The Strategic Position: Strategic Capability

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
Exploring Corporate Strategy 8e, © Pearson Education 2008 3-2

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
resources
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
Product
design
Supply
costs
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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
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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
Robustness
of strategic
capability
history
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.
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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
Activity maps
Value chain/
Value network
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
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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.
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