Strategic Capability

The Strategic Position
3: Strategic Capability
Learning Outcomes (1)

Distinguish elements of strategic capability
in organisations: resources, competences,
core competences, and dynamic capabilities
Recognise the role of continual improvement
in cost efficiency as a strategic capability
Analyse how strategic capabilities might
provide sustainable competitive advantage
on the basis of their value, rarity, inimitability,
and nonsubstitutability
Exploring Corporate Strategy 8e, Pearson Education 2008
3-2
Learning Outcomes (2)

Diagnose strategic capability by means of
value chain analysis, activity mapping,
benchmarking, and SWOT analysis
Consider how managers can develop
strategic capabilities of organisations
3-3
Core Concepts in
Strategic Capability
Foundations
Cost efficiency
Sustainability
Organisational
knowledge
Analysis
Development
3-4
What is Strategic Capability?

Strategic capability refers to
the resources and competences
of an organisation needed for it to
survive and prosper.
3-5
Exhibit 3.1 Strategic Capabilities and

Competitive Advantage
3-6
What are Resources?

Tangible resources are physical
assets of an organisation such as
plant, labour, and finance.
Intangible resources are nonphysical assets such as information,
reputation, and knowledge.
3-7
Resource Categories
Physical
resources
Financial
resources
Human
resources
Intellectual
capital
3-8
The Terminology of
Strategic Capability
Threshold resources
Threshold competences
Unique resources
Core competences
3-9
What are
Core Competences?
Core competences are the skills and
abilities by which resources are deployed
through an organisations activities and
processes such as to achieve competitive
advantage in ways that others cannot
imitate or obtain.
3-10
Exhibit 3.3 Sources of

Cost Efficiency
Economies
of scale
Experience
Cost
efficiency
Supply
costs
Product
design
3-11
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
3-12
Exhibit 3.4 The Experience Curve
3-13
Capabilities for achieving and

sustaining competitive advantage
Value
Rarity
Inimitable
Substitution
Dynamic
3-14
Rarity of Strategic Capabilities

Ease of transferability
Sustainability
Core rigidities
3-15
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
3-16
Strategic Capability for the

Royal Opera House
3-17
Exhibit 3.5 Criteria for

Inimitability
Culture and
history
Complexity
Robustness
of strategic
capability
Causal
ambiguity
3-18
What are Dynamic Capabilities?

Dynamic capabilities are an
organisations abilities to renew and
recreate its strategic capabilities to
meet the needs of a changing
environment.
3-19
Dynamic Capabilities at HMD Clinical
3-20
What is
Organisational Knowledge?
Organisational knowledge is the
collective experience accumulated
through systems, routines, and
activities of sharing across the
organisation.
3-21
Diagnosing Strategic Capability
Value chain/
Value network
Activity maps
Benchmarking
SWOT analysis
3-22
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.
3-23
Exhibit 3.6 The Value Chain
3-24
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.
3-25
Exhibit 3.7 The Value Network
3-26
Understanding the Capabilities

in Relation to the Value Network
Which activities are central important
to organisations strategic capability?
Where are the profit pools?
What should be outsourced?
Who might be the best partners in
the parts of the value network?
3-27
Exhibit 3.8 An Activity System Map
3-28
Lessons Learned
from Activity Maps
Consistency and reinforcement
Difficulties of imitation
Trade-offs
3-29
Approaches to
Benchmarking
Historical benchmarking
Industry/sector benchmarking
Best-in-class benchmarking
3-30
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
3-31
Limitations in Managing
Strategic Capabilities
Competences valued but not
understood
Competences are not valued
Competences are recognised,
valued, and understood
3-32
Developing
Strategic Capabilities
Add and change
Exploit
Extend
Cease
Stretch
Develop externally
3-33
Case Example: eBay

Analyse eBays strategic capability.
3-34

Strategic Capability

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The Strategic Position

Learning Outcomes (1)

Exploring Corporate Strategy 8e, Pearson Education 2008

Learning Outcomes (2)

Exploring Corporate Strategy 8e, Pearson Education 2008

Exploring Corporate Strategy 8e, Pearson Education 2008

What is Strategic Capability?

Exploring Corporate Strategy 8e, Pearson Education 2008

Exhibit 3.1 Strategic Capabilities and

Exploring Corporate Strategy 8e, Pearson Education 2008

What are Resources?

Exploring Corporate Strategy 8e, Pearson Education 2008

Exploring Corporate Strategy 8e, Pearson Education 2008

Exploring Corporate Strategy 8e, Pearson Education 2008

Exploring Corporate Strategy 8e, Pearson Education 2008

Exhibit 3.3 Sources of

Exploring Corporate Strategy 8e, Pearson Education 2008

The Experience Curve

Exploring Corporate Strategy 8e, Pearson Education 2008

Exhibit 3.4 The Experience Curve

Exploring Corporate Strategy 8e, Pearson Education 2008

Capabilities for achieving and

Exploring Corporate Strategy 8e, Pearson Education 2008

Rarity of Strategic Capabilities

Exploring Corporate Strategy 8e, Pearson Education 2008

Core Competences Lead to

Exploring Corporate Strategy 8e, Pearson Education 2008