Strategic Capability

STRATEGIC CAPABILITY

1. Position audit is examination of an organization’s strategic capability
Strategic capability is defined by the adequacy and suitability of resources and competencies.
Organization’s resources: men, money, materials, markets, management, methods
Unique resource is better than that of competitor and difficult to imitate.
Limiting factor: shortage or difficulty of supply
Resource based strategy: distinctive resource can be a source of sustained competitive advantage.

2. Cost Efficiency
Economies of scale: reducing cost per unit by increasing sales volume.
Supply costs: transport costs; quantity of purchase
Design of products and processes: reducing wastage, efficient designs.
Experience: learning curve, experience curve

3. Sustainable Competitive Advantage
Value to buyers: satisfying customer needs
Rarity: De Beers
Robustness: Apple
Non-substitutability: not easily substituted
Dynamic capabilities: change, innovate and learn

4. Knowledge
Organizational knowledge is the collective and shared experience accumulated through systems, routines and activities of sharing across the organization
Tangible knowledge and Intangible Knowledge
Data, information and knowledge
Knowledge Management: is the process by which organizations generate value from their intellectual and knowledge-based assets.

4. Knowledge
Knowledge management systems
Office automation
Groupware
Intranet
Extranet
Internet
Expert system
Database

5. Value Chain
The value chain describes those activities of the organization that add value to purchase inputs.
Value activities are the means by which a firm creates value in its products.
Value Chain Diagram
Value Network Diagram

6 & 7. The Product Portfolio New Products and innovation
Must develop new products
Consumer needs
Source of growth for the company
Response to environment and technology
Every product is born, has its stages and then dies
New Product Development strategies: 1. acquisition 2. new product development (original products, product improvements, product modifications, new brands)

New Product Odds
Up to 90 % of new products meet failure
New Coke, Eagle Snacks, Zap Mail, Premier “Smokeless” cigarettes, Arch Deluxe
Reasons:
Market overestimation
Actual product poorly designed
Incorrectly positioned
Wrong timing for launch
Price too high
Poor advertisement

Process
Idea generation
Idea screening
Concept development and testing
Marketing strategy development
Business analysis
Product development
Test marketing
Commercialization

Product Life Cycle
Product launch – happy life
Cover costs
Earn profits
Length not know in advance
Coca-Cola, Gillette, Budweiser, American Express, Wells-Fargo, and Tabasco

PLC – S Curve

Introduction Stage
Product launch
Takes time
Slow growth
Negative profits
High promotion and distribution cost

Growth Stage
Product, if satisfies market, enters growth stage
Sales climb quickly
Early adopters continue, new join through favorable word of mouth
New competitors enter market
Competition – increase in sale points
Spread of sales, unit cost reduces
Sustain rapid growth
New market segments
Prices may be lowered to attract more customers (iPod)

Maturity
At some point sale slows down, product enters maturity stage
Lasts longer
Marketing management most of the time deals with mature products
More producers selling the same product
Greater competition
Prices down, increase in sales promotion
Drop in profit
Well established competitors stay

Maturity
Product manager should modify market, product and marketing mix
Market: increase consumption of product, new users, present users
Product: quality, features, style (milk pak, Honda City)
Four Ps

Decline Stage
Eventually dip
Oat meal, VHS tapes, VCR, Tape recorders
Reasons: technology, consumer tastes, increased competition, profits decline, withdrawal from market
Furthermore:
Weak product costly to firm
Management time
Price adjustments
Advertising/sales efforts
Reputation of other co products affected
Old Spice/ co can sell brands

8. Benchmarking
Benchmarking is the process of gauging the internal practices and activities within a firm to an external reference or standard. It is a continuous process of measuring one’s own products, services, systems, and practices against the world’s toughest competitors to identify areas for improvement.
Managers while benchmarking their practices should set realistic goals and gradually increase the level of difficulty to encourage employees. This technique is also known as shaping. For example, if an organization wants to meet the 1 % defects benchmark from its existing 20 %. It would be appropriate to set 15 % goals in the first place. Once this goal is achieved the manager can set a new target of 10 % and gradually meet the benchmark of 1 %. To use shaping effectively in benchmarking practices, the following tips can be considered:

8. Benchmarking
Identify a benchmark (product, service or process)
Identify comparables.
Collect data to accurately define goals.
Collect data to determine the current performance of the organization against the benchmark.
Make the target specific.
Train the staff to meet set goals.
Provide feedback and reinforce set goals.
Review progress periodically.

9. Managing Strategic Capability
Competencies can be extended
Things that do not create value should cease
Best practices to be extended
Activities that add value should be extended
New and improved way of working should be introduced
Weakness should be remedied
External links should be improved

10. SWOT analysis
Environmental analysis
Internal appraisal
TOWS Matrix

Strategic Capability

by Mazhar Iftikhar (mazhariftikhar@gmail.com)

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