capabilities ad competencies

2.  Capability as the ability of a bundle of
resources to perform an activity. It is a way
of combining assets, people and processes to
transform inputs into output. Physical assets,
financial resources, human skills are of no
use unless these are put to good use, in order
to produce results. This can be represented
mathematically thus:
 C= F (TA, IA, S)
 Where C= capability TA = Tangible assets, IA =
intangible assets and S = Skills

3.  Capabilities thus, reflect a firm’s capacity to
deploy resources that have been purposefully
integrated to achieve a desired end state.
 They emerge over time through a complex
process of interactions between tangible and
intangible resources.
 The whole purpose is to create and exploit
external opportunities and develop sustained
advantages over rivals in the field.
 Through constant practice capabilities
become stronger and more valuable
strategically.

4.  The term competency refers to the ability of
an organization to achieve its purpose.
 It is the ability to perform exceptionally well
and increase the stock of targeted resources
of an organization. Hamel and Prahalad
coined the term core competence.

5.  Capability-based strategies are based on the notion that
internal resources and core competencies derived from
distinctive capabilities provide the strategy platform
that underlies a firm's long-term profitability.
 Evaluation of these capabilities begins with a company
capability profile, which examines a company's
strengths and weaknesses in four key areas:
 managerial
 marketing
 financial
 technical

6.  Then a SWOT analysis is carried out to
determine whether the company has the
strengths necessary to deal with the specific
forces in the external environment. This
analysis enables managers to identify:
 external threats and opportunities and
 distinct competencies that can ward off the
threats and compensate for weaknesses.
 The picture identified by the SWOT analysis
helps to suggest which type of strategy.

7.  Corporate strategy does not depend on products or
markets but on business processes.
 Key strategic processes are needed to consistently
provide superior value to the customer.
 Investment is made in capability
 The CEO must champion the capability-based
strategy.
 Capability-based strategies, sometimes referred to as
the resource-based view of the firm, are determined
by (a) those internal resources and capabilities that
provide the platform for the firm's strategy and (b)
those resources and capabilities that are the primary
source of profit for the firm.

8.  A key management function is to identify what resource gaps need to be filled in
order to maintain a competitive edge where these capabilities are required.
 Several levels can be established in defining the firm's overall strategy platform (see
figure).
 At the bottom of the pyramid are the basic resources a firm has compiled over time.
They can be categorised as technical factors, competitive factors, managerial
factors, and financial factors.


9.  Core competencies can be defined as the unique
combination of the resources and experiences of
a particular firm. It takes time to build these
core competencies and they are difficult to
imitate. Critical to sustaining these core
competencies are their:
 Durability - their life span is longer than
individual product or technology life-cycles, as
are the life spans of resources used to generate
them, including people.
 Intransparency - it is difficult for competitors to
imitate these competencies quickly.
 Immobility - these capabilities and resources are
difficult to transfer.

10.  Core competencies are the activities that the
firm performs especially well compared to
competitors and through which the firm adds
value to its goods and services over a long
period of time.
 Core competencies serve as a source of
competitive advantage for a firm over its
rivals.