BLB10089-3 Tutor. (Core Text Exploring (Corporate) Strategy, Seventh Edition, © Pearson Education Ltd 2008 or 2011) 1 Lecture Week 4 Assessing The Strategic

BLB10089-3 Tutor . (Core Text Exploring (Corporate) Strategy, Seventh Edition, © Pearson Education Ltd 2008 or 2011) 1

Lecture Week 4

Assessing The Strategic

Position. The Internal Position Part 1


Learning Outcomes

At the end of this weeks learning sessions you are expected to be able to understand:

• What is meant by strategic capability and how this contributes to the competitive advantage of organisations

• The strategic importance of resources, competences, core competences and dynamic capabilities

• The characteristics of strategic capabilities to provide sustainable competitive advantage.


Strategic Capability - Outline

• Resources, competences and dynamic capabilities

• Continual improvement in cost efficiency• Strategic capabilities and competitive

advantage• Organisational knowledge and strategic

capability• Diagnosing strategic capability: value chain,

value networks, activity maps, benchmarking• Developing strategic capabilities


Fit and Stretch• Chapter 2

– External environment– Opportunities and threats

• Chapter 3– Internal strategic capability– Strengths and weaknesses

• Matching strategic capabilities to opportunities in environment– Strategic fit

or• Leveraging strategic capabilities for competitive advantage

– Strategic stretch


Core Concepts in Strategic Capability – key areas of readings

Foundations section 3.2

Cost efficiencySection 3.3

Sustainability (SCA)Section 3.4

OrganisationalKnowledge Section 3.5

AnalysisSection 3.6

(e.g. value chain)

Development of strategic capabilitiesSection 3.7

Sections in chapter 3 of Johnson et al (2008) – essential readings!


Resource-based View of Strategy• Competitive advantage derives from the

distinctiveness of an organisation’s capabilities– Some businesses achieve extraordinary profits

compared with others in the same industry– Their resources or competences permit

• production at lower cost

or• generation of superior product or service at

standard cost


Strategic Capability

• Resources – Tangible resources – physical assets of an organisation– Intangible resources – non-physical assets of an

organisation

• Competences– The activities and processes through which an

organisation deploys its resources effectively

Strategic capability is the adequacy and suitabilityof the resources and competences of anorganisation for it to survive and prosper

Strategic capability is the adequacy and suitabilityof the resources and competences of anorganisation for it to survive and prosper


Exhibit 3.1 Strategic Capabilities and Competitive Advantage


Resources• Physical resources

– Machines, buildings, production capacity

• Financial resources– Capital, cash, debtors/creditors, suppliers of

money (shareholders, bankers etc)

• Human resources– Number and mix of people, skills and knowledge

• Intellectual capital– Patents, brands, business systems, customer

databases, “goodwill”


Strategic Capability- the terminology (following slides – and core text)

Exhibit 3.2



Competences• How an organisation employs and deploys

its resources

• Efficiency and effectiveness of physical, financial, human and intellectual resources– How they are managed– Cooperation between people– Adaptability– Innovation– Customer and supplier relationships– Learning


Threshold Capabilities (1)

• Threshold capabilities: those essential to compete in a given market– Required to be “in the game”

• Threshold levels change over time– changes in CSFs– new entrants– competitor activity


Threshold Capabilities (2)

• Tradeoffs to achieve threshold capability for different customers– high volumes of standard products versus high

value specialities

• Possible redundancy of capabilities– Can be difficult to dispose of

• Complementary resources and competences– Competences required to manage the resources


Unique Resources and Core Competences

• Unique resources– Critically underpin competitive advantage and

cannot be imitated or obtained by others

• Core competences– Activities and processes through which

resources are deployed such as to achieve competitive advantages in ways which others cannot imitate or obtain



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


Cost Efficiency• Customers benefit from cost efficiency via

– Lower prices

– More product features for the same price

• Cost management can create competitive advantage … but …

• Cost management may become a threshold capability:– Customers do not buy at any price – need appropriate

value at acceptable price– Competitive rivalry requires continual cost reduction


Sources of Cost Efficiency

Exhibit 3.3


The Experience Curve

Exhibit 3.4


Implications of the Experience Curve (1)

• Growth not optional– Longer experience means lower costs– Threat of competitors gaining cost advantages

• Real unit costs should decline each year

• First mover advantage can be important– Accumulated experience


Implications of the Experience Curve (2)

But• Sustained competitive advantage unlikely due to

unachievable market share

Therefore• Cost reduction becomes a threshold competence• Outsourcing may become appropriate


Capabilities for Sustainable Competitive Advantage (1)

• Value

• Rarity

• Robustness

• Non-substitutability

• Dynamic capabilities


Rarity of Strategic Capabilities

Ease of transferability

Sustainability

Core rigidities


Strategic Capability for the Royal Opera House



• Value– Ability to deliver what the customer values

• Rarity– Unique resources, rare competences

• Who owns the competence and how easily transferable is it?

• Preferred access to customers/suppliers• Situation dependent/non-transferable• Sunk costs



• Rarity– Danger of becoming core rigidities

• Difficult to change• Can lead to strategic drift

• Robustness– Complexity– Culture and history– Causal ambiguity

• Non-Substitutability– Risk of substitution

• At product/service level by other products or services• At competence level by a different approach


Strategic Capability – Key Points

• Competitive advantage derives from strategic capabilities

• Strategic capability comprises tangible and intangible resources deployed via competences

• Continual improvement of cost efficiency is vital • For sustainable competitive advantage strategic

capabilities must be valuable, rare, robust or non-substitutable

• Further readings in chapter 3 of Johnson at al (2008), Black Board site for BLB10089-3 and do not forget your tutorial preparation and portfolio assessment work

» Thank you!

Documents

BLB10089-3 Tutor. (Core Text Exploring (Corporate) Strategy, Seventh Edition, © Pearson Education Ltd 2008 or 2011) 1 Lecture Week 4 Assessing The Strategic