Strategic Management Essays, The quality of your answer is much more important than its quantity. You do not need to use in-text citation, nor reference in answering the questions.
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What the firm might do
What the firm can do
Modules 2 & 3 The Environment
The Macro-env analysis Five Forces Analysis Strategic group Market and competitor
Module 5
Strategic capabilities
Sustainable Competitive Advantage
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Opening story: Wha nderpins D son s compe i i e ad an age?
Dyson Ltd (Formerly Dyson Appliances) was created in 1987 by James Dyson - a British inventor, industrial designer and founder of the Dyson company
A small (one-person) family business in 1987
Its revenue and profit reached US$5.67 billion and $1.42 billion in 2018 respectively, selling
bladeless hand dryers, lighting, hair dryers, bagless vacuum cleaners air purifiers, and even washing machines
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D son s main prod c s
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Wha nderpins D son s compe i i e advantage? The D son s s or (2 05 )
https://www.youtube.com/watch?v=3DHAnmTC S5Q
It is: Industry design, product innovations, and entrepreneurship
However, Dyson scrapped a project to build electric cars in Oct 2019, and sent 523 UK employees home.
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Questions
On what fundamental basis has Dyson been competing
At the early stage of its development?
At the growth stage over the last two decades?
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Learning Objectives After studying this module, you should be able to
Understand he classifica ion of an organisa ion s resources and competences. Identify an organisa ion s strategic capabilities using the criteria of value, rarity, inimitability and organisational support (VRIO). Diagnose strategic capability by means of value chain analysis, activity systems mapping, and benchmarking. Manage strategic capabilities for organisations
Understand resource-base view (RBV) another dominant strategic perspective.
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Strategic capabilities: the key issues
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Resources and competences
Resources are the assets that organisations have or can call upon (e.g. from partners or suppliers), that is,
ha e ha e , including: Tangible (e.g., physical, financial, HR) Intangible (e.g., patent, technological know-how, brand name, goodwill) Knowledge-based resources
Competences are the ways those assets are used or deployed effectively, ha i , ha e d ell , including
Skills and ability Dynamic capability: How quick to learn and adapt to changes
LO1
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Resources Competences
Distinctive capabilities Required to achieve
competitive advantage
Threshold capabilities Required to be able to compete in a market
Threshold Resources
Threshold Competences
Distinctive Resources
Distinctive Competences
Redundant capabilities Those don genera e valued to customers
The classification of capabilities: redundant, threshold and distinctive capabilities
Redundant Resources
Redundant Competences
RMIT University©2018
What are Threshold Capabilities?
Threshold capabilities are those needed for an organisation to meet the necessary requirements to compete in a given market and achieve parity with competitors in that market qualifiers .
For example IT infrastructure for banks Website for e-tailers
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What are Strategic Capabilities?
Strategic capability refers to the resources and competences of an organisation needed for it to achieve competitive advantage winners .
They help an organization achieve its long-term survival and competitive advantage
For example Apple: Design, Mobile technology, Powerful
brandname Samsung: Display technology
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Components of strategic capabilities
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Where strategic capabilities reside?
Each operational activity or process E.g., marketing, production, R&D
Singapore Airlines: Excellent customer service McDonald s: fas c s omer ser ice Apple: product innovation Dell: Distribution Honda: engine technologies
Linkages of operational activities and processes
The combined effect of all these activities and processes For example: R&D and Marketing for Nike; 3M: culture
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Diagnosing an organisation s strategic capabilities
The four key criteria by which capabilities can be assessed in terms of providing a basis for achieving sustainable competitive advantage are:
Value, Rarity, Inimitability and Organisational support
VRIO
LO2
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Criteria for identifying strategic capabilities - VRIO
Value by customers (from a customer s perspective)
delivering value for money
Rare (from a competitor s perspective) Those resources or competence possessed by one or a few organizations only.
Inimitability (or robustness) of competence due to: complexity, causal ambiguity, culture and history,
and change
Supported by the organisation
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Criteria used for identifying strategic capabilities – Summary
Valuable Rare Inimitable Supported by organisation
Competitive Consequences
Performance Implications
No No No No Competitive
Disadvantage
Below
Average
Returns Yes No No Yes/no Competitive
Parity
Average
Returns Yes Yes No Yes/no Temporary
Competitive
Advantage
Aver/Above
Average
Returns Yes Yes Yes Yes Sustainable
Competitive
Advantage
Above
Average
Returns
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RC
TC
SC
TC or SC?
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Diagnosing strategic capabilities- Valuable?
Valuable? It is the most important criterion of VRIO
Analytical techniques for diagnosing if an organisation's strategic capability is valuable include:
The value chain and value network Activity systems mapping
Benchmarking
LO3
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Diagnosing competitive strategic capability - Valuable
The value chain Value chain can be used to diagnose which strategic capability is valuable to customers
The concept of value chain can be used to help understand a firm s cost position and the value each activity delivers. It helps in identifying an (or a cluster of ) organization's capabilities in terms of what is valuable.
What activities are most valuable to organization?
This depends on what industry an organization is operating
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The value chain within an organisation
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The roots of competitive advantages
Product/service features
Value chain activities and processes
Strategic capabilities
Resources Capabilities
Strategic capability:
The roots of competitive advantages
Insourcing or outsourcing
What customers value:
Critical success factors
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Diagnosing strategic capabilities – valuable?: Activity systems mapping
Activity systems mapping aims to link an organization's activities and processes to i s ind s r s critical success factors (CSFs), then identify those resources and competences that are employed to undertake them within the organization. CSFs are those product or service features that are particularly valued by a group of customers.
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Diagnosing strategic capabilities – valuable?: Activity systems mapping (cont d) Analyzing the features of products and/or services offered
The concept of the total product layers of products Levels of product feature
Threshold features (survival features) Critically successful features
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The Concept of the Total Product
Core benefit
or service
Installation
Packaging
Delivery and
credit
Warranty
StylingQuality
FeaturesBrand name After-
sale service
Augmented product
Actual product
Core product
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SUCCESS
Critical success factors
Brand Innovation
Good service
Range Reliable delivery
Solving b ers
problems
Flexibility
Main benefits to customers – or Higher order strategic themes
Rapid response
Good personal relations
with buyers
Accepting returned goods
Fast turnround of urgent orders
Staff discretion and r le bending
Low plant utilisation 24 hr despatch
Stock levels
Use of subcontractors
for transport
Distribution and logistics systems
Resources and competences
Diagnosing strategic capability Activity systems mapping
Activity mapping: Linking CSF to a fi m a egic capability (e.g., its, activities processes, and resources) Activities and
processes
It is built on the basis of solid understanding of customers, competitors and the organization
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Diagnosing the value of strategic capability: Valuable? - Benchmarking
Benchmarking Horizontal benchmarking
Best-in-class benchmarking (e.g. BA benchmarked its refuelling operations against Formula 1) Industry/sector benchmarking
Vertical benchmarking Historic comparison to identify any significant changes in relation to previous years
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Diagnosing competitive strategic capability – the other 3 criteria
Rare? Competitor analysis. It is often based on the management knowledge
Criteria of inimitability (robustness) complexity causal ambiguity culture and history (path dependence)
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Criteria for the inimitability of resources and capabilities
O – Organisational support
The organisation must be suitably organised to support the valuable, rare and inimitable capabilities that it has. This includes appropriate processes and systems.
Organisational structure Systems (e.g., IT, control, infrastructure) Process
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From a resource/competence to a strategic capability
Managing strategic capabilities
Developing strategic capabilities Internal capability development:
Leveraging capabilities identifying capabilities in one part of the organisation and transferring them to other parts (sharing best practice). Stretching capabilities - building new products or services out of existing capabilities.
External capability development adding capabilities through mergers, acquisitions or alliances.
LO4
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Managing strategic capabilities (cont d)
Protect strategic capability strategic capabilities need to be protected from imitation or outflowing. Ceasing activities non-core activities can be stopped, outsourced or reduced in cost. Managing the capabilities of people training, development and organisation learning.
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Resource-based view (RBV)
The resource-based view (RBV) of strategy asserts that the competitive advantage and superior performance of an organisation is explained by the distinctiveness of its capabilities.
Its main proposition: An organization's performance is largely determined by its resources and capability (skills and capacity) that are valuable, rare, costly to imitate, and hard to substitute.
LO5
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Resource-based view (RBV) (cont d)
A firm can be regarded as a bundle of resource Two basic assumptions
Resource heterogeneity Competing firms possess different bundle of resources.
Resource immobility These resource differences may persist
Strategic implications Resource-picking ability Capability development Strategic leverage
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Module summary (1/3)
Strategic capabilities comprise both resources and competences.
Sustainability of competitive advantage is likel o depend on an organisa ion s capabilities being of at least threshold value in a market but also being valuable, relatively rare, inimitable and supported by organisations
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Module summary (2/3)
Ways of diagnosing organisational capabilities include:
Anal sing an organisa ion s value chain and value network as a basis for understanding how value to a customer is created and can be developed. Activity mapping as a means of identifying more detailed
activities which underpin strategic capabilities. Benchmarking as a means of understanding the relative
performance of organisations.
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Module summary (3/3)
Managing strategic capabilities understanding, developing, protecting, and leveraging
RBV Main proposition: the competitive advantage and superior performance of an organisation is explained by the distinctiveness of its capabilities Two key assumptions: resource heterogeneity and immobility
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Next Week
Module 5 Stakeholder Management and Governance
Form your group of four within the same tutorial for Assignment 2
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