers Make progress visible and bring measurements and reward into alignment  Medequip: Field service employees now measured on particular customer profitability than on overall service profitability Do not delegate the leadership of the transformation  Medequip: Capabilities being cross functional require hands-on guidance by CEO

8. Kmart Walmart Product oriented instead of Process oriented Frequent change of vendors Leasing and subcontracting of Support systems/various departments Inventory Replenishment Capability (Cross docking) Partnership with Vendors Strategic investment in support system (Dedicated fleet, Private satellite, Video conferencing) CA of Walmart over Kmart

9. Kmart Walmart Growth sought by acquisition of unrelated business Centralized operational processes (less focus on strategic issues) Growth rate a function of proper training of associates Decentralized operational processes, but centralized strategic control CA of Walmart over Kmart

10. Wachovia Banc One Superior returns & growing market share (highest cross- selling) Capability to understand & serve the needs of individual customers Focus on transfer of customer-specific info across numerous points of customer contacts Highest return on assets Capability to understand & serve the needs of entire communities Focuses on transfer of best practices across affiliate banks Banc One versus Wachovia

11. Wachovia Banc One The personal banker is empowered to take decisions Capability embedded in training personal bankers Capabilities difficult to transfer to new acquisitions The affiliate president is empowered to take decisions Capability embedded in corporate MIS and training of senior officers Capabilities easy to transfer to new acquisitions Banc One versus Wachovia

12. The Capabilties propelled success of Dell Direct model of selling  Saving on margin charged by wholesaler and retailers Build to Order  Inventory remains in Supplier books: Postpone assembly  No warehouse  Assembly factories hold inventories for a maximum of 2 days  1 PC built by 1 worker: High traceability and accountability

13. The CA of Toyota in the Automotive industry A model of ‘lean production’ 1 st to show that built-in quality ('right first time') was cheaper, not more expensive Kaizen- 'continuous improvement‘ Automation with a human touch

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