Strategic Position: Strategic Capability

Strategic Position:

Strategic Capability

•Strategic Management (5 ECTS)

•Ismo Vuorinen

•Principal Lecturer

•Autumn 2010

Core Concepts in

Strategic Capability

Foundations Cost efficiency

SustainabilityOrganisational

knowledge

Analysis Development

What is Strategic Capability?

Strategic capability refers to

the resources and competences of an

organisation needed for it to survive and

prosper.

Strategic Capabilities and Competitive

Advantage

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.

Resource Categories

Physical

resources

Financial

resources

Human

resources

Intellectual

capital

The Terminology of

Strategic Capability

Threshold resources

Threshold competences

Unique resources

Core competences

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.

Bases of Competences

Cost efficiency

Value-added to the customer

Managing internal and external linkages

Robustness

Sources of Cost Efficiency

Cost

efficiency

Economies

of scaleExperience

Product

design

Supply

costs

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

The Experience Curve

Capabilities for achieving and sustaining

competitive advantage

Value

Rarity

Inimitable

Substitution

Dynamic

Rarity of Strategic Capabilities

Ease of transferability

Sustainability

Core rigidities

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

Criteria for Inimitability

Robustness

of strategic

capability

Complexity Culture and

history

Causal

ambiguity

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.

What is Organisational Knowledge?

Organisational knowledge is the

collective experience accumulated

through systems, routines, and activities

of sharing across the organisation.

Diagnosing Strategic Capability

Activity maps

Benchmarking SWOT analysis

Value chain/

Value network

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.

The Value Chain

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.

The Value Network

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?

An Activity System Map

Lessons Learned

from Activity Maps

Consistency and reinforcement

Difficulties of imitation

Trade-offs

Approaches to Benchmarking

Historical benchmarking

Industry/sector benchmarking

Best-in-class benchmarking

SWOT Analysis

Strengths Weaknesses

Opportunities Threats

SWOT steps

Identify current “S”

Identify key SWOTs

Explore relationships strengths and weaknesses

◦ ---- opportunities and threats

Recommend new/modified strategy

Improving SWOT

See as general aid.

Make measures and criteria explicit.

Prioritize SWOTs.

Use outside consultants.

Specify and substantiate SWOTs.

Limitations in Managing

Strategic Capabilities

Competences valued but not

understood

Competences are not valued

Competences are recognised, valued, and

understood

Developing

Strategic Capabilities

Add and change

Extend

Stretch

Exploit

Cease

Develop externally