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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
