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Strategic strategic capabilitiies 2003

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Strategic strategic capabilitiies 2003

  1. 1. Strategic Capability
  2. 2. Learning Outcomes <ul><li>Distinguish elements of strategic capability in organizations: resources, competences and core competences. </li></ul><ul><li>Recognize the role of continual improvement in cost efficiency as a strategic capability </li></ul><ul><li>Analyze how strategic capabilities might provide sustainable competitive advantage on the basis of their value, rarity, inimitability, and nonsubstitutability </li></ul>
  3. 3. What is Strategic Capability? <ul><li>Strategic capability refers to the resources and competences of an organisation needed for it to survive and prosper. </li></ul>
  4. 4. Strategic Capabilities and Competitive Advantage
  5. 5. What are Resources? <ul><li>Tangible resources are physical assets of an organisation such as plant, labour, and finance. </li></ul><ul><li>Intangible resources are non-physical assets such as information, reputation, and knowledge. </li></ul>
  6. 6. Resource Categories Physical resources Financial resources Human resources Intellectual capital
  7. 7. The Terminology of Strategic Capability Threshold resources Threshold competences Unique resources Core competences
  8. 8. Threshold Resources <ul><li>The resources need to meet customers minimum requirements and therefore to continue to exist . </li></ul><ul><li>To an athlete : The athletic ability suited to a chosen event </li></ul>
  9. 9. Threshold Competencies <ul><li>Activities and processes needed to meet customers minimum requirements and therefore to continue to exist . </li></ul><ul><li>Healthy body, Medical facilities, training venues and equipments and food supplements. </li></ul>
  10. 10. Important issues in Threshold Capabilities <ul><li>Threshold level of Capability will change </li></ul><ul><ul><li>With the changes of CSF’s </li></ul></ul><ul><li>Trade offs </li></ul><ul><li>Redundancy of capabilities </li></ul><ul><li>Complementary level of Resources and Competencies. </li></ul>
  11. 11. Unique resources <ul><li>Resources that underpin competitive advantage and are difficult for competitors imitate or obtain. </li></ul><ul><li>Exceptional heart and lungs, Height or weight, World class coach. </li></ul>
  12. 12. Core Competences <ul><li>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. </li></ul><ul><li>A combination of dedication, tenacity, time to train and will to win. </li></ul>
  13. 13. Cost efficiency <ul><li>Cost efficiency is an important strategic capability for any organization. This involves having both appropriate resources and competencies to manage cost. </li></ul><ul><ul><ul><li>Lower price for product </li></ul></ul></ul><ul><ul><ul><li>More product features for the same price </li></ul></ul></ul>
  14. 14. Cost efficiency as a threshold Capability <ul><li>Customers do not value product features at any price. </li></ul><ul><ul><li>Appropriate level of value should offer at an acceptable price </li></ul></ul><ul><li>Competitive rivalry will continually require the driving down of costs . </li></ul>
  15. 15. Sources of Cost Efficiency Cost efficiency Economies of scale Experience Product design Supply costs
  16. 16. <ul><li>Economies of scale: production level should be such so as to meet the cost of the plant setup, capacity and resources which is very high. </li></ul><ul><li>Supply cost is influenced by location, ownership of raw material, etc. </li></ul><ul><li>Capacity fill, labour productivity, working capital utilization can be considered under the product/process design. </li></ul>
  17. 17. The Experience Curve <ul><li>Competences in activities develop over time based on experience, resulting in cost efficiencies </li></ul><ul><ul><li>Growth may not be optional </li></ul></ul><ul><ul><li>Unit costs should decline year on year </li></ul></ul><ul><ul><li>First mover advantage is important </li></ul></ul>
  18. 18. The Experience Curve
  19. 19. Capabilities for achieving and sustaining competitive advantage <ul><li>Value </li></ul><ul><li>Rarity </li></ul><ul><li>Inimitable </li></ul><ul><li>Substitution </li></ul><ul><li>Dynamic </li></ul>
  20. 20. Value of strategic capability <ul><li>The strategic capabilities must be able to deliver what the customer values in terms of product or service. </li></ul><ul><li>customer values (CSF’s) </li></ul><ul><ul><li>Reputation </li></ul></ul><ul><ul><li>After sales service </li></ul></ul><ul><ul><li>Delivery reliability </li></ul></ul><ul><ul><li>Technical quality </li></ul></ul>
  21. 21. Rarity of Strategic Capabilities <ul><li>The organization need to possess some unique or rare capability, providing competitive advantage. </li></ul><ul><ul><li>Some libraries have unique books, powerful brands, good location can be taken as rarity. </li></ul></ul><ul><ul><li>Years of experience, brand management, good relationship with key customers are some rare competencies. </li></ul></ul>
  22. 22. Criteria for Inimitability Robustness of strategic capability Complexity Culture and history Causal ambiguity
  23. 23. Non- substitutability <ul><li>Substitution can be viewed in two ways </li></ul><ul><li>Product or service as a whole might be a victim of substitution. </li></ul><ul><ul><li>Email substituted postal system </li></ul></ul><ul><li>Competencies also can be substituted </li></ul><ul><li>Expert systems have substituted many qualities of the expert persons </li></ul>
  24. 24. What are Dynamic Capabilities? <ul><li>Dynamic capabilities are an organisation’s abilities to renew and recreate its strategic capabilities to meet the needs of a changing environment. </li></ul>
  25. 25. What is Organisational Knowledge? <ul><li>Organisational knowledge is the collective experience accumulated through systems, routines, and activities of sharing across the organisation. </li></ul>
  26. 26. Diagnosing Strategic Capability Activity maps Benchmarking SWOT analysis Value chain/ Value network
  27. 27. What is a Value Chain? <ul><li>A value chain describes the categories of activities within and around an organisation, which together create a product or service. </li></ul>
  28. 28. Exhibit 3.6 The Value Chain
  29. 29. What is a Value Network? <ul><li>A value network is the set of inter-organisational links and relationships that are necessary to create a product or service. </li></ul>
  30. 30. The Value Network
  31. 31. Understanding the Capabilities in Relation to the Value Network <ul><li>Which activities are central important to organisation’s strategic capability? </li></ul><ul><li>Where are the profit pools? </li></ul><ul><li>What should be outsourced? </li></ul><ul><li>Who might be the best partners in the parts of the value network? </li></ul>
  32. 32. Benchmarking Strategic Capability <ul><ul><li>Historical – performance compared to previous years </li></ul></ul><ul><ul><li>Industry/sector – comparative performance of other organisations </li></ul></ul><ul><ul><li>Best in class – wider search for best practice </li></ul></ul><ul><ul><ul><li>Increased expectations due to improved performance in another sector </li></ul></ul></ul><ul><ul><ul><li>Breaking the frame about performance standards to be achieved </li></ul></ul></ul><ul><ul><ul><li>Spot opportunities to outperform incumbents in other markets – stretch core competences </li></ul></ul></ul>
  33. 33. Benchmarking Issues <ul><li>If the basis of benchmarking is flawed then it can set off a re-orientation of strategy that is flawed . Eg university sector. </li></ul><ul><li>Does not identify the real reason (s) for good performance, merely highlights the consequence </li></ul><ul><li>Benchmarking against who?… </li></ul>
  34. 34. SWOT Analysis Strengths Weaknesses Opportunities Threats